Birla Cotton Spinning and Weaving Mills vs Workmen and Others

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

Court: supreme-court

Case Number: Civil Appeal No. 104 of 1956

Decision Date: 2 May 1962

Coram: K.N. Wanchoo, P.B. Gajendragadkar, J.C. Shah, N. Rajagopala Ayyangar

In the matter titled Birla Cotton Spinning and Weaving Mills versus Workmen and Others, the Supreme Court rendered its decision on the 2nd of May, 1962. The judgment was authored by Justice K. N. Wanchoo and the bench comprised Justice K. N. Wanchoo, Chief Justice P. B. Gajendragadkar, Justice J. C. Shah, and Justice N. Rajagopala Ayyangar. The case is reported in the All India Reporter at page 1158 of the 1966 volume and also appears in the Second Series of the Supreme Court Reports at page 716 of the 1963 volume. The parties were identified as the petitioner, Birla Cotton Spinning and Weaving Mills, and the respondents, the workmen and others. The appeal was filed under civil appellate jurisdiction as Civil Appeal No. 104 of 1956, taken by special leave from an award dated 29 December 1958 issued by the Industrial Tribunal of Delhi in Industrial Dispute No. 36 of 1957 and published in the Delhi Gazette on 5 March 1959. Counsel for the appellant and counsel for the respondents were instructed, without reference to individual names, to present their arguments before the Court.

The dispute centered on the classification of employees known as ministries and line jobbers, and on the question of wage increase and standardisation for those performing the work of fancy jobbers. The appellant argued that an earlier award dated 1951 remained in force and that the reference of the matter to the Tribunal was therefore incompetent. The Tribunal, however, ordered wage standardisation based on the Bombay Scheme, accepted the claim concerning fancy jobbers, and directed that where existing wages exceeded those prescribed by the Bombay Standardisation Scheme, such higher wages should be retained and not reduced. The Tribunal further held that operatives who were designated differently from the Bombay list should receive pay comparable to workers described by any other name but performing identical work in Bombay. It also provided that any anomalies arising from the application of the scheme should be resolved by a committee comprising representatives of management and the registered union.

In its analysis, the Supreme Court held that the agreement following the earlier award did not constitute a settlement within the meaning of section 19(2) of the Industrial Disputes Act, and accordingly, the reference to the Tribunal was competent. The Court further observed that the Tribunal ought to have examined the applicability of the Bombay Standardisation Scheme to the conditions prevailing in Delhi by evaluating the evidence, and it should not have excluded evidence relating to the operation of the Bombay Scheme in Delhi. The Court criticized the Tribunal for not carefully considering the matter and for making modifications without proper scrutiny. Moreover, the Court stated that the Tribunal should not have delegated the determination and adjustment of anomalies arising from the application of the Bombay Scheme to a joint committee; instead, it should have resolved those issues itself. The Court further affirmed that, where standardisation is required, it may be necessary, if justice so demands, to protect individual workmen who were receiving wages higher than those prescribed by the standardisation scheme. Such protection, however, must be subject to three conditions: first, there can be no further increase in the wages of those protected by the standardisation scheme; second, if the standardisation scheme provides incremental scales, the protected workmen must receive wages that fall between the minimum and maximum of those scales, without entitlement to additional increments beyond that range; and third, the category of protected workmen should eventually cease to exist as a result of retirement or other termination of service. The Court concluded that the Tribunal’s direction, if read to protect existing higher wages in general rather than the higher wages of particular workmen, conflicted with the principles of wage standardisation. The judgment was delivered by Justice K. N. Wanchoo on the 2nd of May, 1962.

In the judgment, the Court explained that the Tribunal’s direction required that, according to each worker’s length of service, future wage increments should continue to be adjusted until the protected workers attained the appropriate position on the wage scale that corresponded with their service. The Court further stipulated that the category of protected workers would eventually be eliminated as those workers left service either by retirement or by other means. The Court held that the Tribunal’s direction could be understood as protecting the existing higher wages in a general sense rather than safeguarding the higher wages of specific individual workers. The Court found that such a general protection was inconsistent with the principles of standardisation. The judgment concerned Civil Appeal No. 104 of 1956, which was filed by special leave against the Award dated 29 December 1958 of the Industrial Tribunal, Delhi, in Industrial Dispute No. 36 of 1957, as published in the Delhi Gazette on 5 March 1959. Counsel for the appellant were G. B. Pai and I. N. Shroff, while counsel for the respondent were M. K. Ramamurthi, B. K. Garg, S. C. Agarwala, and D. P. Singh. The appeal was decided on 2 May 1962, with the judgment delivered by Justice Wanchoo. This appeal arose from an industrial dispute between Birla Cotton Spinning and Weaving Mills Limited (the appellant) and its workmen. Although many matters had been referred to the Industrial Tribunal, the present appeal focused on two principal issues: first, whether the wages of certain categories of workers needed to be increased and standardised, and what directions should be issued in that regard; and second, whether workers performing the duties of fancy jobbers should be designated as such and paid accordingly. The first issue was limited to mistries and line‑jobbers because other employees were covered by a separate award in another reference (No. 1‑D‑52 of 1957) between the same parties, an award that had previously been appealed to this Court and whose decision is reported in The Management of Birla Cotton Spinning and Weaving Mills Ltd. v. Its Workmen (AIR 1961 SC 1179). The Court had set aside that earlier award and remitted the case to the Tribunal for further proceedings, and the parties later reached a compromise. The workmen in the present reference, specifically the mistries and line‑jobbers, claimed that their wages were low, not standardised, and that despite having made representations to the appellant, no corrective action had been taken. Consequently, they sought an increase in wages, standardisation of their pay, and the introduction of incremental pay scales for their categories. Regarding the fancy jobbers, the workmen contended that they had recently been designated as assistant fancy jobbers despite performing the duties of fancy jobbers, and therefore argued that they should be redesignated as fancy jobbers with corresponding pay increases and standardisation. The appellant opposed these claims on several grounds.

The appellant contended that an earlier award dated 1951, issued by Shri Dulat, remained in force and therefore the present reference was legally incompetent. The appellant further argued that there was no comparable wage structure between Swatantra Bharat Mills and Delhi Cloth Mills on one side and the appellant’s mills on the other, so wages in those mills could not be used as a benchmark for fixing the appellant’s workmen’s wages. The appellant also urged that the textile industry did not contain any incremental wage scales, and consequently the claim for such scales should be dismissed. The appellant maintained that the workmen who had been designated as assistant fancy jobbers were correctly classified and therefore could not claim to be fancy jobbers. Finally, the appellant asserted that applying the Bombay standardisation scheme to its workmen was inappropriate because the conditions in Bombay differed in many respects from those in Delhi. The tribunal rejected the submission that the 1951 Dulat award had not been terminated, holding that the award was no longer operative and the reference was therefore competent. The tribunal observed that differences existed between Swatantra Bharat Mills and Delhi Cloth Mills and the appellant’s mills. It concluded that such differences were not material because variations between units of the same industry are inevitable, and therefore the wages in those mills were comparable. Concerning the claim for incremental wage scales, the tribunal held that no incremental scale had been provided in any textile industry standardisation scheme and consequently rejected the claim. The tribunal determined that those workers were in fact fancy jobbers who had previously been designated as such. Consequently, it ordered that they be designated as fancy jobbers.

Finally, the tribunal held that the Bombay standardisation scheme should be applied to the appellant’s mistries, line jobbers, and fancy jobbers. The tribunal directed that wherever existing wages exceeded those fixed under the Bombay scheme, the higher wages should remain unchanged and not be reduced. It further directed that any operative designated by a name not appearing in the Bombay list, or whose designation differed materially, should receive wages equal to those paid for identical work under the Bombay list. The tribunal emphasized that this wage equalisation principle aimed to ensure fairness across all categories of workers performing similar duties. The tribunal also suggested that a joint committee composed of management and union representatives be formed to investigate any anomalies arising from the application of the Bombay scheme. The committee was to examine discrepancies and report its findings to the tribunal for further action. The tribunal provided that, if the joint committee could not resolve a disagreement, the matter could be referred to the industrial tribunal through a regular reference made with mutual consent. Alternatively, an arbitrator mutually agreed upon by the parties could be appointed to decide the issue. The appellant subsequently challenged the award and reiterated the principal contentions that had been previously set out.

In the appeal the workmen challenged the tribunal’s award on five separate grounds. First, they contended that the reference was incompetent because the Dulat award of 1951 had not been terminated at the time the reference was made. Second, they argued that the tribunal erred in holding that the workers who had been called “assistant fancy jobbers” should continue to be designated simply as “fancy jobbers.” Third, they maintained that the tribunal was wrong to apply the Bombay standardisation scheme to the appellant’s employees without giving the appellant an opportunity to present evidence showing the differences between the conditions prevailing in Bombay and those existing in Delhi, a difference that, in their view, required a modification of the scheme before it could be applied to their workmen. Fourth, they asserted that directing the formation of a joint committee to investigate the anomalies did not actually resolve the dispute referred to the tribunal and would inevitably give rise to further disputes. Finally, they claimed that the tribunal’s direction that “wherever the said existing wages are higher than those fixed under the Bombay standardisation scheme, they shall remain, and shall not be lowered” ran contrary to the fundamental principle on which standardisation schemes are based.

The Court first addressed the argument concerning the alleged incompetence of the reference on the basis of the Dulat award. It noted that this question had already been examined in an earlier judgment and that the earlier decision had rejected the contention. The Court explained that the Dulat award itself had held that there was no justification for delaying standardisation and had ordered the parties to devise a scheme using Bombay award No 1 as a model. In compliance with that direction the parties prepared a scheme and reached an agreement on 29 September 1951. The appellant argued that this agreement became part of the Dulat award, and because the award was only terminated in November 1956 while the present reference was made on 3 March 1956, the award should have rendered the reference incompetent. The Court rejected this claim on two grounds. First, it held that the 1951 agreement could not be regarded as forming part of the Dulat award; consequently the award could not affect the competence of the reference even if it had not been terminated before the reference was made. Second, the Court observed that the 1951 agreement did not amount to a settlement within the meaning of section 2(p) of the Industrial Disputes Act, 1947, as it stood in 1951, and therefore the provisions of section 19(2) did not apply to that agreement. On the basis of these reasons the Court concluded that the appellant’s contention that the reference was incompetent because the Dulat award was still in force must fail, and it dismissed that particular ground of challenge. Regarding the second ground, the Court affirmed that the tribunal was correct in holding that the workers who had recently been termed “assistant fancy jobbers” should continue to be designated as “fancy jobbers,” thereby rejecting the appellant’s second contention as well.

In this case the workmen who had formerly been described as “fancy jobbers” were later referred to by the tribunal as “assistant fancy jobbers.” The tribunal examined the whole body of evidence concerning this change of terminology, including the testimony of the workmen and the records of the employer. After a detailed review, the tribunal concluded that the term “assistant fancy jobbers” was not a genuine new classification but was merely a device intended to lower the status of this class of employees. The Court agreed with that view, holding that the assistant fancy jobbers should continue to be designated as fancy jobbers, exactly as they had been before the change. The Court therefore found that the argument seeking to uphold the new label was untenable and dismissed the contention that the re‑designation was lawful or justified.

The tribunal’s approach to the broader dispute was also examined. The tribunal appeared to have followed its earlier award numbered ID 52 of 1957 when it applied the Bombay standardisation scheme to mistries, line jobbers, and fancy jobbers. That earlier award had been set aside by this Court in a previous judgment on several grounds, and the Court noted that it need not repeat those reasons. The Court affirmed that the same reasons applied fully to the present award because the present award likewise introduced the Bombay standardisation scheme for the workmen involved in the current dispute. The appellant had sought to adduce evidence about the operation of the Bombay scheme and had proposed to call two witnesses, one from Bombay and one from Kanpur, to testify on that subject. However, by an order dated 6 January 1958, the tribunal held that examining those witnesses was unnecessary given the conditions prevailing in Delhi, the region under its jurisdiction. Despite refusing to hear the proposed evidence, the tribunal nevertheless adopted the Bombay standardisation scheme in its entirety, without any modification, when issuing its award, relying on its earlier award as authority. The Court expressed the view that it was unfair for the tribunal to exclude the appellant’s evidence on the Bombay scheme and then apply that scheme without alteration to the appellant’s mill. The tribunal also justified its use of the Bombay scheme by stating that the scheme was applicable to the same class of workmen in the Delhi Cloth Mills and the Swatantra Bharat Mills. The Court found that this justification was not supported by the evidence presented by the two witnesses from those mills. The first witness, Manoharlal (W.W. 19), a labour officer of the Bharat Mills, testified that the Swatantra Bharat Mills had voluntarily adopted the Bombay standardisation scheme for its workers in the matter of wage payment, but that the scheme had not been applied to mistries and jobbers. The tribunal apparently interpreted this statement to mean that the Bombay scheme applied to mistries and jobbers, although Manoharlal had expressly said otherwise. The Court therefore concluded that the tribunal’s reliance on the Bombay standardisation scheme was improper in view of the rejected evidence and the earlier setting aside of the 1957 award.

It was noted that Manoharlal had testified that, for certain categories of mistries and jobbers, Swatantra Bharat Mills paid wages that exceeded the amounts specified in the Bombay standardisation scheme; however, his evidence did not establish that the Bombay scheme was applicable to every mistry and jobber employed by that mill. The second witness, B. L. Saxena, who served as the labour officer in the Delhi Cloth Mills, observed that the wages of line jobbers and mistries were, in some instances, higher than those under the Bombay scheme and, in other instances, were equal to them. Nevertheless, Saxena also affirmed that the line jobbers and mistries at Delhi Cloth Mills had not been placed under the Bombay standardisation scheme. From the combined testimony of both witnesses, the Court concluded that there was no single fixed wage grade for mistries and jobbers; each individual received a pay rate that could be described as his own. Consequently, while a particular jobber or mistry might sometimes receive wages higher than or equal to those prescribed by the Bombay scheme, this did not demonstrate that the Bombay standardisation scheme, in its entirety, had been applied to the mistries and jobbers of the two Delhi mills. Accordingly, the tribunal’s finding that the Bombay scheme should be applied to the appellant mills, based on a comparison with the other two Delhi mills, was deemed erroneous. The tribunal’s award concerning the “fancy jobbers” further illustrated the unfair manner in which the Bombay scheme was applied. After correctly classifying assistant fancy bobbers as fancy jobbers, the tribunal proceeded to order that these fancy jobbers be paid according to the Bombay standardisation scheme without a thorough examination of that scheme. The copy of the scheme produced before the Court shows that the Bombay scheme categorises fancy work into three classes: head fancy jobber, fancy jobber and assistant fancy jobber. Therefore, before deciding to apply the Bombay scheme, the tribunal should have compared the work performed by the fancy jobbers in the appellant mills with the work performed by either fancy jobbers or assistant fancy jobbers under the Bombay scheme, and then determined whether each individual fell within the designation of fancy jobber or assistant fancy jobber, or possibly some under one category and some under the other. The Court was of the view that the tribunal’s handling of the case was perfunctory, even though the tribunal claimed it was merely following its own earlier award. The Court further held that, if the Bombay standardisation scheme were to be applied to the appellant mills for the workmen involved in the present appeal, the tribunal must reconsider the matter carefully, examine the scheme in detail, and decide whether the scheme should be applied in full or modified to reflect the differences between conditions in Bombay and those in Delhi, covering all the workmen in dispute, namely the line jobbers, mistries and fancy jobbers.

In the present appeal the Court instructed that the tribunal must re‑examine the questions concerning the workmen again, following the guidance set out in the Court’s earlier judgment. The tribunal is required to determine whether the Bombay standardisation scheme should be applied in its entirety to the appellant‑mills for the workmen involved in the dispute, or whether any modification is necessary because of the differences between the conditions that exist in Bombay and those that exist in Delhi. This instruction extends to every category of workman who is part of the appeal, namely the line jobbers, the mistries and the fancy jobbers. Consequently the Court expressed the opinion that the appeal should be allowed and that the matter be remitted to the tribunal for reconsideration in accordance with the directions previously articulated by the Court.

Regarding the tribunal’s earlier direction that a joint committee should be constituted to investigate the so‑called “anomalies,” the Court referred to its earlier judgment where a similar direction had been examined. In that earlier judgment the Court observed that, by delegating the matter to a joint committee, the tribunal had effectively left a portion of the dispute to be settled by the parties themselves, thereby failing to fulfil the function that the tribunal itself was required to perform under the terms of reference. For this reason the Court set aside the direction to appoint a joint committee and ordered that the tribunal must address the issue directly, either on its own or with the assistance of assessors if it deems such assistance necessary, before deciding whether to apply the Bombay standardisation scheme in full or with appropriate modifications to the workmen employed in the appellant‑mills.

The Court then turned to the last point raised by the appellant, namely the tribunal’s direction that wherever the existing wages are higher than those prescribed by the Bombay standardisation scheme, such wages shall remain unchanged and shall not be reduced. The appellant objected to this direction. The Court recalled a similar direction in an earlier award and reproduced its own observation made at page 1182 of that award. The Court noted that when a standardisation scheme comes into force it operates as an integrated whole and may inevitably result in some categories of workmen receiving lower remuneration than they previously earned. The purpose of a standardisation scheme, the Court explained, is to bring wages to a uniform level: wages that are low must be raised to the standardised rate, and wages that are high must be reduced so that they fit within the scheme. Accordingly, the tribunal was clearly wrong in contravening this basic principle by ordering that wages should be increased where they were low but should not be decreased where they were high. The Court emphasised that this principle of standardisation is well‑established and even the counsel appearing for the workmen had conceded its correctness. The respondents, however, submitted that these remarks might be misunderstood.

It was observed that the wording of the earlier decision might suggest that a tribunal is barred from safeguarding the wages of individual workmen who happen to be receiving more than the amount prescribed by a standardisation scheme at the moment the scheme becomes operative. The respondents acknowledged the fundamental principle of a standardisation scheme as articulated by the Court, yet they argued that while, after the scheme’s commencement, management may not legally pay wages exceeding the scheme’s rates, this principle does not automatically compel a reduction of the wages of those employees who, at that point, were already earning a higher amount. The respondents maintained that the tribunal retains the authority to protect the higher wages of such workmen, even though, once the scheme is in force, the employer cannot lawfully grant higher wages to any newly employed person. Conversely, the appellant contended that the moment a standardisation scheme is implemented, the wages of all individuals receiving more than the scheme‑prescribed amount must be reduced, and that a tribunal lacks the power to preserve those higher wages. In support of this view, the appellant relied on the decision in Daru v. Ahmedabad Spinning and Manufacturing Company Limited (1) (1955) 1 L. L. G. 355. In that case, the Bombay High Court examined the principles governing a standardisation scheme while referring to the report of the Textile Labour Inquiry Committee and to Dr. D. R. Gadgil’s treatise “Regulation of Wages and Other Problems of Industrial Labour in India.” The Court noted that when an industry exhibits widely divergent wages, with a substantial gap between the highest and lowest rates, the initial step is to fix a minimum wage positioned roughly between those extremes. However, where wages within a particular occupation are relatively uniform, the tribunal may proceed to standardise them, because any reduction in pay to certain workers would be modest and, given the objective of ensuring equal pay for equal work, such standardisation would ultimately serve the interests of labour. The Court affirmed that the soundness of these principles is not in dispute and that their validity becomes evident when applied to the factual matrix of the case.

In the earlier case a standardisation scheme had been introduced in 1948, and it applied to a group of cotton mills. In 1951 one of those mills created a new production section, and the wages for the workers in that section were also intended to fall under the existing standardisation scheme. However, the mill fixed the wages for the new section at a level that was higher than the rates prescribed by the standardisation scheme. Two years later, in 1953, the mill issued a notice to the work‑men of that section stating that their wages would be reduced so that they would conform to the rates laid down in the standardisation scheme. The work‑men objected to the reduction, contended that the higher rates had been lawfully fixed, and the disagreement gave rise to a dispute that was brought before the High Court. The High Court held that, because the standardisation scheme had been in force since 1948, the employer could not lawfully pay wages higher than those fixed by the scheme in 1951; the purpose of the scheme was to ensure that workers performing the same job received equal remuneration, and any wages above the scheme rates had to be brought down to the scheme level. The Court observed that the earlier decision did not address the protection of individuals who might already be receiving more than the scheme rate at the moment the scheme came into operation; the observations of the High Court must therefore be read in that limited context, and the principles underlying a standardisation scheme remain sound. The respondents argued that the tribunal’s protection in that case was confined solely to work‑men whose wages exceeded the scheme rate at its commencement, and that such a direction was proper and not barred by any legal rule. The Court found that it would not contravene the basic principle of standardisation to allow the tribunal to protect the wages of individual work‑men who, at the time the scheme is introduced, are being paid more than the prescribed rates. Accordingly, the decision placed the discretion with the tribunal to decide whether to issue a protective direction for such individuals; if the tribunal declines to do so, the work‑men will have no protection and their wages will have to be reduced to the scheme level, whereas the tribunal may, if it deems it just, issue a direction safeguarding those higher wages even though they exceed the rates fixed by the standardisation scheme.

The Court explained that when a standardisation scheme is introduced, any decision to protect workmen who are already receiving wages above the rates fixed in the scheme must satisfy three essential conditions. First, after the scheme becomes operative, management may not raise the wages of those protected workmen any further, because any such increase would violate the principle of standardisation. Second, if the scheme establishes an incremental wage scale and a protected workman is presently earning an amount that lies between the minimum and maximum of that scale but, according to his length of service, he is entitled only to a lower grade, the excess portion of his current wage must be absorbed into future increments until he is correctly placed on the scale in line with his service length. Third, when any workman’s service terminates for any reason, no other employee—whether newly appointed or existing—may claim the higher wage that the departing employee was receiving on the basis that a vacancy with that higher pay has arisen. Subject to these three stipulations, the Court held that a tribunal could lawfully protect the wages of individual workmen even though those wages exceed the amounts fixed in the standardisation scheme at the time the scheme is introduced. Turning to the tribunal’s actual order, the tribunal directed that “wherever the said existing wages are higher than those fixed under the Bombay standardisation scheme, they shall remain, and shall not be lowered.” The Court observed that this direction did not constitute protection of individual workmen but rather protection of wages that exceed the scheme rates, which the Court considered inconsistent with the fundamental principles of a standardisation scheme as articulated in earlier precedent. The effect of the tribunal’s direction, according to the Court, would be to preserve a particular post with higher wages, allowing future incumbents to claim that higher pay on the ground that the wages had been protected. The Court noted that the appropriate method of protection, if the tribunal believes justice requires safeguarding individuals who receive higher wages than those prescribed by the scheme, would be to fix such individuals’ wages according to the scheme and to pay the difference, if any, as personal remuneration for as long as they remain in service. Once such an individual leaves service, a successor would not be entitled to the personal pay previously enjoyed and would be placed under the standard scheme rates. The direction, however, of the tribunal in this case is capable

The Court observed that the tribunal’s direction was framed not for the protection of individual workmen but for the protection of wages, and that such an approach could not be reconciled with the basic principles that govern a standardisation scheme. Consequently, the Court held that the order directing protection of the existing wages, in the form in which it was issued by the tribunal, must be set aside. At the same time, the Court left it to the tribunal, when the matter is referred back for reconsideration, to decide whether it is just to protect individual workmen even if a standardisation scheme is introduced, in the manner previously indicated by the Court. Accordingly, the Court allowed the appeal and partially set aside the tribunal’s order with respect to the specific matters addressed during this judgment. The Court directed the tribunal to rehear the reference and to reconsider, in the light of both this judgment and the earlier judgment, what its award should be concerning miseries, line‑jobbers and fancy jobbers, in relation to the term of reference: “Whether the wages require to be increased and standardised, and what directions are necessary in this respect.” The parties were given liberty to lead further evidence on any issue that is sent back for reconsideration, as they deem appropriate. In the circumstances, the Court ordered each party to bear its own costs and recorded that the appeal was allowed.