CI-IAPTER 9

F 0 U N D A T ION S 0 F WAG E F I X I N G
 Chapter 9

FOUNDATIONS OF WAGE FIXING

In the sphere of indU$trial wages, a new trend

has emerged. Earlier, regulation of wages was confined

to removal of sweating, checking of inflation and in

general, promotion of industrial peace. In modern times,

the idea of appropriate distribution of national income

1
is gaining prominance. The ability of the employer

to pay and the position of the national economy thus

become relevant in fixation of wages. The wage deter-

mining authority should bear in mind the impact of the

wage structure on tqe employer as well as on the national

economy. It becomes necessary therefore to look into

the capacity to pay. For keeping a wage structure in

unison with the general wage level, it also becomes

necessary for the wage determining authority to fix the

wage on an industry-cum-region basis.

1. See P.R.N.Sinha, wage Determination (1971), p.19.

 231

Financial capaci~~y wages

In providing the workers with wages ac~ve the

minimum level, the capacity to pay becomes relevant.

In other words, an increased burden of fair wages may

be imposed on an employer only if he can shoulder that

2
burden. In examining the capacity to pay, not only

the current position but also the development in the

past and the prospects for the future are to be con-

3
sidered.

Unsound financial position may be a defence for

t ne employers in opposing wage increase. very often

tile difficulty in defining the capacity of the employer

may create problems. Even the Comnittee on Fair Wages

2. In wo~~en~~_Gujarat Electricity Board. v , GUjarat

~lectricity Board, (1969) II L.L.J. 791 (S.C) the
Supreme court had this view. According to the
industrial tribunal, any wage which is beyond the
minimum wages must be provided only after considering
the financial capacity of the employer. On the facts
of the case, the tribunal came to the conclusion that
if the demand of the workers for an increase in wages
was fulfilled, an additional burden of Rs.49 lakhs a
year would be cast upon the Board, which was beyond
its capacity to pay. This holding was upheld by the
supreme court.

3. In the GUjarat Electricity Board case, the tribunal

took into consideration the heavy losses suffered
by the Board in the past years. Ibid.
 232

failed to explain, how the capacity can be calculated. 4

However, judicial trend in this regard is to find out

whether the employer can bear the a d d i t i o n a l financial

. 5
b uraen.

Financial capacity to pay is a broad classifica-

tion. For the purpose of clarity and convenience, the

6
capacity to pay may be divided into the following four

groups:
------------------- ---_ ._---
4. The point of v .iew of the CommitLee that the wage
determining authority should determine t~ capacity
to pay on the basis of (i) a fair return on capital
and remuneration to management and (ii) a fair allo-
cation to reserves and depreciation so as to keep
the industry in a healthy condition is also not very
clear. The quantification of these requirements will
become SUbjective. Report of the committee on Fair
wages (1948), para 24.

5. The Labour Appellate Tribunal observed,

II before incremental scales can be imposed
by adjudication, it is essential to see wheth~r
employer would be able to bear its burden. The
financial condition of the company must be such
as to lead to the conclusion that it would be
able to pay the increments year by year for an
appreciable number of years . . II
Q~~on Drug Co. v. T~~~r Workmen (1954) I L.L.J. 766
(LJ.A.T), p.767.
6. Ac c o r di ng to the Committee on Fair wages, the capacity
of industry to pay could mean one of the following
three things.
1. The capacity of a particular unit
~. The capacity of a particular industry as a whole
to pay
3. The capacity of all industries in the country to pay.
see keEort o~_~~~corrunittee on Fair wage~ (1948),
para 21.
 233

1. Financial capacity of all industries in the

country

2. Financial capacity of a particular industry

as a whole

3. Financial capacity of an employer

4. Financial capacity of a particular unit or

establishment.

These sub divisions become important individually

in accordance with the manner of wage fixation. When

wages are fixed on a national level, irrespective of

industries, the first classification becomes significant.

When wage fixation is done on industry basis at the

national level, the finan:::ial capacity of a particular

industry is to be considered. If wages are determined

in establishments with functional integrity under an

employer, financial capacity of an employer is the

relevant consideration. Where wage fixing is done for

a particular unit, financial stability of that unit is

t.a ke n into account.

Fina~~ial capacity of all industries in the cou~

The consideration of the capacity on a national

basis becomes relevant when a national wage structure is

 l34

evolved. For fixacion of wages, above the minimum level,

at the national level l the living standards of workers

as well as the cost of co~nodities for consumption must

Decorne uniform thr:oughout the nation. As things stand,

in the Indian context this is not likely to be achieved

in the near future. The National commission on Labour

was of the view that a uniform monetary remuneration for

7
tile country as a whole is neither feasible nor desirable.

Financial capacity: o f: a particular ind~_~;:y

If introduction of uniform wages throughout the

country is impracticable in the present day context, the

next question that falls to be considered is payment of

same wages to workers in the same industry throughout the

country. When wages at national level is to be fixed

in a particular industry, the financial capacity of that

industry throughout the country becomes relevant. When

wages are fixed in any textile, sugar, jute, paper or

7. According to the National Commission, the vastness

of the country and the wide differences in the levels
of development -in industries and regions l and lack
of coordination due to sectorial d ifferences were
the rea sons for t.ne same. Report of the National
Commission on Labour (1969);-P~i34.
 235

engineering industry which is spread allover the country,

capacity of that particular industry in the nation as a

w1101e may be considered. The advantage of this system

of wage. fixation is t hat workers in the s ame industry will

receive uniform wages without any state or regional dis-

parities.

Apparently such a wage fixation may seem to be

satisfactory. However, a problem may arise. The general

financial capacit.y of the industry to pay may be very high.

The financial capacity of a particular unit of that industry

maj be very low. There may be instances of wide disparity

among the units of the same industry in the matter of

finctncial position. When wages are fixed on the basis

of the general capacity of the industry, particular weak

units may be adversely affected, as the rates of wages so

fixed may be beyond trEir capacity to pay. If, on the

contrary, wages are fixed on the financial position of a

weak unit, the wages would be low. It will create a lack

of interest in the workers in flourishing concerns because

their wages do not reflect the higl~r productivity and

their right to share the fruits of their labour.

The proper method, therefore, is, not to take

into account the financial capacity of a particular unit

 236

alone or the financial capacity of the industry as a

wnole alone, but as suggested by the cormnittee on Fair

l/Jag e s , to consider the c z.pa c.i.ty of a particular industry

8
in a specified region. AS far as possible, the same

wage should be prescribed for all units of that industry

in that region.

such an approach is common in the case of wage

determination by wage boards. The wage boards are

9
expected to ta ke a fair cross section of the industry

for tt~ purpose of recommending the wage rates. For

the success ful completion of the work entrusted with the

wa::Je board, it may divide the industry into different

10
c.L a s ses on a regional basis. A wage board in such an

instance is not bound to consider the financial capacity

of individual units, but a cross section of the respective

11
classes is taken in order to assess the burden. A wage

8. ~~:eort of the committe~on_!:~:!:.;:~~9.es (1948), para 23.

9. Ibid.
10. The proposition to divide the industry into different
classes was put forward by the supreme Court in
~~;:~~~ News Pa~rs Ltd. v. union of India, A.I.R.
1958 s.c. 578 at p.604.
11. workmen of Shri Bajrang Jute ~ills v. The ~mpl~yers of
Shri Bajrang Jute Mills, A.I.R.1970 s.C.878, ~r
vaidialingam, J., at p.888. The court affirmed the
wage board's classification of jute mills into
different classes and the wage structure recommended
for such classes.
 237

board, !10WeVer, is not obliged to divide an indus try into

classes or to examine the financial capacity of individual

. . . 12
unlts In a reglon. The importaut factor to be taken

into account is that in deciding the wages, a fair cross

section of the industry in the respective region is con-

Sl. d ere d . 13 Even if the industry is divided ir~o differ-

ent classes i t will still be necessary to consider the

capacity of the respective classes to bear the burden

imposed on them. For this, a cross section of the res-

pe ot.a. ve c 1 asses may t)ave to b e ta k

en 'Lnt.o cons i. ce
...:J,...
rat.i.on,
14

--_._------
112. liThe classification into classes . is not obli-
gatory but is required only in cases where otherwise
a fair wage cannot be determined. Any injunction
tnat the industry in a region should in all cases be
divided into classes in determining a fair wage for
that industry would, on the other hand, be likely to
introduce greater disparity".
Ki.l:.ampudi Sugar Mills Ltd. v , 1ndustr:!=.al T!:ibunal,
(1971)11 L.L.J.491 (S.C) ~ Jaganmohan Reddy, J.
at p.498.
13. Id., p.499.
I

1tt workmen~f Sh!:!_Balang Jute Mills Ltd. v. Shri Baiang

Jute Mills, A.l .R. 1970 S.C~ 878. The workmen of the
mill were aggrieved by an order of the industrial
tribunal which held that their claim to get the wage
board recommendation implemented was not justified.
They preferred an appeal by special leave to the
Supreme Court. The wage board for the Jute Industry
selected 20 mills from west Bengal and 9 mills from
the rest of the country, to form a representative
cross-section and came to the conclusion that the
general financial capacity was satisfactory. The
employers of the Bajrang Mills opposed this on the
ground that the mill had no financial capacity to pay

contd
 238

It would, however, be appropriate that marginal

units are kept as a separate group to avoid hardship to

them. such d step may provide a practical solution to

any injustice which may arise in fixation of wages on an

industry-cum-region basis.

~~~ial ~apacity of the employer

An individual employer may have a number of

establishments under him. Some of them may be having

.
f unctlolB l ' .
lntegrlty. 15 The financial capacity of such

individual units may not be uniform. Some units may be

running ~t a loss. ot.be r units may be making large

profits. Social justice would demand in such a cir-

cumstarce that the financial capacity is determined not

on the basis of .i nd.i.v.Ldua L units, but on too basis of

the general financial capacity of the employer, taking

tile different units as a whole. If tl~re is functional

integrity among different units, the composite whole

f.n. contd..

an increased wages. The supreme Court was of the

opinion that the wage board should have grouped
the various mills into different classes and fixed
the wages accordingly. Id., p.8SS.

15. See infra., n.1?

 239

could be treated as one for ascertaining the financial

16
capacity of the common employer.

Financial c apacity of a unit

If . no f unctlona
th ere lS . ' . 1 7 among t h e
l lntegrlty

various units of establishments of an emp.Loyer , the units

16. Karam Chand Thapar and Bros. Ltd. v. Their workmen,

(1964) II L.L.J.242 (S.C.). A company was acting
as the managing agent for a number of other companies.
Evidence showed that the staff was under the complete
control of tte managing agents. The Supreme Court
held that if the units have functional interdepend-
ance, the capacity of the whole establishment, has to
be taKen into consideration while fixing wages in the
concern managing the whole affairs.

17. The question of functional integrity is jUdged not

only on a corrunercial basis but also on the basis of
activities. In workm~n o~Q.'.::,@~~~ectr:!:.~ity._~C2ard
v. GUlar~t Electricity Board, (1969) II L.L.J. 791
(s.C.), the activities of generation of electricity
and its distribution were considered by the Supreme
court to be an integrated whole for the pur'pcs e of
deciding the financial capacity of the Board for
fixing wages. The Court observed, at p.797, t.ha t,
the profit of the Board could be worked out only
after including in the accounts all expenditures
incurred by it on all its schemes for distribution
of electricity to licensees or to consumers, whether
in urban areas or in rural areas. The Court observed
that when so worked, it is found that the Board
was incurring heavy losses. So it was held that
the Board did not have the capacity to pay any
hi'::)her wages.
 240

are not treated as part of one establishment for the

purpose of determining the financial capacity. Each

unit is treated as a separate establishment and the

financial capacity of each individual concern is taken

.lutO account. When the financial capacity of the

establishment is not satisfactory it is not proper to

have an ir~reased wage~.

A wage fixing authority must be guided by some

ob ject.a.ve standards wru Le ascertaining the financial

capacity of any of the four groups mentioned above. The

capacity to pay must be ascertained on the basis of the

possible financial strain imposed by the increased wage

bill. If the wage structure will dry up the capital

itself, then such a wage should not be recommerrled by

the d u t ho r i t y . There fore, t he impact of t he increased

w~ge bill for a SUbstantially long period in the coming

f uture must b e a re 1 evant cons~

'd '
erat~on.
18 Hence, ,
~t was

-+-------~--

18. William Sons (India) (p) Ltd. v. Its Workmen, (1962)

I L.L.J. 302 (S.C.). The Supreme Court observed that
the tribunals should, while considering the financial
position to pay, consider, inter alia, the prospects
about the future of the business undertaken by each
of the establishments. Id., p. 305.
 241

held that the financial stability in the future also

. . f y the -f'lxatlon
must Justl . 0 f a J wage. 19
a f alr

Ttle wage fixing authority should not be satis-

fied with the financial ability due to the unusual

profits in a particular year. Similarly the unusual

loss in an year also should not mislead the authority.

such contingencies,20 no doubt, affect the financial

condition, but should not be allowed to have a vital

ro 1 e In wage d etermlnatlon.
. . 21

The capacity to pay should not be ascertained on

tile oasis of hypott-etical situations. For instance, a

19. In D.C.M. Chemical Works v. Its Workmen, (1962-63)22

F.J.K. 407 (s.C.). Wanchoo, J. observed at p.417,
II both financial ability at present and

financial ability in the near future must be

t nere to justify fixation of an increased fair
wage on an increased sea le II

20. Sudden cnanges may occur in the conduct of a business

at times, which may not influence the future economic
condition to pay. Since fixation of wage structure
is not of a temporary nature, such unstable situations
should not un du Ly influence t he wage structure.
21. Ahmedabad Mill Owners' Association v. Textile Labour
As s o c i a t i o n , A.l.R. 1966 S~~-497. Gajendragadkar, J.
observed at p. 519,
"Unusual profits made by the industry for a
single year as a result of adventitious circum-
stances, or unusual loss incurred by it for
similar reasons, should not be allowed to play
a major role in the calculations which industrial
adjUdication would make in regard to the constru-
ction of a wage structure".
 242

wage should not be fixed or the capacity to pay should

not be ascertalned on the presumption that a contingency

will occur in the future which will adversely affect the

financial capacity.22 Presumptions or assumptions should

not be relied on by the wage fixing authorities in decid-

ing the capacity to pay. Optimistic statements regarding

t.ne possible financial capacity, expressed by the employers

should not be the basis for deciding the financial capacity

23
to pay.

22. Manageme~t of wenger and Co. v. Their Workmen, A.I.R.

1964 s ;c, 864. TO show that the ma nagement's capacity
to pay was poor, they raised a contention that the
financial position of the employer in the future will
be deteriorated due to the proposal fOr introducing
total prohibition in Delhi. The court, refusing to
accept this argument held,
II if in the course of time, total prohibi-
tion is introduced and it materially affects the
prosperity of the trade, it would be open to the
employers to raise a dispute for the reduction
in the wa~e structure and in case they are able
to show t!at as a result of the introduction of
total prohibition their financial position is
weakened to such an extent that they cannot bear
the burden of the waye structure directed by the
present award, the matter may nave to be examined
on the merits. II
~ Gajendragadkar, J. at p. 870.

23. sangam Press Ltd. v. The workmen, (1975) II L.L.J.

125 (S. C.). The industrial tribunal while determin-
ing the financial capa.city of a firm acted upon the
Director's report expressing aslight optimism about
the future prospects of the firm. On the basis of
this, the tribunal held that the firm had the capacity
to pay an increased wages. Aggrieved by this the
firm approached the supreme cour t. The Court held
contd .
 243

In general, what is required is a balanced

approach by the wage fixing authority. The authority

must try to reconcile the reasonable expectation of the

capital and labour. While giving a fair and higher

wage to workers, the authority must recognise the fin-

ancial pressure on the employer to make the payment.

The question of wages nas relevance to the current

economic trends of society. The prevailing rates of

wages in the locality is another important consideration

in determinir~ the wage structure. In other words, the

wage fixed in an industry should not create an economic

imbalance in the locality. In order to keep this

balance, the adjudication machinery has evolved another

principle called the industry-cum-region formula.

The Indust~y-cum-region Formula

A wage fixing authority has to give proper consi-

deration to the problem of wages in the light of the

i mp a c t which a wage structure makes on the general economic

f.n. contd

at p.l27 that the capacity to pay must be based on

actual accounts and not on observations in annual
reports which are intended to dispel doubts and
misgivings in the minds of shareholders.
 244

structure. Therefore, while the needs of an industrial

worker are considered while fixing wages, the wage fixing

aut nority must not d isregard the impact of wages on the

general economy.

The principle of industry-cum-region was put

forward by the Committee on Fair Wages. According to

them, the wage determiuation must depend on a considera-

tion of lithe prevailing rates of wages in the same or

similar occupations in the same or neiyhbouring locali-

.
t1GS II
. 24 This principle recommended by the committee

lIas been adopted by the industrial adjUdication as a

yUiding principle. This principle has come to be known

as the I in dustry-cum-reg ion , formula for fixing wage

. 1n
structures 1n . d ustr1a
. 1 esta bl 1S
' hments. 25 T h e purpose

of tnis rule is to maintain the balance of economy in a

region. This is intended to avoid unnecessary competi-

tion among workers to join an industrial establishment

26
which pays more. This principle tries to establish

----- ._---_._----------- --------

24. Re~~~_~~_the~~~~ittee on Fair Wag~_(1948), para 15.

25. O.P. Malhotra, The Law of Ind~~~rial DisEutes (1981),

vol.1, p.443.

26. Apart from this, there will be another type of unfair

competition also. The cost of production in the con-
cern which pays more may be more due to high wages.
This may result in an unfair competition in the market.
 245

industrial peace in a particular region. The basic

idea behind this principle is the desire to maintain

un Lf o mu.t y in conditions of service in comparable con-

cerns in the industry in the region so that t.ne re is no

imbalance in the conditions of service between workmen

27
of similar establiShments. The terms 'similar con-
I
cerns' or comparable concerns' may raise problems.

Similar concerns would be those in the same line of

business as che concern wi th which the compa r'Ls on is

made.

In G.G. _~gra J;.I],dus~rie~_J'i~z_~oor_~~ion v ; G.G ~Tin

28
Facto;:i,~;;ra, the Labour Appellate Tribunal expressed

tt~ view that if the wage rates existing in a concern

are comparable to wages paid in similar industries in

the region, the wage structure should remain unaltered

even if the concern had made huge profits. Similarly

29
in Burmqh Shell. Oil Co. v. Their Employees, the tribunal

27. Atic Industries v , Workmen, [1972J uab. I.C. 632 at

p.638 ~ vaidialingam, J.
28. (1952) I L.L.LT. 507 (L.A.T.)

29. (1953) II L.L.J. 236 (L.A.T.). workers of the

Company demanded wages in accordance with 170 points
of the cost of Living Index. The tribunal refused
to do this, on the ground that such a step would
lead to anomalies and consequent industrial unrest
when the general wage structure obtaining in l"ladras
was based on 100 points.
 246

refused to alter the existing wage structure on the

need for maintaining the balance of economy in the

region.

The Supreme Court had opportunity to reGoynise

tn.i s principle in Expr~ss _~~~s Pa;eer~_(!:l Ltd. v , Union

30
of India. According to the Court, the capacity to

pay must be considered on an industry-cum-region basis

after taking a fair cross section of the industry.31

For compa r Lnq different concerns certain guide-

lines were ::iuggested by Justice GajeCldragadkar in

32
Novex Dry Cleaners v, !.!:~_\!~rkmen. The comparison

among different concerns, according to him, must have a

33
bedring on the foll owing pOints:

1. Their standing

2. The strength of labour force employed by them

3. The extent of their respective customers

4. The position of the profits or losses incurred by

them for some years, before the date of award.

---------------------
30. A.I.R. 1958 s.c. S78. The Court, in this case, was
considering the fairness of the wage rates fixed by
tne Wage Board for Working Journalists.
31. Id., p. 605.
32. (1962-63) 22 l".J.R. 248 (S.C)
33. Id., p. 251.
 247

5. The extent of business carried Cn by them

6. The capital invested by them

7. The nature of business carried on by them

8. The presence, abs.ence and the extent of treir

reserves

9. The dividents declared by them

10. The prospects about the future of their business

This list is not exhaustive, but only gives a

general idea about the areas to be considered in the

process of comlJarison. These points can never be con-

34
sidered as some rigid principles to be followed by

every wage adjudicator. However the principles thus

formulated were being followed by courts in SUbsequent

35
cases. The concern may be one in the pUblic sector

34. see discussions on the relaxation of the principle

infra.

35. See for instance, Workmen of Balmer Lawrie & Co. v.

Balmer Lawrie & Co. Ltd., A.I.R. 1964 S.C. 728;
workmen of Ne~_~~!:ton woollen M!lls v. New Ege~ton
woollen Mills, (1969) II L.L.J. 782 (S.C.); Unichem
Laboratories Ltd. v. The Wor~nen, (1972) I L.L.J.
576; and Sh!~~Fine Arts Litho Works v. State
In~~~trial Court, [1978J Lab. I.C. 828 (S.C.).
 248

36
or private sector or one with foreign collaboration. 37

The same rules will apply to them.

The Supreme Court in Gr~~~~~_~~~~on & C~.~.J=!:~. v ,

38
Th~ir~orkmen, held that the comparable concerns must

be c arrying on the same industry in the same region.

36. Hindustan Antibiotics Ltd. v. The Workmen, A.I.R.

1967 S.C. 948:---;rhe court held I I . if the
expre ssion 'labour force' is understood to mean
the labour force employed in both the sectors, the
alleyed discrimination between different parts of
the pUblic sector will disappear, for, as far as
possible, the labour to whichever sector it may
oelong in a particular reyion and in a particular
industry, will be treated on equal basis."
Id., p.959 per subba Rao, C.J.

37. unichem Laboratories Ltd. v. The workmen, (1972)

I L.L:-J:""576atp.594 per vaidialIngam, J:-The
Industrial tribunal compared the appellant company
with Mis. Burroughs Wellcome (India) Private Ltd.,
which was a foreign company. The Supreme Court
ne Ld t nat such a concern cannot be ruled out of
consideration for purposes of comparability. Id.,
p.595.

38. A.I.R. 1964 S.C. 689. The appellants urged that the
tribunal did not consider the principle of industry-
cum-region while fixing wages of clerical and sub-
ordinate staff. It was also urged that whatever
comparison was made was with concerns Which were not
comparable and the wages awarded were even higher
than those present in any comparable concern.
 249

In this case the court expressed the view that in apply-

ing the principle of industry-cum-region, tribunals should

lay stress on the 'industry' part of the formula, if

trere are a large number of concerns in the same region

.
carry~ng
. d ustry. 39
on the same ~n According to the Court,

it appeared that the tribunal showed more lenience

towards the 'region' part of the principle. The Court

found that the companies which were compared were not

40
engaged in the same line of industry. However, t.be
41
Court did not find fault with tre action of the tribunal,

because, it was usual for the controlling company to

keep the same scales for clerical and SUbordinate staff

in all the concerns. Another reason for supporting the

tribunal's award was that it was not clear whether there

were a large number of comparable concerns in the same

region.

39. Id., p. 693, per wanchoo, J.

40. The first company was Greaves Cotton and Company

which was investing money in manut act.ur'Lnq concerns
and was also the managing concern. The second
company, Greaves Cotton and Crompton Parkinson Private
Limited, was distributing the products of Crompton
Parkinson (works) India Limited and repairing and
servicing the said products. The third company,
xenyon Greaves Pvt. Ltd. was manUfacturing high grade
interstanded ropes for the textile industry. The
last was Ruston and Hornsby (India) Pvt. Ltd. doing
Dusiness of manufacturing oil engines and pumps.
41. Id., p. 693.
 250

Though trere may be a number of concerns in the

same line of business, they need not be comparable.

42
v . The workmen. The Court took the stand that if

comparing of concerns in the same line of business will

end up in injustlce, it was not proper to do so. In

other words, a small concern should not be compared with

a large flourishing concern in the same line of business

to impose a 'If/age structure prevailing in the larger

43
concern as a lIrule ot thumb ll without considering the

nature of the business carried on by it. It is not

practlcal that two or more concerns exist with equal

qualities. A practical remedy is to see that the dis-

parity between the concerns under comparison shall not

b e so 1arge as to rnak e ~
t!~
.
comparlson unrea 1 . 44

42. (1950-67) s.C. L.J. 4096 The tribunal, while fixing

wages in the appellant company which was dealing with
ferrous metal, compared it with other companies deal-
ing with non-ferrous metals. One of the companies,
according to the appellant was comparable, but the
tribundl observed that it was a much smaller corcern
and hence not comparable. There was only one company
engaged in the same trade in the region. The tribunal,
therefore, proceeded to compare other companies in
the region with the appellant company. The Court, in
the circumstances, held that it was open to the tri-
bunal to take into consideration t re conditions exist-
ing in engineering concerns, which belong to the same
groups.
43. O.P. Malhotra, The Law of Industrial Disputes (1981)
vo Lr , p.446.
~4. French Motor Car Co. v , The Workmen, A.I.R. 1963
s.c.13Z?; per Wanchoo, J. at p.1329.
 251

Relaxation of the principle of industry-cum-region

All theoretical calculations of wages must be

supplemented by social elements in order to make i~

acceptable to the community. Increasing demands of

welfare state and social justice call for a relaxation

from strict adherence to any rigid principle. The

same is the case w.it.h the principle of industry-cum-

region. Industrial adjudication while deciding indi-

vidual cases cannot be strictly bound by certain prin-

' 1'es f o rmuate d at a prl.or
Clp . .
l.nstance. 45

The general principles set out in tte earlier

decisions should act as the base from which a future

adjudicator can make a probe. The adjudicator must

not be gUided solely by the principles formulated by

the prior authority.46 The wage adjudicator should

take into account all relevant factors involved in the

dispute. For instar~e, the number of employees in an

45. There may be changes in the socio-economic structure

in society. The requirements of the workers may not
remain constant. Financial conditions of the employer
may change. All these cnanges necessitate a flexible
a p p r o a c h towards almost all principles of wage
determina tion.

4 6. See supra, n.34.

 252

establismnent should not be the only ground on which

the comparison should lie. If that is done, the differ-

ence in the number of workers in a concern will make i t

uncomparable with any other concerns. The wage deter-

milling authority should not drop the comparison there,

but it should probe further into the matter and after

considering a 11 other factors, .

arr~ve at a d ec~s~on.
" 47

It was a 1 re Qd y .
ment~one d 48 t h at t h e wage d eter-

mining authority can lay stress on the 'industry ' part

or the 'region' part as the requirements of justice calls

for. If comparable concerns of the same industry do

not exist in a particular region the waye determining

aut.no r.Lt.y should compare the concern with other industries

which are of comparable nature situated within the same

. 49
rey~on.

-----------_.__._ - -
47. In the case of Unichem Laboratories, (191~ I L.L.J.
576 (S.C.), the tribunal found that there was a
great difference in the number of workmen employed
in two concerns under comparison. The supreme Court
justified the comparison on the ground that the firm
employing lesser number of workmen was eqUipped with
modern equipments and methods of production. The
circumstances and other relevant considerations also
were taken into account in arriving at a conclusion.
see also supra, n.37.
48. supra, n.39.
49. In Workmen of Orient Pa~~ Mills Ltd. v , M/~. Orient
Paper Mills Ltd., A.I.R. 1969 S.C. 976, the tribunal
was faced with lack of comparable concerns in the
contd
 253

A major departure from the principle of industry-

cum-oreq ion is visible in Mis. Tata Chemi~~ls L~~. v ,

50
The ir Workmen. A progressive step is taken by the

Court in this case when i t held that in fixing wages,

t.ne tribunal can depart from the industry-cum-region

formula in the absence of comparable concerns in the

region. According to the Court l

lilt cannot also be lost sight of that with the

march of time the narrow cor~ept of industry-
cum-region is fast Changing and too much import-
ance cannot be attached to regi ..:."n l l . 5 1

--- --------------
f.n. contd

same industry. In the region under consideration,

there were only two other paper mills, which were
not at all comparable with the Orient Paper Mills.
So the tribunal considered the wage paid by three
collieries I a Cement Factory and the Indian Alumi-
nium Company situated in the same region. The
tribunal also considered the wages paid by other
paper mills situated outside the region. However,
the wages were fixed on the basis of the wages
prevalent in other industries in the region, which
according to the tribunal were comparable concerns.
The Supreme Court supported the view of the tribunal.
50. A.I.R. 1978 S.C. 828. After examining the relevant
materials relating to the c~npany's investments;
reserves, production l percentage of wages of workers,
profits and declared dividents, the tribunal came
to the conclusion that the company was a flourishing
and highly integrated cllemical complex of long stand-
ing and tha..t no other unit in the heavy chemical
industry in the region could be compared with Tata
Chemicals. Therefore the tribunal compared the indus-
try with comparable concerns in other parts of Gujarat.
51. Id., ~ Jaswant Singh, J. at pp.834, 835.
 254

At first the emphasis was on the industry part

of t be formula. Gradually the jUdicial trend laid

stress on the region part in appropriate cases. Tata

Ch~mlc~~~~52 marked a difference in the jUdicial

attitude towarcis the industry-cum-region fonnula.

Where there are no comparable concerns engaged in

similar activities in the region, it was held that

tribunals
i
or courts can look to such similar industries

in other regions in the state having similar economic

" 53
con d ltlons.

----- -------- --- -- -

52. A.I.R. 1978 s.c. 828.

~3 . Id., p. 835.