1962 INSC 0093
Williamsons (India) Private, Limited
v.
Its Workmen
(Supreme Court Of India)
HON'BLE MR. JUSTICE P. B. GAJENDRAGADKAR HON'BLE JUSTICE
A.K.SARKAR HON'BLE JUSTICE K. N. WANCHOO
Civil Appeal No. 307 Of 1961 | 28-02-1962

Gajendragadkar, J.

1. This appeal by special leave arises out of an industrial dispute between the
appellant, Williamsons (India) Private, Ltd., and the respondents, its workmen.
The appellant is a private limited company which has been established and
incorporated under the Indian Companies Act in 1947. Its business consists
mainly of importing mills stores, such as leather belting, pickers, bobbins and
machinery cloths. It no doubt buys and sells similar articles manufactured in
India, but this part of its business is insignificant. The secretaries of the
appellant are Gillanders Arbuthnot & Co., Ltd. The appellant has entrusted its
secretarial and accounts work to the said secretaries who carry out the said work
through the staff working directly under them on the remuneration which has
been agreed between the appellant and them. The present dispute is concerned
with the sales department managed by the appellant company itself. In this sales
department, the appellant employees sixteen workmen, two of them are
designed as stenographers-cum-clerks, one typist-cum-clerk, one godown-
keeper, one assistant godown-keeper, eight unskilled workmen and three motor-
car drivers.

2. Through their union, the respondents made demands on the appellant on 29
October 1957. These demands related to the wage structure, dearness
allowance, washing allowance leave, gratuity scheme, uniforms, medical aid
and bonus. These demands could not be settled amicably and so, ultimately they
were referred for adjudication to the industrial tribunal by the Government of
Bombay on 26 July 1958. The reference included nine demands in all, eight of
which have already been specified and the ninth was in respect of the
retrospective operation of the benefits of some of the demands made by the

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respondents. After hearing the parties and considering the evidence led by them,
the tribunal made its award on 21 April 1960. It is against this award that the
appellant has come to this Court by special leave.The main point which Sri
Sastri has made before us on behalf of the appellant is that on the finding made
by the tribunal on the principal question about the financial position of the
appellant and its capacity to bear the burden, it would follow that the major
portion of the award relating to wage structure and dearness allowance cannot
be sustained. He has also contended that the tribunal was in error in holding that
concerns like Gillanders Arbuthnot & Co., Greaves Cotton, Gannon Dunkerley,
Parry & Co. and Forbes Forbes & Co. are comparable to the appellant. It is on
these two points that the validity of the substantial portion of the award is
changed before us by Sri Sastri.

3. It appears that before the tribunal it was urged that the financial position of
the appellant was not very satisfactory and that its business was fast decreasing.
In support of this plea, a confidential statement Ex. C3 was filed by the
appellant. The correctness of this statement was not challenged by the
respondents. This statement shows that since 1956, the quota allotted to the
appellation has been considerably reduced in regard to most of the articles and
in respect of some, it has been cancelled. The appellant urged that it had been
carrying on its business during the recent years because of the previous stock
which remained with it and its case was that owing to the reduction in the quota
in a large number of articles and its cancellation in respect of some, it would not
be able to carry on the business for long and so, it would be unreasonable to
impose upon it the additional burden of a new and enhanced wage structure.
The tribunal party accepted this argument and held that it appeared highly
improbable that for sometime to come the quotas would be increased to any
appreciable extent. But it went on to observe that it was likely that some of the
articles which were now imported by the appellant might be manufactured
locally and that the tribunal did not think that the appellant would allow its
business to come to a standstill on account of the restriction on imports. Then
the tribunal had added that concerns doing purely or largely import business
have turned to trade in indigenous goods, or substituted some other kind of
business in place of the sale of imported goods and are doing very well. It
would, therefore, be wrong, said the tribunal, to think that the import restrictions
would completely cripple the finances of the appellant or imperil its very
existence in future. It is this part of the decision which is seriously challenged
before us by Sri Sastri.Ex. C3 which has been printed in the paper book before
us, clearly shows that the quotation have considerably been reduced in a large

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number of articles and in some cases, they have been cancelled and the extent of
the business of the appellant has naturally been proportionately reduced. Ex. C2
which refers to the financial position of the appellant also tells a similar story.
Indeed, the tribunal itself has accepted the appellant's case that if business has
not so far shown signs of collapse, it is partly because of its old stocks. The
balance-sheets for the years 1956, 1957 and 1958 show that whereas the
appellant had valued its goodwill at a lakh of rupees and has adjusted its profit
and loss accounts on that basis, it owes debts to a large extent and its reserve or
surplus is very little. Having regard to these facts, it is not easy to appreciate
how the tribunal reached the conclusion that the financial position of the
appellant was very satisfactory and that it could be compared in that behalf to
Gillanders Arbuthnot & Co. It may be that the tribunal happens to know that
some other concerns which were dealing in import of foreign goods have turned
to trade in indigenous goods or have substituted some other kind of business
and have prospered in the new line. But, surely, that cannot be a valid or
legitimate basis for assuming by anticipation the appellant would also undertake
a new line of business and will prosper in it. It is well-settled that in
constructing a wage structure with a scale of increments, industrial adjudication
had to take a long-range view and it has to examine very carefully the impact of
the wage structure on the financial position of the concern in question. Having
found that the business of the appellant was on the decline and that in the light
of business in which the appellant was operating so far there was no chance of
improvement, the tribunal should have hesitated before imposing additional
burden on the appellant by constructing a new wage structure. Therefore, in our
opinion, having regard to the findings of fact recorded by the tribunal, the
appellant is entitled to contend that the ultimate decision of the tribunal about
the financial capacity of the appellant is based purely on speculation and that
such speculation cannot supply a proper basis for the decision of the main
dispute between the parties.There is another argument which has been strongly
pressed before us and that is that the tribunal was in error in treating Gillanders
Arbuthnot & Co. as a comparable concern. This Court has repeatedly observed
that in considering the question about comparable concerns, tribunals should
bear in mind all the relevant facts in relation to the problem. The extent of the
business carried by the concern, the capital invested by them, the profits made
by them, the nature of the business carried on by them, their standing, the
strength of their Labour force, the presence or absence and the extent of
reserves, the divides declared by them and the prospects about the future of their
business - these and all other relevant facts have to be born in mind. In the
present case, the tribunal itself was conscious that the Gillanders Arbuthnot &
Co. was a much bigger concern with a much bigger capital and with a much

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larger business spread all over India. Even so, the tribunal thought that because
the number of employees engaged by Gillanders Arbuthnot was much larger,
whereas the employees engaged by the appellant were only sixteen, it would be
safe to compare Gillanders Arbuthnot & Co., with the appellant. It our opinion,
the approach adopted by the tribunal in dealing with this aspect of the question
is open to serious criticism. Therefore, we are satisfied that the criticism, made
by Sri Sastri against the award in so far as it assumes thai Gillanders Arbuthnot
was a comparable concern, is also not without justification.

4. Having reached this conclusion, the question which we have to consider is :
what order we should make on the present appeal ? Sri Dudhia for the
respondents saw the infirmity of some of the reasons adopted by the tribunal,
but he contended that in considering the financial position of the appellant it
may nor be irrelevant to have regard to the fact that the appellant was
distributing to its there directors an unconsciously large amount under the head
"commission, remuneration, motor-car, travelling and entertainment
allowance." In fact, according to Sri Dudhia, the total emoluments paid to the
directors are of the order of Rs. 2, 20, 875. If the appellant can afford to fritter
away such a large amount on its directors, it is not open to the appellant to
contend that its financial position is not satisfactory. There may be some force
in this argument.Besides, Sri Dudhia stated before us that in fact, the appellant's
business during the years subsequent to the date of the award has very much
improved and what looks like speculation in the award has actually come true.
In that connexion, he pointed out that in the last year, the appellant has given by
way of bonus four months' basic wages to its employees. Sri Dudhia's
suggestion, therefore is that of the award is set aside, his clients should be given
a chance to justify their claim before the tribunal and so, the matter be
remanded to the tribunal with a direction that it should examine the problem
once again in the light of such additional evidence as the parties may lead
before it. In fact, having come to the conclusion that the reasons given by the
tribunal in support of its finding that the appellant should bear the financial
burden of the wage structure devised by the award are not satisfactory, we tried
to see if we could settle the dispute ourselves in appeal, but that turned out to be
very difficult; and so, we have decided to set aside the award and send the case
back for disposal in accordance with law in the light of this judgment.

5. Of the demands referred to the industrial tribunal for adjudication, no
grievance has been made before us in reject of demand 3 in regard to washing

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allowance; demand 5 in regard to leave with pay and allowance and demand 7
in regard to uniforms. In respect of demand 5 as to leave with pay and
allowances, Sri Sastri had first attempted to argue that the provisions made by
the award under this demand were unreasonable, but Sri Dudhia pointed out that
the material provisions in that behalf are consistent with the statutory provisions
which have now been included in the Bombay Shops and Establishments Act
(79 of 1948) by the Amending Act 26 of 1961. Therefore there is no grievance
about the relief granted by the award in respect of leave with pay and
allowances.Just as the wage structure with scales of increments cannot
reasonably be constructed unless the financial position of the appellant is
properly ascertained and the result of the impact of the wage structure in future
is judged, so adequate dearness allowance provision also cannot be made unless
the said facts are ascertained. That is why the award in regard to wage structure
and the dearness allowance must be set aside. For the same reasons, the award
in respect of the gratuity must also be set aside. The demand in respect of
retrospective operation of these provisions must, as a consequence, be set aside.

6. That takes us to the demand for medical aid. The tribunal has ordered that
medical relief should be given by the appellant to its employees on the same
lines as Gillanders Arbuthnot & Co. The direction issued by the tribunal
requires that the company should bear the cost of simple prescriptions and also
pay Rs. 3 on any patent or proprietary medicine included in any single
prescription by the company's doctor. No ceiling has been placed in respect of
medical aid and the fact that the company has no doctor of its own has not been
taken into account. Besides, the main basis of the relief granted by the tribunal
under this demand appears to be that the tribunal was inclined to treat the
appellant as comparable to Gillanders Arbuthnot & Co. We would, therefore,
set aside this part of the award as well.

7. That leaves the question of bonus to be considered. Sri Sastri has raised two
conditions against the award in respect of bonus. His first argument is that in
directing the appellant to pay three months' total wages as bonus, the tribunal
has departed from the usual convention in such matters which is to award a
specified number of months' basic wages and not total wages as bonus. The
second contention raised by Sri Sastri goes to the root of the matter. He
contends that the calculations made by the tribunal contain an obvious mistake
in regard to the allowance made for income-tax. It appears that in the statement
filed by the appellant, it had claimed deduction of Rs. 43, 449 by way of tax and

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this claim was made on this specific ground that the said amount of tax had in
fact, been paid for the year 1956-57 which is relevant. There is no doubt that
what the tribunal has to find in working out the formula is not the amount of tax
actually paid but the amount of tax which under the relevant rates would be
payable notionally on the profits determined under the formula. There is no
dispute about the amount of profits; the dispute is about the rate. The tribunal
has calculated income-tax at seven annas in a rupee, whereas Sri Sastri contends
that the proper rate is 61.5 nP in a rupee and in support of his argument he has
referred us to the relevant provisions of the Finance Act (18 of 1956). On the
other hand Sri Dudhia has contended that in proceedings between the parties in
this Court in relation to stay, an affidavit had been made on behalf of the
appellant admitting that the relevant rate for tax is 51.5 nP. That, no doubt,
appears to be so; but the rate at which tax has to be levied has to be governed by
the relevant provision of the statute and if Sri Sastri can show that the rate
prescribed by the statute is 61.5 nP then the affidavit on which Sri Dudhia relies
cannot go against the appellant. It must be held to be a mistake committed by
the person who made mistake committed by the person who made the affidavit.
We would have ourselves decided this question in appeal, but Sri Dudhia has
argued that before determining the rate which was applicable, considerations of
rebate will have to be borne in mind and he, therefore, contends that he should
be given a chance to justify the finding of the tribunal that the rate was seven
annas in a rupee and no more. According to Sri Dudhia, it would not be possible
for him to say what rebates the appellant could claim and how the rate would
not be 61.5 nP but seven annas. Since we are remanding the matter for the
consideration of the major items of dispute between the parties, we have
decided to set aside that portion of the award which deals with bonus and send
this dispute for the consideration of the tribunal on the narrow point as to the
relevant rate at which the calculation of the income-tax should be governed. If
the rate turns out to be 61.5 nP. as alleged by Sri Sastri, then, of course, there
would be no scope for making any payment of bonus. If the rate turns out to be
seven annas in a rupee as at present assumed by the tribunal, then the only point
which the tribunal may consider is whether three months' total wages should be
awarded as bonus or three months' basic wages, or any thing less.Since we are
setting aside the award in regard to demands 1, 2, 4, 6, 8 and 9, it follows that
the terms of employment between the appellant and the respondents would be
governed by the existing conditions until a fresh award is made by the tribunal.
It appears that pending the appeal in this Court, the appellant has paid dearness
allowance at the increased rate awarded by the tribunal to the respondents. But
the payment of the said dearness allowance will now have to be stopped until a
new award is made. It would be open to the respondents to apply to the tribunal

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for any interim order in that behalf and if such an application is made, the
tribunal may deal with it in accordance with law.

8. In the result, the appeal substantially succeeds and the award in respect of the
items already specified is set aside. The matter will now be sent back to the
tribunal for disposal in accordance with law in the light of this judgment. There
would be no order as to costs.

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