PETITIONER:
UNION OF INDIA & ANR.
Vs.
RESPONDENT:
MAJUR MAHAJAN MANDAL & ORS.
DATE OF JUDGMENT16/12/1976
BENCH:
GOSWAMI, P.K.
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 714 1977 SCR (2) 472
1977 SCC (1) 548
ACT
Additional Emoluments (Compulsory Deposit) Act, 1974--s.
2(b)--"Sanctioned" meaning of.
HEADNOTE
Section 2(b) of the Additional Emoluments (Compulsory
Deposit) Act, 1974 defines additional dearness allowance to
mean such dearness allowance as may be sanctioned from time
to time after the appointed day, i.e., July 6, 1974 over and
above the amount of dearness allowance payable in accordance
with the rate in force immediately before the date from
which such sanction of additional dearness allowance is to
take effect. Section 6(2) (b) enjoins on the employer the
duty to make deductions and to remit to the nominated au-
thority additional dearness allowance from the emoluments
disbursed after the appointed day. Section 115A of the
Bombay Industrial Relations Act, 1946 provides that if any
agreement is arrived at between the employer and employees
who are parties to an industrial dispute pending before the
industrial court, the award in such proceeding shall be made
in terms of such agreement, except in certain circumstances
stated therein.
As a result of negotiations between the employers and
employees a settlement was entered into between the parties
on June 28, 1974 enhancing the dearness allowance with
retrospective effect from January 1, 1974. The Indus-
trial Court before which certain disputes were pending
gave the award conformity with the settlement sometime
in August-September, 1974. Arrears of dearness allowance
were paid after the appointed day.
In a petition under Article 226 of the Constitution by
the employees’ Union, the High Court issued a writ re-
straining the employers from effecting any deduction from
the arrears of D.A. payable to the employees on the basis of
the settlement and granted certain other reliefs.
In appeal it was contended that since the settlement of
June 28, 1974 could not be effective prior to the award
made in August-September 1974 additional dearness allow-
ance could be said to be sanctioned only after the award and
so the provisions of s. 2(b) would be attracted.
Dismissing the appeal
HELD: One of the components of cl. 2(b) namely, that the
additional dearness allowance is that part of the D.A.
which is sanctioned after the appointed day, is absent
since there was no sanction for any rise in dearness
allowance after the appointed day. [477 G]
(1) According to s. 115A of the Bombay Industrial Rela-
tions Act if the conditions enumerated therein did not
exist the award "shall be made" in terms of the settle-
ment. Since the settlement in this case had merged in the
award, the terms of the award are those specified in the
settlement. The sanction of the award in such a case was
the sanction under the settlement and since the settlement
was prior to the appointed day, additional dearness allow-
ance could not be said to be sanctioned after the appoint-
ed day. [476 F & H]
In the instant case the Industrial Court having passed
the award in conformity with the terms of the settlement,
the award came into operation on the date specified in it.
(2) Sanction must have relevance to the reality of the
transaction between the parties. Increased dearness
allowance payable between January 1, 1974 and July 5, 1974
was sanctioned prior t.o the appointed day. Once it is
found that the sanction was prior to the appointed day, s.
2(b) would not be attracted.
[4 77
C & F]
473
(3) From the definition of "additional wages" in s. 2(c)
it is clear that the Act recognises agreements and settle-
ments in the same way as awards of Tribunals. Any wage
revision "whether by or under an agreement or settlement
between the parties or any award" comes within the sweep of
the definition clause. Agreements and settlements are
distinctly mentioned along with awards. Settlement is a
type of sanction recognised under the Act. There is there-
fore sufficient warrant under the Act to give effect to the
sanction by voluntary settlement in respect of D.A. When
there is no ambiguity in the word "sanctioned" in s. 2(b)
recourse to the aim and object of the Act is not called for.
[478 A-B]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 690 of 1976.
Appeal from the Judgment and Order dated the 16th December,
1975 the Gujarat High Court in Special Civil Appln. No.
571/75.
G.S. Sanghi and Girish Chandra for the Appellants.
V.M. Tarkunde, K.L. Hathi and Mrs. P.C. Kapur for Re-
spondent No. 1.
The Judgment of the Court was delivered by
GOSWAMI, J. This appeal on certificate is from the
judgment of the High Court of Gujarat. The appellants 1 and
2 are respectively the Union of India and the Regional
Provident Fund Commissioner. The 1st respondent is Majur
Mahajan Mandal (hereinafter to be described as the union), a
registered trade union representing the majority of the
textile workers of the five textile mills of Baroda (re-
spondents 2 to 6) who are not represented before us and who
will be described hereinafter as the mills,
Since some time in 1973, industrial disputes in respect
of dearness allowance (D.A.) had been pending between the
union and the mills in five references before the Industrial
Court, Gujarat, being Reference Nos. 406, 407, 408, 409 and
421 of 1973. The rate of D.A. for the employees in the
cotton textile industry in Ahmedabad had earlier been fixed
by an award of an industrial Tribunal which will be referred
to hereinafter as the Ahmedabad Rate. The prevalent D.A. in
1973 in the mills with which we are concerned was 90% of the
Ahmedabad Rate. The union was raising the aforesaid disputes
for increasing the D.A. to 100% of the Ahmedabad Rate with
effect from October 1, 1972. Hence the above references were
pending before the Industrial Court.
As a result of negotiations between the parties during
the pendency of the said disputes before the Industrial
Court D.A. was agreed to be paid at the rate of 95% of the
Ahmedabad Rate of D.A. with effect from January 1, 1974, as
will appear from an interim award of the Industrial Court
dated June 21, 1974. Thereafter by further negotiations the
disputes regarding D.A. were finally resolved by the mills
and the union entering into a settlement on June 28, 1974,
by fixing D.A. at 100% of the Ahmedabad Rate with effect
from January 1, 1974. Awards were later made bY the Court in
conformity with the said settlement in the pending disputes
some time in August and September, 1974.
It is not disputed that the workers of the mills in
pursuance of the settlement of the disputes received D.A. at
100% of the Ahmedabad Rate retrospectively with effect from
1st January, 1974. It may even be assumed that the arrear
D.A. for the past period from January
474
1, 1974, was paid to the workers in August or perhaps. even
later, that is to say, after 6th July, 1974, the signifi-
cance of which date we will immediately see.
While the aforesaid disputes were pending before the
Industrial Court, The Additional Emoluments (Compulsory
Deposit) Act 1974 (briefly the Act), replacing the earlier
Ordinance on the subject, came into force retrospectively
from 6th July, 1974, the appointed day, under the Act. This
Act was passed as the preamble says, "to provide, in the
interests of national economic development, for the compul-
sory deposit of additional emoluments and for the framing of
a scheme in relation thereto, and for matters connected
therewith or incidental thereto".
The employees to whom the Act is applicable are classi-
fied into three categories, namely, employees of the Govern-
ment, of local authorities and other employees.
The principal object of the Ordinance and later of the
Act is to control the menacing inflationary trend which has
been the bane of the country’s economy. On the one hand
there has been persistent demand from employees for revi-
sion of wages and increase of D.A. on account of the high
cost of living and on the other the State has to tackle the
national problem of mounting pressure of inflationary
forces. While, therefore, meeting with the demands for rise
in emoluments, simultaneously, steps with equal force had to
be taken so that the additional amounts disbursed do not
immediately flow to the market adding a further fillip to
inflation. The Ordinance and later the Act thus provide for
compulsory deposit for a period of one year of the whole of
the additional wages and for a period of three years of half
of the additional D.A.
The additional emoluments earned are thus impounded
under the Act and are not immediately available to the
employees for instant consumption. The Act provides a
scheme of beneficial forced saving and the deposited amounts
will be finally repaid to the employees in different ways
specified in the Act with interest at 21/2% over and above
the Bank deposit rate.
Before we proceed further we may note some of the provi-
sions of the Act material for our purpose:
By section 2(a) of the Act "appointed day" means the 6th
day of July, 1974".
By section 2(b) "’additional dearness allowance’ means
such clearness allowance as may be sanctioned from time to
time, after the appointed day, over and above the amount of
dearness allowance payable in accordance with the rate in
force immediately before the date from which such sanction
of additional dearness allowance is to take effect".
* * * *
By section 2(e) "’dearness allowance’ means all cash
payments, by whatever name called, made to an employee on
account of rise in
475
the cost of living". Under section 2(g) "’emoluments’
include wages and dearness allowance".
Under section 5 every specified authority (herein the
employer) shall open two separate accounts, namely, the
Additional Wages Deposit Account and the Additional Dearness
Allowance Deposit Account. The employer shall open a sepa-
rate ledger account in the name of each employee. Section
6(2)(b) of the Act enjoins on the employer a duty to make
deductions and to remit to the nominated authority addition-
al wages and additional D.A. from emoluments disbursed after
the appointed day. In the case of additional wages it will
be the whole amount and in the case of additional D.A. it
will be half of it.
It is common ground that the Act applies to the mills which
are the "employers" under the Act and also "specified au-
thorities" under the Additional Emoluments Compulsory Depos-
it (Employees other than employees of Government and Local
Authorities) Scheme, 1974, which is made under section 10 of
the Act.
The union applied to the High Court under Article 226 of the
Constitution for a writ of mandamus or other suitable order
to permanently restrain the mills from effecting any deduc-
tion from the arrears of dearness allowance payable to their
employees from January to June 1974 on the basis of the
settlement of 28th June, 1974. There was a further prayer
to permanently restrain the mills from treating the base for
calculation of additional D.A. at a rate less than the
agreed 100% of the Ahmedabad Rate and to direct the mills
not to deduct or deposit 21/2% of D.A. per month payable to
each employee treating the same as not being additional D.A.
within the meaning of section 2(b) of the Act. Lastly there
was a prayer for refund of the amount already deducted by
the mills. The High Court allowed the writ application and
also granted certificate to appeal to this Court.
The appellants contend that 100% of the Ahmedabad Rate
of D.A. to the workers was sanctioned after the appointed
day, that is to say after 6th July, 1974, when the awards
were made between August and September 1974 in pursuance of
the settlement of June 28, 1974. The claim of the appellants
is two-fold: First, since the increased D.A. to the work-
ers was sanctioned after the appointed day, only when the
awards were made, the difference between the increased D.A.
at 100% of the Ahmedabad Rate and the prevailing rate pay-
able in arrears from 1st January, 1974 to 30th June, 1974,
will be additional D.A. in terms of section 2(b) of the Act
and is, therefore, subject to deduction of 50% of the same.
Second, for future deductions of additional D.A., after the
appointed day, the base for calculation of additional D.A.
should be 95% of the Ahmedabad Rate of D.A. which was pre-
vailing prior to 6th July, 1974, in terms of the interim
award of 21st June, 1974. In other words, for future
deductions of additional D.A. after 6th July, 1974 the
appellants claim that the workers should be treated as if
they were in receipt of D.A., prior to the appointed day, at
95% of the Ahmedabad Rate which had been in force in terms
of the interim award of 21st June, 1974, which is the earli-
er sanction for the 95% rate. Hence, 2 1/2% (that is 50% of
5% being the difference between 95% and 100%) of the same
will be liable for deduction under the Act from 6th July,
1974. According to the appellants, the benefit of 100% was
available only after the making of the awards which was,
thus, sanctioned after
476
the appointed day notwithstanding the fact that the settle-
ment had been entered upon on 28th June, 1974. Section 2(b)
will, therefore, be clearly attracted, according to the
appellants.
It is submitted by the appellants that the word "sanc-
tioned" in the definition of ’additional dearness allowance’
under section 2(b) is very significant. It is contended
that the settlement during the pendency of an industrial
dispute before the industrial Court has to be approved by
the Court before it can be said to be sanctioned within the
meaning of the provisions of section 2(b). Reference is made
to section 115A of the Bombay Industrial Relations Act,
1946. That section, so far as it is material for our pur-
pose, provides that if any agreement is arrived at between
an employer and the union which are parties to an industrial
dispute pending before an Industrial Court the award in such
proceeding shall be made in terms of such agreement unless
the Industrial Court is satisfied that the agreement was in
contravention of any of the provisions of the Act or the
consent of either party to the agreement was caused by
mistake, misrepresentation, fraud, undue influence, coercion
or threat. Relying on section 115A, it is submitted by the
appellants, that unless the award is made in pursuance of
the settlement under the said section the settlement is
inchoate and cannot be said to be effective, in law, prior
to the making of the award which was done, in the instant
case, between August and September 1974. It is, therefore,
submitted that the additional D.A. can be said to be sanc-
tioned only under the award which was made admittedly after
the appointed day, that is after July 6, 1974.
We are unable to accept this contention. It is true
that an agreement arrived at between the parties during the
pendency of an industrial dispute before the Industrial
Court has to be placed before that Court. It is also true
that if the Industrial Court is satisfied that certain
conditions enumerated in section 115A exist it will not
recognise the settlement and dispose of the dispute in
accordance with law. If, however, the conditions enumerated
in section 115A do not exist the award "shall be made" in
terms of the settlement. There is no. other option.
In this particular case the settlement was placed before
the Industrial Court which ultimately passed the awards in
conformity with the terms of the settlement. We are not
required to consider a case where the Industrial Court has
not approved of the settlement under section 115A.
Once, therefore, the award is made in terms of the
settlement, under section 75 of the Bombay Industrial Rela-
tions Act, the award shall come into operation on the date
specified in the award or where no such date is specified
therein on the date on which it is published under section
74. We are informed that the awards have not yet been
published but that should not detain us in this case. It is
common ground that the awards were in terms of the settle-
ment which had retrospective operation from January 1, 1974.
Since the settlement has merged in the awards the terms
of the awards are those specified in the settlement. It is
those dates which
477
are, therefore, specified in the awards and, under section
75 of the Bombay Industrial Relations Act, the awards came
into operation with effect from January 1, 1974. The sanc-
tion of the awards in such a case is the sanction under the
settlement and since the settlement was prior to July 6,
1974, the additional D.A. cannot be said to be sanctioned
after the appointed day. 100% of the Ahmedabad Rate of D.A.
will be payable to the workers with effect from January 1,
1974 and the sanction for that rise was on 28th June, 1974,
the date of the settlement which was prior to the appointed
day.
Sanction must have relevance to the reality of the
transaction between the parties. The settlement of 28th
June, 1974, makes the increased D.A. of 100% payable with
effect from January 1, 1974. Hence the said rate of in-
creased D.A. which was payable to the workers between Janu-
ary 1, 1974 and July 5, 1974, was sanctioned prior to the
appointed day.
We have already noted the definition of additional D.A.
in section 2(b) which is an integrated definition. The
definition clause has twin components both of which will
have to be satisfied in order that a particular amount can
be held to. be additional D.A. To put it clearly the two
components are--
( 1 ) additional D.A. is that part of the
D.A. which is sanctioned after the appointed
day; and
(2) which is over and above what was
payable immediately before the date from which
sanction of the particular rise in D.A. is to
take effect.
With regard to the first component any unilateral deci-
sion to increase the D.A. or a bilateral settlement for its
increase, to take only two instances, must take place after
the appointed day.
It is manifest that if the sanction is after the appointed
day it is then only the question of additional D.A. will
arise within the meaning of section 2(b). Once it is found
that the sanction of rise in DA. is prior to the appointed
day, section 2(b) will not at all be attracted. In that
event it will not be necessary even to. consider the second
component of the definition mentioned above. In the instant
case we have already held that the rise in D.A. to 100% of
the Ahmedabad Rate of D.A. was sanctioned under the settle-
ment of 28th June, 1974, that is, before the appointed day.
One of the principal components of the definition clause
is, therefore, clearly absent in this case since there is no
sanction for any rise in D.A. after the appointed day.
We should observe that this is not a case where Explana-
tion-I to section 2(b) is applicable.
Mr. Singhvi for the appellants submits that in view of
the aim and object of the Act the Court should lean in
favour of an interpretation advancing the remedy by constru-
ing the word "sanctioned" in section 2(b) to .mean sanc-
tioned by the award and not by the settlement. We have
already given our reasons for our inability to accept this
submission. One other reason may be added.
478
The Act recognises agreements and settlements in the
same way as awards of Tribunals, vide, section 2(c). The
definition of "additional wages" under section 2(c) clearly
points to that. Any wage revision "whether by or under an
agreement or settlement between the parties or any
award .... "comes within the sweep of the aforesaid defi-
nition clause. Agreements and settlements are separately
and distinctly mentioned along with awards. Settlement is a
type of sanction recognised under the Act. There is, there-
fore, sufficient warrant under the Act to give effect to the
sanction by voluntary settlement in respect of D.A. when
the same has never been repudiated by any of the concerned
parties. When there is no ambiguity in the word "sanctioned"
in section 2(b), recourse to the aim and object of the Act
is not even called for in this case.
Both the contentions of the appellants, therefore, fail
on the solitary. ground, namely, that the particular sanc-
tion of additional D.A. in this case is not after the ap-
pointed day. The appeal is dismissed with costs.
P.B .R.
Appeal
dismissed.
479