Clerks of Calcutta Tramways vs Calcutta Tramways Co. Ltd

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 105 of 1954

Decision Date: 11 October 1956

Coram: P. Govinda Menon, Natwarlal H. Bhagwati, S.K. Das

In the case titled Clerks of Calcutta Tramways versus Calcutta Tramways Co. Ltd., decided on 11 October 1956, the Supreme Court of India heard the matter with an authorial contribution from Justice P. Govinda Menon and a bench comprising Justices P. Govinda Menon, Natwarlal H. Bhagwati and S. K. Das. The petition was filed by the clerks of the Calcutta Tramways Company and the respondent was the Calcutta Tramways Company itself. The judgment was recorded in the 1957 All India Reporter at page 78 and also appears in the 1956 Supreme Court Reports at page 772, dealing with an industrial dispute concerning dearness allowance for clerks and other middle‑class employees and examining whether uniform rates should be adopted, as well as the power of the Supreme Court to interfere with decisions of tribunals. The headnote observed that it was well settled that a tribunal’s findings of fact were final unless the tribunal acted beyond its statutory jurisdiction, failed to exercise a clear jurisdiction, displayed an error apparent on the face of the decision, or misapplied well‑accepted jurisprudential principles. The Bengal Chamber of Commerce, of which the respondent company was a member, had conducted a study of the cost‑of‑living index for middle‑class families and had fixed the dearness allowance payable to employees of mercantile firms in Calcutta. Before both the Industrial Tribunal and the Labour Appellate Tribunal, the clerks, on behalf of themselves, asserted that their dearness allowance should be set at the same rates fixed by the Chamber for the middle‑class families to which they belonged. They further contended that the Labour Appellate Tribunal’s procedure, which had omitted twenty points of the living‑cost index without neutralising them, was unjustified. The Court held that there could be no rigid rule applicable to all categories of employees regarding the grant of dearness allowance and that, except for the very lowest class of manual labourers, it was improper to neutralise the entire increase in the cost of living through dearness allowance. It noted that the middle class comprised various grades and that the clerks could not claim the same dearness‑allowance rates as those fixed for clerks of mercantile firms by the Chamber. The judgment fell under civil appellate jurisdiction as Civil Appeal No. 105 of 1954, filed by special leave against the order dated 6 November 1952 of the Labour Appellate Tribunal, Calcutta, which modified the award dated 25 September 1951 of the District Judge’s Industrial Tribunal, Calcutta, in Case No. VIII‑23 of 1951. Counsel for the appellants were S. C. Isaacs, A. K. Datt and Sukumar Ghose; counsel for the respondent were M. C. Setalvad, the Attorney‑General for India, D. B. Das and S. N. Mukherji; and counsel for the intervenor, the State of West Bengal, were B. Sen and P. K. Bose.

The judgment of the Court was delivered by Govinda Menon J. This appeal was taken by special leave against the decision of the Labour Appellate Tribunal of India, Calcutta, which had modified the award originally passed by the Industrial Tribunal, Calcutta. The dispute before the Industrial Tribunal had been referred to it by the Government of West Bengal for adjudication of the rates of dearness allowance applicable to the clerks and depot cashiers employed by Calcutta Tramways Co. Ltd. At the material time there were about six hundred clerks and depot cashiers out of a total work‑force of ten thousand employees of the Company. Earlier disputes had arisen between the workmen of the Company on the one side and the employers on the other with respect to the dearness allowance payable to the workmen. Two earlier awards had been made, one dated 16 May 1947 by S. N. Guha Roy and the other dated 27 October 1948 by P. K. Sircar; both of those awards dealt with all the employees of the Company and not exclusively with clerks and depot cashiers. Subsequently, on 13 June 1951 the Government of West Bengal made a reference concerning a dispute relating to the dearness allowance of the workmen of the Company, expressly excluding clerks and depot cashiers. After the award was rendered, an appeal was filed and, on that appeal, the Appellate Tribunal increased the dearness allowance by Rs. 7⁄8 for workmen whose pay fell below Rs. 50 and up to the pay range of Rs. 250, and it fixed a flat increment of Rs. 5 for workmen in the higher pay ranges, taking the cost‑of‑living index of the workmen’s class to be 370 points.

The award now under consideration concerned only the clerks and depot cashiers. The Industrial Tribunal fixed a dearness allowance of Rs. 47⁄8 for a pay range of Rs. 51 to Rs. 100 and provided for a progressive increase of Rs. 5 for each subsequent slab of Rs. 50 in the pay scale. The Labour Appellate Tribunal then raised the amounts awarded by an additional Rs. 2⁄8, i.e., more than the increase granted to the other workmen of the Company. For the purpose of determining the appropriate allowance, the cost‑of‑living index for middle‑class families had been fixed by an investigating body of the Bengal Chamber of Commerce at 382 points, whereas the index applicable to the working class had been fixed at 370 points. The higher amounts awarded for the various pay ranges, as reflected in the decision of the Labour Appellate Tribunal, were founded on these cost‑of‑living indices, although the amounts did not coincide with those recommended by the Bengal Chamber of Commerce. Before both the Labour Appellate Tribunal and the Industrial Tribunal, the claim presented on behalf of the clerks and depot cashiers was that the dearness allowance should be calculated on the same rates decided by the Bengal Chamber of Commerce, of which the Company was a member, and that no distinction should be drawn between the allowance recommended by the Chamber and the allowance awarded by the Industrial Tribunal.

In this case the appellants argued that the recommendation made by the Bengal Chamber of Commerce should have been applied in full because the Company was a first‑class member of that Chamber and the recommendation was intended for the middle‑class workers, a class that includes the Company’s clerks and depot cashiers. They pointed out that the Mercantile Tribunal, which dealt with the dearness allowance payable to employees of mercantile firms in Calcutta, had accepted the Chamber’s recommendation, and therefore the Industrial Tribunal as well as the Labour Appellate Tribunal ought to have followed the same approach. The learned judges of the Appellate Tribunal observed that the Chamber’s recommendations were directed at mercantile firms whose work‑force consisted principally of clerical and subordinate staff, whereas the Tramways Company employed a large percentage of workers in other categories, making clerks and depot cashiers only a small minority. Nevertheless, the judges accepted the cost‑of‑living index prepared by the Bengal Chamber of Commerce as the appropriate criterion for fixing the increased dearness allowance for the Company’s employees. On behalf of the appellants it was submitted that a different method of calculation should not have been adopted because the Chamber’s recommendations were intrinsically reasonable, reflecting the uniform standard of living and habits of the middle class to which the clerks and depot cashiers belong. The appellants further contended that, as a member of the Chamber, the Company should have treated the recommendation as a binding mandate and should not have acted inconsistently with other members, especially since no valid reason had been offered for rejecting it. They also argued that no satisfactory defence had been raised to show that the recommendation could not apply to an institution like the Company that has a mixed staff. In contrast, the Company’s written statement explained that, under the previous award, it had been paying a uniform sliding scale of dearness allowance to all categories of workmen, as set out in Paragraph 6(b). Accordingly, the appellants maintained that the Industrial Tribunal and the Appellate Tribunal should have devised a principle that linked the dearness allowance to the basic salaries and the cost‑of‑living index, thereby fulfilling the Chamber’s recommendation. The Court therefore had to examine whether the procedure adopted by the lower tribunals ignored any legal principle or contravened any statutory provision. It was clear that if the Chamber’s scheme were applied to clerks and depot cashiers, the amounts awarded would be considerably higher and would far exceed the sums granted to other workmen whose appeals had already been decided by the Appellate Tribunal, although the higher cost‑of‑living index for the appellants was acknowledged as being greater than that for workmen whose occupations involved physical labour rather than mental effort.

In this case, the Court observed that if the recommendation of the Bengal Chamber of Commerce were applied to the clerks and depot cashiers, those employees would receive amounts that were far in excess of, and wholly disproportionate to, the awards given to the other workmen whose appeals had already been disposed of by the Appellate Tribunal. The Court recognized that the cost‑of‑living index applicable to the appellants ought to be considered higher than the index applicable to workmen whose occupations involved physical labour rather than mental faculties. Consequently, the Court described the clerks and depot cashiers as belonging to the white‑collared fraternity. The Court then turned to the procedure adopted by the Labour Appellate Tribunal, which had left out twenty points un‑neutralised, allowed a rate of rupees five for each twenty‑point rise in the living‑cost index, and had taken into account a higher living‑cost index of three‑eighty‑two for the appellants as against an average index of three‑seventy for the other workmen. The Court questioned whether this method was justifiable. It noted that it was difficult to hold that the middle classes in the country formed a separate stratum of society even in a city such as Calcutta, where the mode of life, necessities, requirements and comforts were largely uniform. The Court further observed that there were different grades even within the middle classes and that it would be unwise to assume identical degrees of comfort and necessity for everyone labelled as middle class. Accordingly, the Court could not accept the argument that clerks in mercantile firms were equal in all respects to the six hundred clerks and depot cashiers of the Company. The Court pointed out that the Labour Appellate Tribunal had not entirely ignored the recommendations of the Bengal Chamber of Commerce; rather, in raising the amount awarded by the Industrial Tribunal, the Appellate Tribunal had based its conclusion on the higher cost‑of‑living index applicable to middle‑class employees. The Court then considered whether any question of principle arose that might justify interference with the Tribunal’s conclusions. It referred to settled law that the Court may interfere with Tribunal decisions only when (1) the Tribunal acted beyond the jurisdiction conferred upon it by the statute or regulation that created it or failed to exercise a patent jurisdiction; (ii) there was an apparent error on the face of the decision; or (iii) the Tribunal erroneously applied well‑accepted principles of jurisprudence. The Court emphasized that interference was appropriate only when such errors were present.

Accordingly, the Court held that interference was called for, but it observed that the appellants had failed to demonstrate any departure from the established principles. The Court noted that had the Tribunal below neglected to apply a basic principle, a point might have been raised; however, the Tribunal, in determining dearness allowance, had examined several methodologies and had selected one of them. Consequently, the Court found no basis to assert that any question of principle arose. The Court then referred to the Central Pay Commission’s report, specifically page 46, paragraph 71, which recommended: “Without adopting such a complicated procedure, we think it sufficient to provide by slabs for persons on different levels of pay, as shown in the accompanying table which also provides for diminishing rates of dearness allowance as the cost of living index falls, taking the stages by 20 points at a time.” (1) [1955] 1 S.C.R. 941, 949. The Commission had deliberately avoided recommending the full neutralisation of the higher cost of living through dearness allowance. The Court further examined the Committee on Fair Wages report, prepared by the Government of India, particularly Chapter IV on Wage Adjustments and paragraph 43, which discussed various modes and methods of providing relief against the burden of an increased cost of living. That report concluded that there was no uniform practice in the extent of compensation granted to employees to meet the higher cost of living. It observed: “The Pay Commission has accepted the principle that the lowest paid employee should be reimbursed to the full extent of the rise in the cost of living and that higher categories of employees should receive a diminishing but graduated scale of dearness allowance. The Pay Commission has rejected the principle of a flat rate for all categories of employees, irrespective of their basic salaries.” Ultimately, the Committee determined that for the lowest categories of employees the aim should be compensation equal to one hundred percent of the increase in the cost of living, whereas for categories above the lowest the same level of consideration would not apply, adding that a flat rate equal to that allowed to the least‑skilled worker would not satisfy higher categories. The Court then turned to the analysis of the Industrial Awards issued by the Ministry of Labour, Government of India. On page 33 of that document, a discussion addressed the linking of dearness allowance to cost‑of‑living index numbers and considered whether a uniform flat rate of dearness allowance, irrespective of income group, should be permitted. The discussion further examined the concept of linking dearness allowance to the cost‑of‑living index across different income groups, but with rates that diminish as income increases. A careful reading of the extensive discussion in Chapter III revealed that no rigid rule could be applied uniformly to all categories of employees, because the appropriate approach would depend on the conditions of labour, the nature of the locality and the mode of living.

The Court observed that the appropriate amount of dearness allowance would vary according to the conditions of labour, the character of the locality and the prevailing mode of living. It referred to the decision in Buckingham and Carnatic Company Ltd., Madras v. Workers of the Company (1), where the Tribunal examined whether the rise in the cost of living could be completely neutralised by granting dearness allowance. The Tribunal had held that a one‑hundred per cent neutralisation could not be permitted because it would create a vicious circle and further fuel an inflationary spiral, and it also stated that there was no justification for allowing industrial workers to avoid the sacrifices made by all other citizens. The Court considered this to be settled law that, except for the very lowest class of manual labourers whose earnings are only sufficient to meet basic necessities, it is imprudent and unwise to offset the whole increase in the cost of living by dearness allowance, particularly for middle‑class employees. The Court further noted that the criterion for fixing dearness allowance was examined in Mahomad Rai Akbarali Khan v. The Associated Cement Companies Limited (2), where similar principles were discussed. Although the appellant’s counsel drew attention to observations in The Millowners’ Association, Bombay v. The Rashtriya Mill Mazdoor Sangh (3), the Court found no distinct principle articulated there. The counsel for the appellants also heavily relied on Workmen of the Firestone Tyre and Rubber Company of India Ltd., Bombay v. Firestone Tyre and Rubber Company of India Ltd. (4), a decision in which the Tribunal expressed that dearness allowance is meant to neutralise the rise in the cost of living and, recognizing a clear difference in living expenses between clerical staff and other workmen, held that the latter were not entitled to claim the allowance on the same basis. The appellant’s counsel argued that the recommendations of the Bengal Chamber of Commerce should be accepted in full. The Court, however, concluded that the cited decision did not support the appellant’s position. In fact, the Labour Appellate Tribunal had distinguished between physical labourers and clerks or depot cashiers, noting that the latter performed not only physical exertion but also mental work, and therefore a higher cost‑of‑living index was appropriate for them. After weighing all the submissions, the Court agreed with the Tribunal’s conclusion that the dearness allowance awarded was proper. The Court found no question of law or principle was violated and therefore dismissed the appeal, ordering the costs against Calcutta Tramways Co. Ltd. The State of West Bengal, which had intervened, was directed to bear its own costs.

In the concluding part of the judgment the word “costs” referred specifically to the expenses that arose from the appeal. The Court indicated that the State of West Bengal, having intervened in the proceedings, was responsible for paying the amounts that were incurred in connection with its participation. These amounts comprised the fees of counsel, charges for filing documents, and any other disbursements that were necessary to maintain the appeal before the tribunal. The reference to costs did not imply any liability on the part of the appellant or respondent beyond what had already been decided. Consequently, the judgment made clear that the financial burden of the legal process would be shouldered solely by the State that had intervened, and that no additional award of costs was to be made against either party. This allocation of costs ensured that each side would bear the expenses that it had generated, and it placed the responsibility for the State’s own legal expenditure on the State itself. The decision thus respected the principle that a party which intervenes in litigation must bear the costs of its own involvement, without shifting that burden to the primary litigants. By affirming that the State would meet its own costs, the Court reinforced the procedural rule that costs follow the party who caused them, thereby maintaining equity among the parties.