Mis. Rohtas Sugar Ltd., and Others vs Their Workmen

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 717 to 742 of 1957

Decision Date: 12 February 1960

Coram: K.C. Das Gupta, P.B. Gajendragadkar

In this case, the judgment concerned Mis. Rohtas Sugar Ltd. and other related companies as petitioners and their workmen as respondents. The decision was delivered by the Supreme Court of India on 12 February 1960. The bench that heard the matter consisted of Justice K.C. Das Gupta, Justice P.B. Gajendragadkar, Justice Subbarao and Justice K. The citation for the decision is reported in 1960 AIR 671 and 1960 SCR (2) 989. The dispute arose under the Seasonal Industries (Unskilled Workmen) Act, which deals with the payment of retaining allowances during the off‑season and the question whether the wage structure should be increased instead of providing such allowances. The factual background related to the unskilled seasonal workers employed in the Bihar sugar industry. The majority of these workers belonged to the land‑less labourer class. Their contractual relationship with the sugar factories terminated at the close of each harvest season, and at the start of the next season they might or might not return to the same employer. The workers raised a claim that they were entitled to a retaining allowance for the period when the factories were not in operation. The Labour Appellate Tribunal, after considering the matter, awarded a retaining allowance calculated at five per cent of the basic wage for the entire off‑season. The Tribunal ordered that this allowance be paid at the beginning of each season when the workers reported for duty. The employer side advanced several contentions. First, the employer argued that agriculture constituted the primary occupation of the workers and that employment in the sugar factory was only a secondary, subsidiary activity. Second, the employer maintained that the claim for a retaining allowance was in reality a form of unemployment relief, which the employer said was the responsibility of the State and not of the industry. Third, the employer contended that the employer‑employee relationship ceased to exist during the off‑season, and therefore no wages or wage‑like payments could be claimed by the workers for that period. The Court held that although the primary responsibility for providing unemployment relief—by arranging alternative employment, by offering unemployment insurance benefits, or by other means—lies with the Government, the sugar industry that employs these workers seasonally cannot remain indifferent to the workers’ distress. The Court observed that the workers had contributed to the prosperity of the industry during the months they were employed, and therefore the industry must bear some responsibility for alleviating their hardship. In determining whether the principle of social justice, which industrial adjudication seeks to apply, justified the payment of a retaining allowance to unskilled workers in the sugar sector, the Court identified several factors to be considered. These factors included: (a) the availability of alternative employment opportunities for the workers during the off‑season; (b) the extent to which the workers had become attached to the particular factory where they were employed; (c) the probable benefit to the industry if the workers were encouraged to return to the factory by the incentive of a retaining allowance payable at the start of the season; and (d) the ability of the industry to bear the financial burden of providing such an allowance. The Court further held that, in order to alleviate the distress of the unskilled workers, a more effective approach would be to raise the wage structure, taking into account the seasonal nature of their employment, rather than to continue paying a retaining allowance for the entire off‑season.

The Court observed that, for unskilled workmen employed in these sugar factories, a more effective solution than paying a retaining allowance for the entire off‑season would be to raise the overall wage structure. The Court noted that during at least part of the off‑season the workmen remained unemployed, and that addressing their financial distress through a permanent increase in wages would be more beneficial than a temporary allowance. In the present case, the Court held that the interests of both the employers and the labour force would be best protected if the question of increasing wages, taking into account the seasonal nature of the employment, were referred to the wage board that had been entrusted with fixing the wages of the workmen involved in the dispute. The Court further explained that the wage board would consider the matter sympathetically, especially because the employers had recognised the reasonableness of the claim presented by the workmen.

The judgment formed part of a civil appellate jurisdiction concerning Civil Appeals Nos. 717 to 742 of 1957. The appeals were taken by special leave from a decision dated 31 August 1956 of the Labour Appellate Tribunal of India, Calcutta, in Appeals Nos. (Cal.) 45 to 52, 59, 61‑63, 65‑78 and 98 of 1955. Counsel for the appellants represented all of the appeals. Counsel for the respondents numbered 1, 4, 5, 7, 8, 10, 14, 15, 21, 24, 26 to 30, 36, 37 and 39 appeared on behalf of those respondents. Counsel for respondents numbered 6, 9, 12, 17, 20, 22, 23, 25, 31 and 32 also participated, as did counsel for the intervener. The judgment was delivered on 12 February 1960 by Justice Das Gupta. These appeals challenged the order of the Labour Appellate Tribunal of India at Dhanbad, which had affirmed the order of the Industrial Tribunal that granted a retaining allowance to unskilled workmen at a rate of five percent of basic wages for the off‑season period in numerous sugar industries in Bihar. The employer companies further contested the correctness of the Industrial Tribunal’s award that prescribed wages, traveling allowance and halting allowance for workmen attending the Tribunal proceedings, and that directed that such workmen be placed on special leave with pay during their attendance.

The appellants argued that those orders conflicted with the Supreme Court’s pronouncements in Punjab National Bank Ltd. v. Sri Ram Kanwar, Industrial Tribunal, Delhi. The Court agreed with that submission, stating that the contention was correct. The Court further held that, irrespective of any arguments offered in support of the Tribunals’ view in ordering the payment of those allowances and in granting special leave to workmen attending necessary proceedings, if the issue were considered anew the Court was bound by the authority of Punjab National Bank Ltd. v. Sri Ram Kanwar, reported in [1957] S.C.R. 220, to hold that no such allowances were payable and that no order granting leave could be made. Accordingly, the Court concluded that the orders of the lower tribunals permitting traveling allowance, halting allowance and special leave to workmen attending proceedings were untenable and should be set aside.

The Court noted that the order granting travelling and halting allowances and special leave to workmen attending proceedings of necessity had to be set aside. The counsel for the appellants, Mr Sinha, declared that the appellants would not seek the return of any allowances that had already been paid. This declaration led the Court to identify the principal issue that required determination in the appeals. The issue was whether a retaining allowance should be paid to unskilled workers employed in the sugar‑manufacturing industry during the period when the factory was not in operation. The Court observed that this question had been the subject of protracted dispute for many years. Successive committees had examined the problem repeatedly, attempting to devise a formula that would satisfy both the employers and the labourers, but none of those attempts had succeeded. In 1950 a reference was finally made to Mr Justice B. P. Sinha, who at that time was a Justice, to resolve the disputes concerning retaining allowance. Justice Sinha’s award provided a retaining allowance for skilled and semi‑skilled workmen, but it expressly excluded unskilled workmen. Before the Appellate Tribunal heard the appeal against that award, the parties – the labourers and the employers – reached an agreement that no retaining allowance would be payable to unskilled workmen. That award operated for two years and was subsequently terminated by a notice served by the workmen, which was followed by a similar notice from the employers. The reference that gave rise to the present appeals also contained several other matters besides the retaining allowance for seasonal employees, but the Court explained that those other matters were no longer relevant to the present proceedings. Likewise, the Court stated that it would not consider the question of retaining allowance for skilled and semi‑skilled workmen, because that portion of the award was not contested by the appellants. The Court then set out the main contentions advanced by the employers on the question of retaining allowance. The employers argued that the primary occupation of the persons in question was agriculture and that work in the sugar factory was only a subsidiary occupation. They further contended that the claim for retaining allowance amounted to unemployment relief, which they said was the responsibility of the State and not of the industry. Finally, the employers maintained that there was no employer‑employee relationship during the off‑season, and therefore no payment of any component that could be characterized as wages could be claimed by the labour.

The Tribunal rejected each of the employers’ objections. It held that the factory’s working season completely coincided with the paddy‑harvesting season in North Bihar, the region where most of the factories were located, so that the workmen—who were largely members of the landless‑labourer class in rural areas—found no employment during the off‑season. The Tribunal also observed that seasonal employees were entitled to statutory benefits such as a provident fund, gratuity and bonus, and that the connection between the employees and the employer was not severed during the off‑season. On that basis, the Tribunal awarded a retaining allowance equal to five per cent of the wages to all unskilled employees, to be paid at the beginning of each season when the employees reported for duty. The Appellate Tribunal, agreeing with the Tribunal’s conclusion, further noted that granting a seasonal allowance to unskilled labour in the sugar industry would promote stability, foster good industrial relations and enhance efficiency.

The Court observed that deciding whether a retaining allowance ought to be paid to seasonal workers during the off‑season presented considerable difficulty. It noted that this complexity was evident from the divergent opinions expressed by the numerous committees that had examined the issue. While the Court refrained from enumerating each differing view and the reasons supporting them, it stated that, with the sole exception of the Labour Enquiry Committee, no committee had ever recommended that unskilled workmen receive a retaining allowance; several committees, however, had suggested such payment for skilled and semi‑skilled workmen. When the matter was placed before the Tribunals for adjudication, the Tribunals were required to decide based solely on the material before them, and the Court found that little assistance could be derived from the committee reports. The Court emphasized the genuine hardship faced by seasonal workmen during the off‑season, yet it also recognized an opposing argument that it would be neither just nor fair to place the entire burden of these workers’ distress on the particular industry or factory that employed them only seasonally. The Court further held that the primary responsibility for relieving seasonal unemployment—whether by arranging suitable alternative work, providing unemployment‑insurance benefits, or employing other measures—lay with the Government. Nonetheless, the Court cautioned that this did not mean the industry employing the workers could remain indifferent or entirely disengaged from alleviating the distress of those who had contributed to its prosperity, even if only for part of the year. The Court added that while these considerations applied generally to retaining‑allowance claims across all industries, the specific facts, categories of workmen, and local conditions in each industry were crucial in reaching a decision.

In addressing the particular appeals before it, the Court focused exclusively on unskilled workmen. It observed that both Tribunals below had noted the employers’ contention that Bihar experienced an abundant supply of unskilled labour, and that whether a retaining allowance was paid or not, this surplus would ensure sufficient availability of workers for the industry. Consequently, the employers argued that they should not be compelled to pay any retaining allowance to unskilled labour. The Court contrasted this position with the situation of skilled and semi‑skilled workers, who could more readily demonstrate that their specialized abilities made it difficult to secure suitable alternative employment during the off‑season, and that employers themselves often found it advantageous to offer a retaining allowance as an incentive for those workers to return when the season commenced. However, in the present case the dispute concerned only unskilled workers, and the Court noted that the employers’ view was that the glut of unskilled labour in the region rendered any retaining allowance unnecessary, leading them to maintain that they ought not

In this case, the Court observed that it would be unreasonable to require an industrial adjudication to order the payment of retaining allowance to unskilled labour merely because employers have agreed to pay such allowance to skilled workers. The Court held that the mere existence of retaining allowance for skilled categories does not automatically render the opposition to similar payments for unskilled workers unjustified. To determine whether the social‑justice principles that guide industrial adjudication justify granting retaining allowance to unskilled workmen in the sugar industry, the Court listed several factors that must be examined. First, the Court must consider what alternative employment opportunities are available to the unskilled workers during the off‑season. Second, the Court must assess the extent to which those workers have become attached to the particular factory in which they are employed. Third, the Court must evaluate the probable benefit to the industry if the workers are encouraged to return for the next season by the incentive of a retaining allowance. Fourth, the Court must look at the capacity of the industry to bear the additional financial burden that the allowance would create. The Court noted that the capacity of the appellant‑employers to bear the extra burden resulting from the five per cent retaining allowance ordered by the lower Tribunals had not been contested. However, the Court found that the record did not clearly establish the existence of alternative off‑season employment for unskilled labour. It accepted the finding that the sugar‑industry working season in North Bihar, where most of the factories in dispute are located, coincides completely with the paddy‑harvesting season, yet considered that this fact alone was insufficient to draw a conclusion about the availability of other jobs for the unskilled workers.

The appellate Tribunal had reasoned that granting a seasonal allowance to unskilled labour would promote stability, good industrial relations and efficiency. The Court observed that this conclusion seemed to rest only on a general probability that newly recruited labour at the start of a season might be less efficient and less disciplined than workers who had previously served, and found no concrete evidence in the record to support this view. Moreover, the Court saw no clear indication that unskilled workers employed in a particular factory felt a lasting attachment to that factory. It noted that, once the season ends, the contractual relationship between the unskilled workers and the employer ceases; the workers may or may not rejoin the factory at the beginning of the next season at their own discretion. Regarding the Tribunal’s observation that seasonal employees are entitled to benefits such as provident fund, gratuity and bonus, the Court found the material on record too scant to reach a definite conclusion about the continuity of the employer‑employee relationship. In view of the nature and the limited extent of the evidence, the Court expressed the opinion that, for the purpose of relieving the hardship faced by unskilled workers in these sugar factories, a more appropriate measure would be to raise the wage structure rather than to order a retaining allowance for the entire off‑season.

In the matter of the unskilled workmen employed in the sugar factories that are the subject of the present appeals, the Court considered that a more appropriate solution would be to increase the overall wage structure rather than to continue the payment of a retaining allowance for the entire off‑season period during which the workers remain unemployed. Counsel for the appellant readily acknowledged that the seasonal nature of the employment, whereby the workmen are engaged only for a few months each year and face considerable difficulty in obtaining work for the remaining months, must be taken into account when fixing their wages. The Court was informed that a Wage Board, which has been given the responsibility of determining the appropriate rates of pay for the workmen involved in these disputes, is currently constituted and actively hearing matters. It was therefore held that the interests of both the employers and the labour force would be best served if, instead of confirming the order of the Appellate Tribunal concerning the retaining allowance, the question of a wage increase reflecting the seasonal character of the workers’ employment were referred to this Wage Board. The Court expressed confidence that the Wage Board would consider the claim sympathetically, especially in view of the fact that the employers, through their counsel, have recognised before the Court the reasonable basis of the workers’ demand for higher wages.

The Court noted that the appellants, through their counsel, have undertaken not to seek restitution of the retaining allowance amounts that have already been paid. They have further agreed to continue paying the retaining allowance for the next season, with half of the amount to be paid at the commencement of the season and the remaining half to be paid midway through the season, until such time as the Wage Board fixes the appropriate wages. Accordingly, the Court allowed the appeals and set aside the order of the Labour Appellate Tribunal of India, Dhanbad, insofar as it related to the retaining allowance payable to the unskilled workmen, as well as its orders concerning the payment of halting allowance, travelling allowance, and wages to workmen attending proceedings of necessity of the Industrial Tribunal. The Court reiterated that the appellants have undertaken not to claim restitution for the halting or retaining allowance already paid and will continue the stipulated payments until the Wage Board determines the wages. No order as to costs was made, and the appeal was allowed.