Holding

Dearness allowance for the Kanpur workmen must be linked to the all‑India consumer price index for Kanpur (base 1960=100) after applying the conversion factor of 4.83; a uniform all‑India CPI linkage is impermissible and the collusive settlement cannot be the basis for revision.

Summary

The case involved workmen of Indian Oxygen Ltd.'s Kanpur unit represented by the Karamchari Union demanding an upward revision of dearness allowance linked to the consumer price index for Kanpur, while the company had unilaterally imposed a scheme linking allowance to the all‑India average CPI after a settlement with the rival Shramik Sangh. The Industrial Tribunal awarded dearness allowance based on the all‑India CPI for Kanpur but ignored the conversion factor of 4.83 required to adjust the index. The company argued that the settlement was binding on all workmen and that uniform all‑India linkage was appropriate. The Supreme Court held that dearness allowance must be linked to the all‑India CPI for Kanpur after applying the conversion factor of 4.83, rejecting the notion of uniformity across disparate centres and deeming the settlement collusive and not a proper basis for revision. It emphasized the industry‑cum‑region principle, noting that dearness allowance is tied to the cost‑of‑living in the specific work location. The Court also found the Tribunal erred in overlooking the conversion factor and in treating the collusive settlement as the starting point for revision. Consequently, the appeal was partly allowed, modifying the Tribunal's award accordingly.

Issues considered

Whether dearness allowance for workmen at a specific unit should be linked to the all‑India average consumer price index or to the consumer price index of the specific centre with an appropriate conversion factor.
Whether a settlement between the employer and one union can bind members of another union and serve as the basis for adjudicating the dispute.
Whether uniform dearness allowance across all units of an all‑India concern is permissible under labour law.
Whether the Industrial Tribunal erred by ignoring the conversion/linking factor in its award.

Legislation cited

U.P. Industrial Disputes Act, 1947s. 4(k)

Subjects

dearness allowanceindustry-cum-region principleuniformityconsumer price indexcollusive settlementindustrial disputewage revisionlabour lawU.P. Industrial Disputes Act

Judgment

Ill

WORKMEN EMPLOYED BY
INDIAN OXYGEN LTD. A
v.

INDIAN OXYGEN LTD.

May 2, 1985 B
[D.A. DESAI, V. BALAKRISHNA ERADI AND
V. KHALID, JJ.]
Labour and Servlces-U.P. Industrial Disputes Act 1947~1ndustrial
Undertaking an all-lndia concern-Unit of a multi-national Company-Dearness C
allowance-Uniformity in dearness allowance for workmen of various units based
on all-India average conswner price index-Whether destructive of concept of
'equality'.

'DearnesJ al/owance'-Formula/or a fair and just dearness a/lowanc~
Principles of-Revision of dearness allowance-When arises-Industry-cum-region
principle-Application of-·Adjudication and linking of conversion factor- D
emphasised.

Settlement between n1anagement and one of the Unions-Whether could be
starting point of revision of dearness formula-Dearness allowance-Linked to
cost of living index in the centre where the workn1an is ernployed-Neutralisa-
tion-Application of industry-cun1-region principle. E
In the respondent-Company there were two rival Unions of workmen,
namely, Kararnchari Union and Sharmik Sangh. The Karamchari Union

- espoused the demand of the workmen employed by the Company in its Kanpur
unit for upward revision of dearness allowance following an award of the
Industrial Tribunal Delhi by which the dearness allowance of the workmen
employed in the Delhi unit was Jinked to the consun1er price index for Delhi
prepared by Labour Bureau, Simla, which substantially increased the dearness
F
allowance of workmen posted at Delhi. The Company in its attempt to thwart
the demand being pursued by the Kararnchari Union, entered into a settlement

- with the Shramik Sa11gh in respect of dearness allowance and then approached
the Labour Commissioner for registering the settlement Failing to obtain the
registration, the Company utilaterally enforced the new scheme of dearness
allowance linked to a11-Jndia average consumer price index prepared by Labour
Bureau, Simla. The Karamchari Union did not accept the revised formula
G

and presSed its demand. The dispute was referred for adjudication.

Before the Tribunal the Company contended : (I) that the settlement
would be binding on the members of the Karamchari Union and the dispute H
does not require adjudication on merits, and (2) that the Company is desirous
of linking dearness allowance to all-India averaie consumer price index for
112 SUPREME COURT REPORTS (1985] SU PPL. s.c.a.
working class with base 1960-100 and the Tribunal should avoid accepting the
A demand of a few workmen.

The tribunal directed that tho workmen of the Kanpur unit of the Com-
pany should be paid dearness allowance linked to the all-India consumer price
index (1960-100) for Kanpur Centre compiled by the Labour Bureau, Simla.
On the question of neutralisation, no change was allowed.

B Partly allowing the appeal of the workmen,

HELD : I. The workmen of the Kanpur unit of the Company should be
paid the dearness allowance according to all-India consumer price index
number for Kanpur (1960-100) compiled by Labour Bureau Simla after
applying conversion factor also called the linking factor of 4.83. Their dear-
c ness allowance cannot be linked to all-India average consumer price index.
[125 B·CJ

2. The Tribunal Committed a grave error in accepting collusive settle-
ment as the starting point of the revision. (122 HJ
J
3, Uniformity, to an uninformed mind, appears to be attractive. But,
D sometimes uniformity a1nongst dissimilar persons becomes counter-productive.
Uniformity and equality have to be an1ongst equals measured by a common
denominator. The implementation or the Constitutional aspiration of 'equal
pay for equal work' can be appreciated. In the matter of basic wages it is a
consummation devbutely to be wished. But when it conies to dearness
allowance any attempt at uniformity between workmen in metropolitan areas
E and in smaller centres would be destructive of the concept of dearness
allowance. [116 G·HJ

Dearness allowance is directly related to the erosion of real wages by
..
-
constant upward spiraling of the prices of basic necessities and as a sequal to
the inflationary input, the fall in the purchasing power of the rupee. It is a
notorious phenomenon hitherto unquestioned that price rise variee from centre
F to centre, [117 A]

Dearness allowance is inextricably intertwined with price rise, it being
an attempt to compensate loss in real wages on account of price rise considered
as a passing phenomenon by con1pensation. That is why it is called variable

G
dearness allowance. Any uniformity in the matter of dearness allowance may
confer a boon on persons employed in smaller centres and those in bigger
metropolitan areas would be hard hit. Dearness allowance by its very form
and name has an intimate relation to the prevailing price structure of basic
necessities at the centre in which the workman is employed. [117 B·CJ
-
l

Dearness allowance to workmen at a particular place should therefore
H depend upon the place where the workman is working irrespective of the fact
that the industrial undertaking in which the workman is employed is a unit of
an industrial enterprises havin$ an alHndia or inter-State operations. [117 Ej
WORKMEN V. INDIAN OXYGEN 113
4. In the matter of dearness allowance the Court should lean in favour
of adjudication of dispute on the principle of industry-cum-region because A
dearness allowance is Jinked to cost of living index of a particular centre which
has a local flavour. A workman is exposed to the vagaries of the market where
he resides and works, even though he may be an employee of a national,
multi-national or transnational industrial empire. Therefore. the region-cum-
industry principle must inform industrial adjudication in the rr1atter of dearness
allowance. In the instant case the Tribunal has overlooked this important

- principle of industrial adjudication. [117 G; 120 H; 121A;121 CJ

Dunlop Rubber Co. (India) Ltd. v. Workmen & Ors., [1960] 2 S.C.R. 51,
B

referred to.

Remington Rand of India Ltd. v. The Workmen [1968! I S.C.R. 164,
Woo/combers of India Ltd. v. Woo/combers Workers Union & Anr., [1974J C
J S.C.R. 504 and Greaves Cotton & Co. and Ors. v. Their Workmen [1964]
5 S.C.R. 362 and Bengal Chemical and Pharmaceutical Works Ltd. v. Its
Workmen, [1969! 2 S.C.R. 113, followed.

5. Any attempt of a company introducing uniformity in the matter of
dearness allowance linked to the all-India average consumer price index D
prepared by Labour Bureau, Simla would be destructive of the concept of
dearness allowance. Not only unequals will be treated as equals but the former
would suffer irreparable harm. Such an approach would deal a fatal blow to
the well.recognised principle of industrial adjudication based on region-cum-
industry because there cannot be any uniformity in the dearness allowance of
the workmen working in metropolitan areas and the workmen working in
smaller areas. [118 A-CJ E
6. Where for a certain industrial centre a dearness allowance formula
is in vogue and it is Jinked to some consumer price index number, whenever
the base year for consumer price index number is changed, a fresh linkage
requires a conversion ratio. Jn the absence of a conversion ratio, the whole
scheme fa11c; out of&ear and becomes unworkable, ineffective aod in fact unjust.
In the instant case the conversion ratio of 4.83 in valid and correct and the F
Tribunal ought to have accepted the same. [123 D; 124 F]

Ahmedabad Mill Owners' Association etc. v. The Textile Labour Associa-
tion, [1966) I S.C.R. 382, followed .
• 7. In the matter of dearness allowance usually the paying capacity of G
the employer is examined. In the instant case, it bas not at all been contended
that the respondent company cannot bear the additional burden. [124 G)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 806 of
1982.
H
From the Judgment and order dated 27-7-1981 of the Indus-
trial TribuDal (III) U,P. in Adjudication Case No. 15 of 1977.
114 SUPREME COURT REPORTS (1985) SUPPL, S.C.R,

M. K. Ramamurthy, Jitendra Sharma and P. Gaur for the
A Appellants.

G. B. Pa~ H. K. Puri and J, K. Mehra for the Respondent.

The Judgment of the Court was delivered by
B DESAI, J. In exercise of the power conferred by Sec. 4 (k) of
the U.P. Industrial Disputes Act, 1947 ('Act' for short) the Govern- .....
ment of Uttar Pradesh by its order dated May 23, 1975 referred the
foJtowing dispute to the Industrial Tribunal for adjudication. The
reference is in Hindi. Agreed translation of the industrial dispute
c referred for adjudication reads as under :

"Whether the variable dearness allowance payable by
the employers to their workmen should be revised and it
should be linked with the consumer price index for
industrial workers at Kanpur computed by Labour
D
Bureau Simla ? If yes, then from what rate {sic) and with
what other details."

There are two rival unions of the workmen employed by the
Indian Oxygen Ltd. ('Company' for short) in its Industrial under-
E taking at Kanpur. They are the Indian Oxygen Karamchari Union
("Karamchari Union' for short) and the Indian Oxygen Sharamik
Sangh ('Sharamik Sangh' for short). There is a federation of
trade-unions formed at various centres where the Company has its
industrial undertaking. Sharamik Sangh is affiliated to the federa-
tion. Karamachari Union claims to represent the workmen
F employed by the Company at Kanpur. The demand and the con-
sequent industrial dispute which led to the reference was espoused by
Karamchari Union.

The Karamchari Union in its statement of claim stated that
the Company is a unit of the multi-national British Oxygen Com-
G
pany. The Indian Unit of the multi-national corporation operates
under the name and style of M/s Indian Oxygen Ltd. The indus-
trial activities of the Company comprises manufacture and sale of
industrial and medical gases etc. It was stated that while the wage
H structure is uniform in respect of workmen employed by the Com-
pany all over the country the dearness allowance formula varies
from centre to centre. Briefly it was stated that the workmen of the
Company employed at Bombay, Madras, Hydrabad, Bangalore and
WORKMEN v. iNDIAN OXYGEN (Desai, J.) 115

Delhi are in receipt of higher dearness allowance compared to the
workmen employed in Kanpur Unit. The immediate provocation A
for raising the demand was an award by the Industrial Tribunal
Delhi by which the dearness allowance of the workmen employed in
Delhi unit was linked to consumer price index for Delhi prepared
by the Labour Bureau Simla which resulted in a substantial increase
in the dearness allowance available to the workmen posted at
B
Delhi. Soon after the award was published, the Karamahcari
Union submitted a demand on January 7, 1975 for revising the rate
of dearness allowance for workmen employed in Kanpur unit and as
there was no adequate response from the employer, the matter was
taken into conciliation. The Company in its attempt to thwart the
demand being pursued entered into a settlement with the Sharamik c
Sangh in respect of the dearness allowance and then approached the
Labour Commissioner Kanpur for registering the settlement. Failing
to obtain the registration, the Company unilaterally enforced the new
scheme of dearness allowance linked to the all-India average con-
sumer price index prepared by Labour Bureau Simla. The
Karamchari Union did not accept the revised formula, and pressed
D
its demand that the dearness allowance should be linked to all-India
consumer price index number prepared by Labour Bureau, Simla for
Kanpur centre, after adopting the linking factor as has been done
in the award by the Industrial Tribunal at Delhi. The conversion
ratio was suggested at 4.83 linked to January 1970 index number. E
The Company consistent with the employer culture put forth
number of preliminary objections so as to delay the adjudication of
the demand. All the preliminary objections failed as per the
decision of this Court in Indian Oxygen Ltd. v. The Workmen as
represented by Indian Oxygen Karamachari Union.(') After the matter F
went back for adjudication on merits it was contended on behalf of
the Company that the settlement arrived at between the Sharamik
Sangh and the Company would be binding on the members of the
Karamachari Union and the Tribunal should not adjudicate the dispute
on merits. This settlement has been stigmatised by this Court to
G
be a collusive one. (See page 920). It was further contended that
the Company is desirous of linking dearness a!lowance to all-India
average consumer price index for working class with base I 960= 100
and that the Tribunal should avoid accepting a demand of a few
workmen where a majority of the workmen have accepted and are H
satisfied with the revised formula introduced by the Company.

(I) [1979] 2 S.C.R. 911.
116 SUPREME COURT REPORTS [19851 SUPPL. S.C.ll.

The Company employs 5,400 workmen in all its establishments
A all over the country. Out of total strength of 5,400 workmen, 3030
are employed in gas manufacturing unit. The employment strength
in Kanpur unit is roughly about 200. It is not in dispute that the
basic wages of all workmen employed all over the country by this
Company are occupation wise uniform but the dearness allowance
paid to workmen differs or varies from place to place.. This ought
B
to be so as will be presently pointed out.

Prior to 1975 dearness allowance to the workmen employed in
the units of the Company in North-Eastern Zone i.e. in the States
of West Bengal, Bihar, Orissa, U.P., Delhi and Punjab was linked to
c the consumer price index number (middle-class) prepared by the
Bengal Chamber of Commerce for Calcutta. It may be mentioned
that the Bengal index has been discontinued since 1975. It is
important to note that by the two awards of the Industrial Tribunal,
the office staff and the workmen employed the Company at Delhi
D are being paid dearness allowance linked to consumer price index
compiled by Labour Bureau Simla for Delhi. Subsequently by a
decision of this Court in Govardhan Prasad and others v. The Manage-
ment of Mis Indian Oxygen Ltd. (1) 10 workmen employed by the
Company stationed at Ghaziabad were required to be paid dearness
allowance to the same extent and in the same manner as was being
E paid under the awards of the Industrial Tribunal to the worlcmen of
the Company at Delhi.

Before we delve into the narrow contentions raised in this
behalf we would remove the gloss over the submission that the
F attempt of the compan} having all-India operation, is to introdnce
uniformity in the matter of dearness allowance payable to its
workmen all over the country. Uniformity, to an uninformed mind,
appears to be very attractive. But let it not be forgotten that
sometimes this uniformity amongst dissimilar person& become'
counter-productive. Uniformity and equality have to be amongst
G equals measured by a common denominator. One can appreciate
the implementation of the constitutional aspiration of 'equal pay for
equal work.' In the matter of basic wages it is a consummation
devoutely to be wished. But when it comes to dearness allowance
any attempt at uniformity between workmen in such metropolitan
H areas like Delhi, Bombay, Madras, Calq1tta a11d in 'mailer centres

(I) [1984] l s.c.R. 21.
WORKMEN v. INDIAN OXYGEN (Desai, J.) 117

would be destructive of the concept of dearness allowance. Dearne's
allowance is directly related to the erosion of real wages by constant A
upward spiraling of the prices of basic necessities and as a sequel to
the inflationary input, the fall in purchasing power of the rupee. It
is a notorious phenomenon hitherto unquestioned that price rise
varies from centre to centre. Dearness allowance is inextricably
intertwined with price rise, it being an attempt to compensate loss in B
real wages on account of price rise considered as a passing pheno-
menon by compensation. That is why it is called variable dearness
allowance. Any uniformity in the matter of dearness allowance may
confer a boon on persons employed in smaller centres and those in
big metropolitan areas would be hard hit. Dearness allowance by
its very form and name has an intimate relation to the prevailing c
price structure of basic neces:;ities at the centre in which the workman
is employed. Therefore, the c1aim in the written statement on behalf
of the company that imbued with the equitable principle of introduc-
ing uniformity in the matter of dearness allowance, the Company
with the easy availability of consent of its protege union Sharamik
Sangh introduced a new scheme of dearness allowance linked to the
D
all-India average consumer price index prepared by Labour Bureau,
Simla is misleading. The Tribunal rightly observed that it is by now
well-settled that dearness allowance to workmen at a particular place
should depend upon the place where the workman is working
irrespective of the fact that the industrial undertaking in which the E
workman is employed is a unit of an industrial enterprise having an
aJl-India or inter-State operations. In Dunlop Rubber Co. (India)
Ltd v. Workmen & Ors.,( 1) a contention on behalf of the employer
that in the case of an all-India concern, it would be adviseable to
have uniform conditions of servi< e throughout India was repelled
observing that 'however desirable uniformity may be in the case of F
all-India concerns, the tribunal cannot abstain from seeing that fair
conditions of service prevail in the industry with which it is con-
cerned.' This view to some extent was affirmed in the Remington
Rand of India Ltd. v. The Workmen~'). Leaving aside basic wages
in the matter of dearness allowance specially the Court should Jean G
in favour of adjudication of dispute on the principle of industry-
cum-region beeause dearness allowance is linked to cost of living
index of a particular centre which has a local flavour. If the concept
of uniformity on an all-India basis is introduced in the matter of
dearness allowance, it would work havoc, because the price structure H
(I) [1960] 2 S.C R. 51.
(2) (1968] I S.C.R. 164.
ll8 SUPRBMB COURT REPORTS (1985] SUPPL. s.c.R.

in a market economy at places like Bombay, Madras, Calcutta,
A Delhi, Ahmedabad has little or no relation to smaller centres like
Kanpur, Varanasi etc. If workmen working in such disparate centres
are put on par in the matter of dearness allowance in the name of
proclaimed all-India uniformity, not only unequals will be treated as
equals but the former would suffer irreparable harm. Such an
B approach would deal a fatal blow to the well-recognised principle of
industrial adjudication based on region-cum-industry developed by
courts by a catena of decisions. Realising this situation courts have
learned in favour of determination of dearness allowance Jinked to
cost of living index, if available for the centre where the workman
employed and in the matter of neutralisation on the industry-cum-
c region principle. The Tribunal having rejected this approach
committed an error apparent on the record.

At this stage, it is necessary to have some idea of what is
consumer price index number, how it is being complied and what is
its relevance in the matter of dearness allowance ? Pursuant to
D the recommendations of the Planning Commission for the Second
Five Year Plan the Labour Bureau, Simla and the Industrial Statis·
tical Organisation of the Government of India took steps to conduct
fresh family living surveys among working class and middle class
population respectively with a view to constructing the new series of
E consumer price index numbers. The working class surveys were
conducted at 50 selected centres and the middle class surveys at 45
centres, 18 centres being common to both. The work of this survey
was commenced in the second half of 1958 and was concluded by
September, 1959. One of the centres selected for survey was Kanpur
(See Ahmedabad Mill Owners' Associ"tion etc. v. The Textitle Labour
F Association(').
•
What materials and statistical information enter into the
compilation of consumer price index number may be briefly noticed.

The consumer price index number for industrial workers (base
G 1960= JOO) are being compiled and published by the Labour Bureau,
Simla every month in respect of 50 industrial centres scattered all
over the country. Amongst them is Kanpur. The material collected
is through the family surveys of working class families. There are
six main groups for which indices for each centre are being compiled
H besides the general index. They are :

(1) [1966] I S.C.R. 382.
WORKMEN ,, INDIAN OXYGEN (Desai, J.) 119

(i) Food
A
(ii) Pan, Supari, Tobacco and intoxicants

(iii) Fuel and light

(iv) Housing
8
(v) Clothing, bedding and footwear, and

(vi) Miscellaneous

Consumer price index numbers are intended to measure relative
temporal (overtime) changes in the price of a fixed basket of goods
c
and services consumed by the index population in a current period in
relation to the base period. The index numbers are compiled by
using Laspeyres' Formula. The Broadly stated this formula takes
note of base and current prices for a particular item, quantity con·
snmed of that item during the base period. It would appear that D
for the compilation of an index, there are three essential requirements
namely : (I) weighting diagram which is the relative percentage share
of the total consumption expenditure as revealed by the basic family
budget enquiry in respect of different items, (2) Base prices of the
different items which go into the index basket and (3) current prices
in respect of each one of the items featuring in the index basket. E
The weighting diagram for a centre is derived on the basis of the
data collected through family budget enquiries which were conducted
in the 1958·59 at each one of the 50 centres. The survey was con·
ducted by taking all samples of working class families in each of the
50 centres and the data was collected by interviewing these families. F
Based on the results of the family budget enquiries, the average
expenditure of a family per month on different items of consumption
was arrived at. All-India average consumer price index number is
a weighted average of the 50 centres' indices. This is compiled and
published alongwith the index number for each centre (Source :
Consumer Price Index : An anatomy published by Labour Bureau, G
Simla).

It would appear at a glance that there would be a noticeable
difference between the consumer price index number for a centre and H
its weighted average for 50 centres which would be the all-India
average consumer price index number, the latter would generally be
lower than the former in some cases.
120 SUPREME COURt REPORTS ( ! 985) SUPPL. S.CJi..

Reverting to the demand in this case, the Karamchari Union
A raised a demand that the variable dearness allowance payable to the
workmen should not only be revised but it should be linked with the
consumer price index for industrial workers at Kanpur. The
Tribunal by its award directed the employer to pay dearness
allowance linked to the all-India consumer price index (1960= 100)
for the Kanpur Centre compiled by Labour Bureau, Simla. On the
B
question of neuturalisation, the Tribunal directed that the calcula-
tion in the rate of dearness allowance will remain the same as
presently operative and no change is required therein. In reaching
this conclusion, the Tribunal committed two manifest errors apparent
on the record.
c
The company introduced as stated in its written statement, a
new scheme of dearness allowance linked to the all-India consumer
price index prepared by Labour Bureau, Simla. That was a very
recent innovation introduced by way of a counter blast to the de-
D mand raised by the Karamchari Union. Prior thereto, it is an
admitted position that the workmen at Kanpur were being paid
dearness allowance linked to Bengal Chamber of Commerce Index
Number. That was unilaterally given up by the Company. There
appeared to be at least two valid reasons for scrapping that scheme :
one is that since 1975 Bengal Chamber of Commerce Index which
E was compiled for middle class families and was being artificially
applied to industrial workers has been scrapped. In other words,
the index is no more being compiled. Secondly, the constituent
members of the Bengal Chamber of Commerce had started their
business in India long before the present century and most of them
F were incorporated in England or other Western countries while the
Company in the present case has been started a few decades back
and therefore, re-induction of the Bengal Chamber Index Number
would not he relevant.

On behalf of the Karamchari Union, it was contended that in
G devising a dearness allowance formula, the region·cumcindustry
principle should ordinarily be accepted. As pointed out earlier,
dearness allowance generally has a local flavour. A man is exposed
to the vagaries of the market where he resides and works, even
though he may be an employee of a national, multinational or
H
trans-national industrial empire. The workman is concerned with
the vagaries of price fluctuation in the area in which he resides and
works for gain and to which he is exposed. Therefore, the region-
WORKMEN v. INDIAN OXYGEN (Desai, i.) i2i
cum- industry principle must inform industrial adjudication in the
matter of dearness allowance. In Woo/combers of India Ltd. v. A
Woo/combers Workers Union & Anr. (1) this Court following its
earlier decision in Greaves Cotton & Co. and Ors v. Their Work-
men( 2), held that in devising basic wages and dearness allowance
structure, industrial adjudication sometimes Jeans on the industry
part of the industry-cum-region formula and at other times, on the
region part of the formula as the situation demands. This well-
B
recognised principle of industrial adjudication cannot be given a go-
by on the specious plea that the workmen are employed by an
industrial undertaking which has an all-India operation. In this
case, the Tribunal has overlooked this important principle of indus-
trial adjudication. c
Before we examine the second manifest error committed by the
Tribunal in narrowly construing the terms of reference, it would be
advantageous to briefly recapitulate what relevant considerations
have to be kept in view in devising dearness allowance formula.
This aspect is no more res integra. In Bengal Chemical and Pharma- D
ceutical Works Ltd. v. Its workmen('). after reviewing all the earlier
decisions, the court restated the principles on which a fair and just
dearness allowance formula must be devised. They are :

"J. Full neutralisation is not normally given, except E
to the very lowest class of employees.

2. The purpose of dearness allowance being to neutra-
lise a portion of the increase in the cost of living, it
should ordinarily he on a sliding scale and provide for an
increase on the rise in the cost of living and a decrease on F
a fall in the cos! of living.

3. The basis of fixation of wages and dearness allowance
is industry-cum-region.
G
4. Employees getting the same wages should get the
same dearness allowance, irrespective of whether they
are working as clerks or members of subordinate staff or
factory workmen.
H
(!) [1974] 1 S.C.R. 504.
(2) [1964] 5 S.C.R. 362.
(3) [1969] 2 S.C.R. IJ3.
SUPREME COURT REPORTS (198S} SUPPL. s.c.it.

5. The additional financial burden which a revision of
A the wage structure or dearness allowance would impose
upon an employer, and his ability to bear such burden,
are very material and relevant factors to be taken into
account."

B We need not examine whether the dearness allowance formula
as at present existing is valid according to the principles herein
extracted because we are not devising a dearness formula for the
workmen working in the industrial undertaking of the company at
Kanpur for the first time. The demand is for upward revision of
the dearness allowance formula and its linkage.
c
The terms of reference extracted hereinbefore unmistakably
show that the workmen sought upward revision of the variable
dearness allowance by linking it to the consumer price index number
for industrial workers at Kanpur computed by Labour Bureau,
D Simla. If the demand is to be granted, the Tribunal was requested
to specify the rate and other details. Interpreting this refernece the
Tribunal observed that the new dearness allowance formula which
was in vogue at the time of the reference as being related to all-
India average consumer price index number for industrial wo.rkers
E in accordance with the settlement with the Shramik Sangh which
settlement was found to be collusive by this Court yet the Tribunal
mus! proceed on the basis that dearness allowance was being paid
to the workmen at Kanpur as per the settlement and that cannot be
wished away. This approach overlooks a vital fact that the intro-
duction of the new formula under a collusive settlement led to the
F demand for revision. The Tribunal rejected .the submission that it
must examine and devise a new formula in relation to the Bengal
Chamber of Commerce Index Scheme which was in vogue before
the formula as per the collusive settlement was introduced. If the
settlement between the company which is found to be collusive by
this Court is to be the starting point of revision of the dearness
G
allowance formula as has been done by the Tribunal, the conclusion
is inescapable that the Tribunal started from a wrong premise and
landed itself into an utterly unsustainable conclusion. This is the
second apparent error in the face of the record which would impoll
us to interfere. Mere so because the genesis of the demand for a
H
revision of the dearness allowance was the collusive settlement.
The Tribunal committed a grave error in accepting the settlement as
the starting point of the revision.
WORKMEN v. INDIAN OXYGEN (Desai, J.) 123

The demand of the Karamchari Union was that the Tribunal
should first take into account, relevant to a certain date, the all· A
India consumer price index number for Kanpur centre (1960=100)
and then the index figure should be multiplied by the conversion
factor of 4. 83 and then dearness allowance should be linked to the
figure so worked out. The Tribunal rejected this demand on the
ground that in the statement of claim, the Karamchari Union B
demanded payment of dearness allowance according to Simla Index
Number for Kanpur. The Tribunal took note of the fact of the linking
factor but observed that as the same has been discontinued by the
Labour Commissioner, U.P., the demand has been essentially for
dearness allowance according to the Simla Index for Kanpur. This
reasoning manifests an error in approaching, appreciating and C
evaluating the demand for revision of dearness allowance.

Before we examine the error, let it be made clear that where for
a certain industrial centre, a dearness allowance formula is in vogue
and it is linked to some cosumer price index number, whenever the D
base year for consumer price index number is changed, a fresh
linkage requires a conversion ratio. In the absence of a conversion
ratio, the whole scheme falls out of gear and becomes unworkable.
To illustrate, in the textile industry, the consumer price index
number was compiled on the basis of base year 1939=100. The
year 1939 was chosen as the year in which the second world war
E
engulfed the world which completely overhauled the consumer
pattern and the prices of essential articles. Over years the price
spiral relentlessly moved upward and that too so rapidly that in
most of the industries where even though 100% neutralisation was
not given by devising a dearness allowance yet the dearness allo· F
wance for a given month was occasionally double or trible of the
basis wage. This was unjust, unfair and from an economist's point
of view, imprudent. Therefore, as pointed out earlier, a fresh
survey was undertaken in 1958 with the base year 1960= 100. A
fresh index was compiled and continues to be compiled with
>
1960= 100 as base year. In fact, the 1960= 100 base year is being
G
replaced. We will however, confine ourselves in this appeal to the
base year of 1960= 100. Now if those industrial undertakings in
which dearness allowance formula was linked to the bare year
!939= 100 are to be delinked and relinked to the index number H
compiled on the base year 1960=100, before the fresh number is
adopted, a linking or a conversion ratio between 1939-100 and
1960= 100 will have to be computed. Only then a fresh linkage
i24 SUPREME COURT REPORTS t19ss] SUPPL. s.c.R.
can be devised. This very obvious fact has been wholly overlooked
A by the Tribunal when it merely awarded that the workmen of the
company at Kanpur should be paid dearness allowance linked to the
all-India consumer price index number (1960= 100) for Kanpur
Centre compiled by Labour Bureau, Simla. This approach over-
looks the linking factor. The rejection of the linking or conversion
B factor makes the scheme devised by the award unworkable, ineffe-
ctive and in fact unjust. In this connection, we may refer to the
Ahmedabad Mill Owner's Association case in which this Court after
noting the fact that the base year having changed, pointed out that
the question of linking factor loomed large and assumed importance.
The court had before it the admitted position that there was only
c one index existing in Ahmedabad which was based on the new series
(1960=100) and the old series (1939=100) has rightly gone out of
existence since it had beoome antiquated. Two alternatives were
submitted to the court for its consideration. It was submitted that
an entirely new scheme of basic wages based not on the pre-war
level of 1939, but based on the cost of living of 1960 as the base year
D
be devised and then award dearness allowance in relation thereto.
In the alternative, it was submitted that an arithmatical method of
linking the old and the new series be devised. The Tribunal had
accepted the conversion ratio at 3.17. This was attacked on diverse
grounds. After examining the whole gamut of argnments, this
E Court held that the linking factor of 3.17 was valid and correct

Approaching the matter from the same angle, and avoiding
the arguments which have been rejected by this Court in the afore·
mentioned judgment, we are of the opinion that the conversion ratio
F of 4.83 is valid and correct and the Tribunal ought to have accepted
the same.

It is usual in the matter of dearness allowance to examine the
paying capacity of the employer. Rightly Mr. Pai did not at all
contend that this employer can not bear the additional burden. We
G therefore, need not stray into this aspect at all.

On behalf of the Karamchari Union, it was seriously contended
that the award of the Industrial Tribunal at Delhi between this very
H Company and its Workmen at Delhi be accepted. We need not
examine the same as the comparison between Delhi and Kanpur is
ill-conceived and untenable. Delhi is the capital of the sub-continent
and it is fast growing. Kanpur is at best a district town though
WORKMEN v. INDIAN OXYGEN_{Desai, J.) 125

undoubtedly an important industrial centre in U .P. But the compa-
rison wonld be invidious. A
Accordingly, this appeal partly succeeds and is allowed. The
award of the Industrial Tribunal that the workmen of the Kanpur
unit of the Indian Oxygen Ltd. should be paid dearness allowance
linked to all-India consumer price index (1960= 100) for Kanpur
centre compiled by the Labour Bureau, Simla is modified to read B
that 'the dearness allowance should be paid according to all-India
consumer price index number for Kanpur (1960= 100) compiled by
Labour Bureau, Simla after applying conversion factor also called
linking factor of 4.83.' In all other respects i.e. the date of enforce-
ability etc. the awrd remains unaltere.d except for the modification c
herein granted. The appeal is allowed to this extent with costs
quantified at Rs. 3,COO,

A.P.J . Appeal partly allowed.

..