judgement:
Appeal No. 1065 of 1965.
Appeal by special leave from the judgment and order dated February 27, 1963 of the Mysore High Court in Writ Petition No. 1096 of 1961.
M. K. Ramamurthi, for the appellants.
O. P. Malhotra, P. C. Bhathari and O. C. Mathur, for respondent No. 1.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the Mysore High Court in Writ Petition No. 1096 of 1961 by which the High Court allowed the Writ Petition and quashed the impugned award dated June 30, 1961, made by the Labour Court, Bangalore, in Reference No. 51 of 1960.
In order to appreciate the points raised before us it is necessary to give the relevant facts.
The second appellant before us, R. Mahalingam, was engaged as a Foreman in the workshop of Sri Rangavilas Motors (P) Ltd., the first respondent, hereinafter referred to as the Company, in the month of April, 1956.
By an order dated January 21, 1960, Mahalingam was transferred from Bangalore to Krishnagiri where the head office of the Company is situated.
Mahalingam entered into correspondence with the Company alleging that according to the conditions of his employment he could not be transferred from Bangalore to Krishnagiri.
Ultimately, the Company framed charges against Mahalingam and removed him from service by an order dated April 7, 1960.
On April 8, 1960, Mahalingam complained in writing to the Assistant Commissioner of Labour who was functioning as the Conciliation Officer at Bangalore.
Later on, one Selvaraj took part in the conciliation proceedings on the authority of the resolution dated July 21, 1960, passed at the General Body 530 meeting of Krishnagiri Motor Workers ' Union, among whose members 112 out of 170 were employees of the Company.
Selvaraj filed a statement of claims before the Conciliation Officer on September 1, 1960.
The Conciliation Officer reported to the Government that the conciliation proceedings had failed, and thereupon the State Government by its order dated November 1, 1960, made in exercise of the powers conferred by cl.
(c) of sub section
(1) of section 10 of the (XIV of 1947) hereinafter referred to as the Act referred for adjudication by the Labour Court, Bangalore, the following points in dispute : " 1.
Whether the order of the management of Sri Rangavilas Motor (Private) Ltd., in transferring the workman Sri It.
Mahalingam, Foreman, from their branch at Fort, Bangalore, to Krishnagiri, is illegal or unjustified.
If so, is the workman entitled to reinstatement in Bangalore Branch with benefits of back wages or to any other relief ? 2.
Is Sri R. Mahalingam, Foreman, entitled to arrears of increments and overtime wages, if so, what is the amount he is entitled to ? Selvaraj, inter alia, prayed in his statement of claims, filed on behalf of Mahalingam, as follows ". it is prayed that the Hon 'ble Court may be pleased to direct the second party (the Company) to cause the payment of overtime wages due, increments due (as mentioned in the annexure to this statement) as also the arrears of wages from 1 2 60 to 15 3 1960 and order payment of back wages with effect from the date of termination of service by setting aside the said order of termination and to reinstate the workman with continuity of service.
" The Company, in reply, contended that the reference was limited only to the question of transfer, and hence no question of reinstatement or back wages could be adjudicated upon.
Further, the Company contended that the reference was bad because it did not fall under any of the items enumerated in the Second Schedule to the Act.
It was also contended that the dispute was an individual dispute.
One further objection was raised to the effect that the reference should have been made to the National Tribunal and not to the Labour Court The Labour Court overruled all the objections regarding jurisdiction raised by the Company and made the award holding that both the transfer as well as the removal from service of Mahalingam were illegal and that he Was entitled to overtime wages as well as 531 increments.
The Labour Court made the following further direction: "The workman Sri Mahalingam should be reinstated in ore branch with full back wages in continuity of the past service and with same emoluments.
The second party should also pay the arrears of Rs. 4629/27 towards the overtime wages and as well as the increments due.
(sic.) As stated above, the Company filed writ petition challenging the award.
The High Court formulated the points which arose out of the arguments addressed before it thus: 1.
Whether the dispute referred by the State Government to the Labour Court is an industrial dispute ? 2.
If it is such a dispute (a) Whether the State Government of Mysore was not the appropriate Government to make the reference ? and (b) Whether the reference should have been made by the Central Government to a National Tribunal 3.
Whether any dispute relating to the termination of the service of the fourth respondent is included in the order of reference ? 4.
Whether the points of dispute actually referred fall within the scope of the items enumerated in the second Schedule of the and are therefore within the competence of the Labour Court ? 5.
Whether on the question of transfer there was any dispute at all for adjudication On the first point the High Court, agreeing with the Labour Court, held that on the facts what was originally an individual grievance of Mahalingam did assume at the time the reference was made by the Government the character of an industrial dispute.
On the first part of the second point, the High Court held that the State Government of Mysore was the appropriate Government to make the reference.
On the second par ' it held that it was for the Central Government to decide to refer or not to refer the dispute but the State Government which is the appropriate Government in relation to the dispute does not lose its power of making 'a reference.
On the third point the High Court held that the question of legality or otherwise of the Company 's action in removing Mahalingam from service was not the subject matter of reference to the M2 Sup.
CI/67 5 532 Labour Court and its award to the extent it dealt with that topic was without jurisdiction.
On the fourth point, the High Court held that the first proviso to cl. '(d) to section 10 (1) of the Act did not apply and that the dispute relating to increments and overtime wages was beyond the jurisdiction of the Labour 'Court and could not have been validly referred to it.
It also held that the dispute regarding transfer was included in the expression "rules of discipline" enumerated as item 8 of the Third Schedule, and was therefore pot within the, competence of the Labour Court to adjudicate upon in view of these findings the Award was quashed.
Regarding point No. 5 formulated by it, the High Court observed that it was.
unnecessary to examine that point, but as the matter had been, argued at some length, the High Court stated its opinion thereon.
In its opinion, there was no scope far making the order of transfer the subject matter of any dispute.
The same points that were formulated by the High Court were . argued before us.
Mr. Ramamurti, appearing on behalf of the appellants, urged regarding point No. 3 that on its true interpretation the order of reference was quite clear and that the question of termination of services of Mahalingam was included in the order of reference.
We have already reproduced the order of reference and, in our opinion, there is force in what Mr. Ramamurti urges It seems to us that the order of reference is quite clear if regard is: had to the words "reinstatement in Bangalore branch with benefits of back wages.
" If the words with benefits of back wages" considered,and with respect,the High Court did not consider them, the High Court 's conclusion might possibly be justified.
It seems to us that by the time the reference tame to be made everybody knew that Mahalingam had been removed from service.
The words "with benefits of back wages" coup led with the word "reinstatement" are appropriate only to a case of removal and not to a case of transfer.
On the facts of this case it is quite clear that the contention of Mahalingam was that the transfer was illegal and if the transfer as illegal, his removal from service would fall automatically with the finding that the transfer was illegal, and one of the appropriate reliefs that would be given would be reinstatement in the Bangalore Branch with benefits of back wales.
In our view it is because of the above considerations that the word "removal" was not expressly mentioned.
In this connection the High Court relied on the provisions of section 10(4) of the Act which reads as under "10(4) Where in an order referring an industrial dispute to a Labour Court, Tribunal or National Tribunal under this section or in a subsequent order, the appropriate Government has specified the 'points of dispute for adjudication, the Labour Court or the Tribunal or the National 533 Tribunal, as the case may be, shall confine its adjudication to those points and matters inidental thereto.
" We are unable to appreciate how this sub section has any re levance to the question of construction of the order of reference made by the Government.
It is true that he points in dispute must be specified, but the point with which we are concerned is, whether as a matter of construction the point in dispute has been specified or not, and according to us the dispute regarding removal has been specified.
Regarding the fourth point, with respect, the High Court misinterpreted the first proviso to cl.
(d) to s."10(1).
This proviso reads as follows "Provided that where the dispute relates to any matter specified in the Third Schedule and is not likely to affect more than one hundred workmen, the appropriate Government may, if it so thinks fit, make the reference to a Labour Court under clause (c) The High Court negative the, plea of Mahalingam on two grounds: First that there is nothing either in the order of reference.
or in any, other material placed before it to indicate that the Government have applied their mind to the applicability of the proviso to the facts of this case or have actually acted pursuant to the proviso in making the references to the Labour Court and secondly, that there can be no doubt that more than one hundred.
per sons are interested in, and are therefore likely to be affected by the dispute in question.
In our view it is not necessary that the order of reference should expressly state that it is because of the proviso that a reference is, being made to the Labour Court, and if the reference can be justified on the facts, there is nothing in the Act which makes such a reference invalid.
The second reason given by the High Court, with respect is erroneous because it seems to have equated, the words "interested ' and ",affected".
It would be noticed that section 10(1A) uses both the words "interested" or "affected".
Section 10(5) also uses both the words "interested" or "affected".
It seems to us that there is a difference in the import of the words " interested" or, "affected".
The Union which sponsors the cause of an individual workman is interested in the dispute but the workmen who are the members of the Union are not necessarily affected by the dispute.
The dispute in this case was regarding the validity of the transfer and consequent removal of the appellant.
The other workmen would naturally be interested in the dispute but they are not affected by this dispute.
In our opinion, the High Court erred in holding that the first proviso to section 10(1)(d) did not apply to the facts of this case.
In view of our decision on this point, it is not necessary to go into the question whether the points in dispute fell within the second or the third Schedule to the Act.
534 Therefore, the appeal must succeed unless the Company can satisfy us that the points decided against it should have been decided in its favour.
This takes us to the other points.
Mr. O. P. Malhotra strongly urges that the State Government of Mysore was not the appropriate Government to make the reference.
He .says that although the dispute started at Bangalore, the resolution sponsoring this dispute was passed in Krishnagiri, and,, that the proper test to be applied in the case of individual disputes is where the dispute has been sponsored.
It seems to us that on the facts of this case it is clear that there was a separate establishment at 'Bangalore and Mahalingam was working there.
There were a number of other workmen working in this place.
The order of transfer, it is true, was made in Krishnagiri at the head office, but the order was to operate on a workman working in Bangalore.
In our view the High Court was right in holding that the proper question to raise is : Where did the dispute arise ? Ordinarily, if there is a separate establishment and the workman is working in that establishment, the dispute would arise at that place.
As the High Court observed, there should clearly be 'some nexus between the dispute and the territory of the State and not necessarily between the territory of the State and the industry concerning which the dispute arose.
This Court in Indian Cable Co. Ltd. vs Its Workmen(1) held as follows: "The Act contained no provisions bearing on this question, which must, consequently, be decided on the principles governing the jurisdiction of Courts to entertain actions or proceedings.
Dealing with a similar question under the provisions of the Bombay Industrial Relations Act, 1946, Chagla, C. J., observed in Lalbhai Tricumlal Mills Ltd. vs Vin and Others , 558 'But What we are concerned with to decide is: where did the dispute substantially arise ? Now, the Act does not deal with the cause of action, nor does it indicate what factors will confer jurisdiction upon the labour court.
But applying the well known tests of jurisdiction, a Court, or Tribunal would have jurisdiction if the parties reside within jurisdiction or if the subject matter of the dispute substantially arises within jurisdiction. ' In our opinion, those principles are applicable for deciding which of the States has jurisdiction to make a reference under section 10 of the Act".
Applying the above principles to the facts of this case it is quite.
clear that the subject matter of the dispute in this case substantially arose within the jurisdiction of the Mysore Government.
(1) [1962] Supp. 3 S.C.R. 589 : 535 Mr. Malhotra further urges that the High Court erred in holding that it was an industrial dispute.
We see no force in this contention.
The High Court rightly observed that once the findings of fact recorded by the Labour; Court are accepted, there is no doubt in law that in the circumstances of this case, what was originally an individual grievance of Mahalingam did assume, at the time the reference was made by the Government, the character of an industrial dispute.
Mr. Malhotra urges that the finding of the Labour Court that the transfer was illegal was perverse.
It is not necessary to go into this question because once it is held that there is an agreement between the Company and Mahalingam that he could not be transferred from Bangalore, the transfer would be bad.
The Labour Court had observed that one of the terms of agreement was that the Company had agreed not to transfer Mahalingam to any place out of Bangalore, for a period of ten years; the Company had transferred Mahalingam from Bangalore to the head office at Krishnagiri and this action of the Company was in contravention of the terms of the agreement.
Then Mr. Malhotra tried to urge the fifth point formulated by the High Court.
This point was not taken before the Labour Court and we did not allow him to raise this point. ' In the result the appeal is allowed, judgment of the High Court set aside and the Award of the Labour Court restored.
The appellant will have his costs here and in the High Court.

summary/full:
The second appellant was a workman in the workshop of the first respondent dent company any in its Bangalore branch in the Mysore State.
The head,office of the Company at Krishnagiri, in the Madras State, transferred him to Krishnagiri, contrary to the agreement that he would not be transferred .from
Bangalore for ten years.
On the workman raising objections, the Company removed him from service.
The Krishnagiri Motor Workers ' Union, a majority of whose members numbering more than one hundred were employees of the Company, took up the workman 's grievance, and the Government of Mysore referred the industrial dispute to the Labour Court under section 10(1) (c) of the .
One of the questions referred was : whether the order of transfer was illegal and if so" Whether the workman was entitled to "reinstatement in the Bangalore branch with benefits of back wages".
The Labour Court ordered the reinstatement of the workman in the Bangalore branch.
The Company challenged the award by a writ petition in the High Court.
The High Court while holding that the Mysore Government was the appropriate Government to make the reference, quashed the award on the grounds : (1) that the legality of the removal of the workman was not the subject matter of reference, and (2) that the reference to the Labour Court could not be justified under section 10(1)(c), because the dispute fell within the Third and not the Second Schedule to the Act; nor under the first proviso to section 10(1)(d), because, the Government did not act under that proviso, and because, more than one hundred persons were interested in and therefore likely to be affected by the dispute.
In appeal to this Court, the Company sought to support the judgment of the High Court also on the ground that the Mysore Government was not the appropriate Government to make the reference.
HELD : (1) The legality of the termination of the service of the workman wag included in the order of reference.
[532 D E] The words "with benefit of back wages" coupled with the word "reinstatement" are appropriate only to a case of removal.
On the facts of the case, the transfer of the workman was illegal and so, his removal from service should be set aside and be should be reinstated with benefits of 'back wages.
[532 F G] (2) The reference to the Labour Court was valid under the first proviso to section 10(1) (d).
[533 H] (a) High Court misinterpreted the proviso by equating the two ,words interested and affected.
The members of the Union which sponsored the cause of the workman were interested in the dispute, but they would not necessarily be affected by the dispute.
[533 F G] 529 (b) It is not necessary that the order of reference should expressly state that it was because of the proviso that the reference was being made to the Labour Court.
If it could be justified on the facts, there is nothing in the Act which makes such a reference invalid.
[533 E F] (3) The Mysore Government was the appropriate Government to make the reference, because, the subject matter of the, dispute substantially arose within the jurisdiction of the Mysore Government.
[534 H] The proper question to raise is : where did the dispute arise and not where was the dispute sponsored : that is, whether there is a nexus between the dispute and the territory of the State making the reference.
Ordinarily if there is a separate establishment and the workman is working in that establishment, the dispute would arise at that place.
[534 A E] Indian Cable Co. Ltd. vs Its Workmen, [1962] Supp.
3 S.C.R. 589,followed.


judgement:
Appeal No. 634 of 1965.
Appeal by special leave from the Award (Part 11) dated April 23, 1964 of the Industrial Tribunal, Maharashtra, Bombay in Reference (IT) No. 271 of 1962.
H. R. Gokhale and I N. Shroff, for the appellant.
K. K. Singhvi, R. section Kulkarni, section C. Agarwala and D. P. Singh, for the respondents.
The Judgment of the Court was delivered by Hidayatullah, J.
This is an appeal against the Award, April 23, 1964, of the Maharashtra Industrial Tribunal, Bombay (Mr. Meher) in reference (IT) 271 of 1962.
The Award was given in a dispute between the Kamani Employees Union, Bombay and the Kamani Metals & Alloys Ltd. The Company is the appellant before us.
The reference was occasioned by a demand raised by the Union on February 25, 1960 in relation to wage scales and classifications, dearness allowance, production bonus, permanency for daily rated workmen and grades and scales of pay, dearness allowance and abolition of marriage clause for monthly paid employees.
At first a reference was made to a Conciliation Board by the Government on September 8, 1962.
The conciliation was frustrated for some reasons and on December 14, 1962, the Bombay Government acting under section 10(1)(d) of the referred the dispute to the Tribunal for adjudication.
By the Award now under appeal, some points were decided in favour of the Company and some others in favour of the work men.
The workmen have not appealed and the Company has also confined this appeal to some of the points decided against it.
We are concerned with a Company which is carrying on the business of melting and manufacturing all kinds of rolled products of non ferrous metals and alloys, copper and copper based alloys, such as sheets, strips, coils etc.
According to the Company the process of manufacture, unlike the general engineering industry, involves only the melting of the non ferrous metals and casting them into suitable slabs for the subsequent processes of hot and cold rolling to alter their shape, size and metallurgical properties.
The product so wrought serves as a base raw,.
material for making products such as automobiles, telephones, radios and other electrical gadgets, etc.
The Company claims that it cannot be described as a general engineering industry.
The main contentions in this appeal concern the revision of wages and monthly pays and the fixing of wage scales and time scales in respect thereof, respectively, and the increase in dearness allowance by adopting a new system of calculation.
The Company 466 also complains that the Award has been given retrospective operation entailing heavy burden upon it.
In support of the above contentions the Company states that its financial capacity does not bear the revision either of the wages and pays on the one hand or the dearness allowance on the other.
It submits that the Tribunal in revising the wages, pays and ' the dearness allowance has followed wrong principles and ignored those laid down by this Court.
of the argument in respects of wages to daily rated workmen and pays to monthly rated workmen is common and it will not be necessary to refer to the argument twice over in the course of this judgment.
This is the first revision of wages and the dearness allowance in this Company during the last 20 years.
The wage scales and the dearness allowance were fixed unilaterally to start with.
The minimum basic wage was fixed at Rs. 30 per month or Rs. 1.16 per day which was the minimum settled by the Bombay Textile Standardization Award and the First Central Pay Commission for Government servants in or about 1950.
The Tribunal has raised the minimum wage to Rs. 1.35 per day, which is equivalent to a wage of Rs. 35 per month.
The maxima have also been raised proportionately.
Similarly,, in the case of monthly rated workmen the minimum monthly ' salary, which was Rs. 60 for the lowest grade clerk, has been raised to Rs. 85/ and the maximum has been increased in almost the same proportion.
The Company contends that this increase is based upon wrong principles inasmuch as the wages and pays in this company have been compared not only with the companies operating non ferrous metals in the same way but with general engineering concerns and has taken an irrelevant factor, namely, the yield from incentive bonus into consideration, has made wrong grades and unnecessary adjustment in making fitments without taking into account the financial burden thus involved and the capacity of the Company to bear it.
We shall consider these submissions.
In dealing with these contentions we shall begin by considering one contention which, if accepted$ will cut at the very toot of the case for revision of wages.
It has, however, no merit.
The submission is that there is no change 'of circumstances justifying a revision of wages and pay scales or dearness allowance.
It can hardly be maintained that wages fixed so far back do not need revision, when, as every one knows, commodity prices have soared high, the general level of wages has gone up and in some industries there have been two or three revisions already and in some others Wage Boards have been appointed to revise or fix wages.
We can take judicial notice of these facts.
In this Company no revision has taken place and the demand is, therefore,.
not unjustified.
Before we deal with the other contentions it is necessary to make a few preliminary observations about the principles which 467 are to be followed.
In questions of this type it is first desirable to consider what amount is necessary to maintain and even improve the workers ' standard of living, how wages of the workers concerned compare with those paid to workers of similar grade and skill by other employers in similar or other industries in the region and what wages the establishment or industry can afford to pay.
These are the fundamental principles which have to be borne in mind.
The first, however, is a general inquiry into the structure of wages which it may not be necessary to examine elaborately each time because that inquiry is generally made independently of ' individual cases.
The data is usually compiled by labour conferences and experts.
The other two matters, of course, require attention.
Fixation of a wage structure is always a delicate task because a balance has to be struck between the demands of social justice which requires that the workmen should receive their proper share of the national income which they help to produce with a view to improving their standard of living, and the depletion which every increase in wages makes in the profits as this tends to divert capital from industry into other channels thought to be more profitable.
The task is not rendered any the easier because conditions vary from region to region, industry to industry and establishment to establishment.
To cope with these differences certain principles on which wages are fixed have been stated from time to time by this Court.
Broadly speaking the first principle is that there is a minimum wage which, in any event, must be paid, irrespective of the tent of profits, the financial condition of the establishment or the availability of workmen on lower wages.
, This minimum wage is independent of the kind of industry and applies to all alike big or small.
It sets the lowest limit below which wages cannot be allowed to sink in all humanity.
The second principle is that wages must be fair, that is to say, sufficiently high to provide a standard family with food, shelter, clothing, medical care and education of children appropriate to the workman but not at a rate exceeding his wage earning capacity in the class of establishment to which he belongs.
A fair wage is thus related to the earning capacity and the workload.
It ' must, however, be realised that 'fair wage ' is not 'living wage ' by which is meant a wage which is sufficient to provide not only the essentials above mentioned but a fair measure of frugal comfort with an ability to provide for old age and evil days.
Fair wage lies between the minimum wage,which must be paid in any event, and the living wage, which is the goal.
As time passes and prices rise, even the fair wage fixed for the time being tends to sag downwards and then a revision is necessary.
To a certain extent the disparity is made up by the additional payment of dearness allowance.
This allowance is given to compensate for the rise in the cost of living.
But as it is 468 not advisable to have a 100%.
neutralisation test it lead to inflation, the dearness allowance is often a little less than 100% neutralisation.
In course of time even the addition of the dearness allowance does not sufficiently make up the gap between wages and cost of living and a revision of wages and/or dearness allowance then becomes necessary.
This revision is done on certain principles.
These principles have been stated in more than one case of this Court.
The Company, however, relies upon Novex Dry Cleaners vs Its Workmen(1).
The principles laid down in that case have been accurately summarized in the head note thus : industry to bear the burden of the said wage scale is a very relevant and very important factor.
Before comparing the establishment in question with other establishments engaged in the same trade in the region, it would be obviously necessary for the industrial tribunal to compare the establishments in respect of their standing, the extent of the labour force employed by them, the extent of their respective customers and what is more important, a comparative study should be made of the profits and losses incurred by them for some years before the date of the award.
It is well known that in fixing the wage structure on a fair basis ; an attempt is generally made in assessing the additional liability imposed on the employer by the new wage structure and trying to anticipate whether the employer would be able to meet it for a reasonably long period in future.
Where the award simply fixed the wage scales on the assumption that the establishment in question was comparable to the other two establishments in the same region without considering the aspects mentioned above, it must be set aside.
In the consequence, the industrial tribunal was directed to reconsider the question of fixation of wage scales in the light of the principles mentioned supra.
The Company contends that many of the matters here stated have not been considered and the Award being defective for that reason deserves to be set aside.
This is not a proper approach.
The observations no doubt lay down the principal guide lines but they are not intended to operate with the rigidity of a statutory enactment.
The Court has indicated what lines of inquiry are likely to lead to the discovery of correct data for the fixation of fair wages in the sense explained above.
In this task all the relevant consi derations must enter but fruitless inquiries into matters of no parti (1) 469 cular importance to a case are hardly to be insisted upon because rather than prove of assistance, they might well frustrate the very object in view.
Each case requires to be considered on its own facts.
In the case before us, all relevant circumstances have, in our opinion, entered the determination, and it has not been shown to us that any other circumstance could or should have been considered.
In fact the argument was that the tribunal considered some irrelevant things and this has vitiated the finding.
We shall.
now consider the specific objections.
The Company has a capital of Rs. 40,00,000.
Its sales in 1957 58 to 1961 62 increased from Rs. 1,81,18,873 to Rs. 2,31,50,485 and its profits in 1962 63 were of the order of Rs. 28 lakhs, excluding Rs. 51 lakhs for depreciation and Rs. 2 lakhs for managing agency commission.
The burden of the increased wage bill will not be more than 1/10th of its net profits, to say nothing of some other savings by way of reduction of income tax.
The tribunal held that the burden could be borne and we agree.
One part of the inquiry, namely, the capacity to pay the increased wage bill was satisfied.
The next part of the inquiry involved the application of the principle of industry cum region.
This principle is that fixation or revision of scales of wages, pays or dearness allowance must not be out of tune with the wages etc. ;prevalent in the industry or the region.
This is always desirable so that unfair competition may not result between an establishment and another and diversity in wages in the region may not lead to industrial unrest.
In attempting to compare one unit with another care must be taken that units differently placed or circumstanced are not considered as guides, without making adequate allowance for the differences.
The same is true when the regional level of wages are considered and compared.
In general words, comparable units may be compared but not units which are dissimilar.
While disparity in wages in industrial concerns similarly placed leads to discontent, attempting to level up wages without making sufficient allowances for differences, leads to hardships.
It is complained that the Tribunal, has done exactly the op posite, namely, that it has compared dissimilar concerns and not compared similar ones.
What the Tribunal has done is to compare the Kamani Metals & Alloys (appellant Company) with the Indian Smelting and Refining Co. Ltd. and the Kamani Engineering Corporation Ltd. The appellant Company does not object to the first but to the second as it deals with non ferrous metals and alloys and does not require engineering process in its manufacture.
For the same reason a comparison with Alcock Ashdown an( Co. and Richardson and Cruddas & Co. is objected to.
On the, other hand, it is submitted that another company Devidayal Metals Industries Ltd., Bombay was a comparable concern.
470 Both sides agree that a comparison with the Indian Smelting and Refining Co. Ltd. was proper.
As regards Devidayal it is clear from the records that it is a much smaller concern and does not furnish a just basis for comparison The scales of pay existing in it are considerably lower than the existing scales in many instances.
As regards Kamani Engineering Corporation it is necessary to consider a few facts.
In 1951 a common award was given in respect of Kamani Engineering Corporation and the Kamani.
Metals and Alloys.
In 1958 the demand for revision of dearness allowance was rejected by a common award.
This time too the charter of demands in respect of the Kamani Engineering and Kamani Metals & Alloys was the same and given within a few days of each other.
These references were first pending before Mr. T. Bilgrani but as he had 551 references pending before him five references in respect of the Kamani group of industries were withdrawn from him and made over to Mr. Meher.
The references were heard together.
The award in the Kamani Engineering was rendered on 27th February, 1964 and that in Kamani Metals & Alloys on 23rd April, 1964.
Many of the exhibits were common and the two awards refer to these common exhibits.
In these circumstances, the comparison was not inadmissible.
The principle of fixation of wages and dearness allowance was stated by this Court in these words decisions is that in applying the, industry cum region formula for fixing wage scales the tribunal should lay stress on the industry part of the formula if there are a large number of concerns in the same region carrying on the same industry ; in such a case in order that production cost may not be unequal and there may be equal competition wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind.
But where the number of industries of the same kind in a particular region is small, it is the region part of the industry cum region formula which assumes importance. . (1).
In dealing, therefore, with only one comparable concern it was open to take into consideration the conditions existing in engineering concerns, particularly those in Kamani Engineering Corporation, which belongs to the same group and there is thus affinity between them.
We were taken through the comparative charts showing the scales of wages in these concerns and pointed out the differences particularly those operating to the disadvantage of the appellant Company.
That some differences are bound to be there because (1) Greaves Cotton & Co. vs Their Workmen [1964] 5 S.C.R. 362: , 346.
471 of many imponderables that go into the fixation of wages, goes without saying.
We are, of course, not expected to go into the matter over again in the appeal.
An appeal against an award brought by special leave is not an appeal as of right.
It is not intended to be an appeal on every ground of fact and of law unless this Court considers it fit to examine the matter from any special angle Before a party can claim redress, it must show that the award is defective by reason of an excess of jurisdiction or of a substantial error in applying the law or some settled principle or of some gross and palpable error occasioning substantial injustice.
An industrial adjudication by reason that it is an award cannot be assailed because some other person would have given a different award or that elaborate reasons have not been given.
We considered the comparative charts carefully and on the whole, we are satisfied that the scales of wages as fixed by this Award when compared with those existing in Indian Smelting, when they are high, are not so high as to merit special comment or interference.
Sometimes they are lower.
It remains, however, to consider the case from the angle of the scales of wages existing in Kamani Engineering Corporation.
In dealing with the scales of pay in comparison with those existing in Kamani Engineering Corporation the Tribunal observed that higher wages were being fixed in the Kamani Metals & Alloys because the yield from incentive bonus in the Kamani Engineering Corporation was between 20 to 30% of the wages and the dearness allowance whereas in this Company it was abnormally low.
Mr. Gokhale contended that the yield from incentive bonus is an irrelevant factor to take into account and observed that if persons could get higher wages by not earning incentive bonus, the result might be a disincentive to work at all.
Speaking generally, his objection is Tight to a certain extent.
But it is not right in the circumstances of this case.
The Company has since 1949 introduced a scheme of wage incentive.
There is no straight piece rate system under which the worker is paid a fixed amount for each unit of out put.
There is a fixation of average production for a whole group and not for the individual worker.
The target in the melting section is fixed at 5000 cwt.
and 1.5 %, on every additional 300 cwt.
is fixed as bonus.
Other sections have different targets and different percentages.
A similar scheme also exists in the Kamani Engineering Corporation.
What has happened is that the Tribunal in fixing scales of wages in the reference from Kamani Engineering fixed lower rates because it was of the opinion that quite a substantial sum was earned in that establishment by way of incentive bonus.
When the Tribunal came to decide the present reference it recalled that lower wages were fixed in the Kamani Engineering Corporation case because of the yield from incentive bonus.
It, therefore, ascertained the yield in the Kamani 472 Metals & Alloys and finding it low fixed the wages at the proper level unaffected by consideration of incentive bonus.
This really means that proper wages were fixed in the Kamani Metals & Alloys with out being influenced in any way by the yield from incentive bonus although in the case of Kamani Engineering Corporation lower wages were fixed, because the yield from incentive bonus was very high.
In these circumstances, we are of the opinion that the wages in the present case 'have not really been influenced by considerations of yield from incentive bonus whatever may be said of Kamani Engineering Corporation.
It was next contended that there is no case made out for ad justment of the workmen in the new time scale after granting them one additional increment after every three years ' service and two additional increments after five years ' service.
The principle on which a point to point adjustment is sometimes departed from and increments are granted was stated in some cases of this Court.
It is sufficient to refer to only one of them.
In Hindustan Times, Ltd. vs Their Workmen(1), the ' question of adjustment of existing employees into new scales was considered.
It was observed as follows : It may.
well be true that in the absence of any special circumstances an adjustment of the nature as allowed in this case by allowing special increment in the new scale on the basis of service already rendered may not be appropriate.
Clearly, however, in the present case the.
tribunal took into consideration in deciding this question of adjustment the fact that it had been extremely cautious as regards increasing the old wage scales.
Apparently, it thought that it would be fair to give some relief to the existing employees by means of such increase by way of adjustment while at the same time not burdening the employer with higher rates of wages for new incumbents.
In these circumstances, we do not see any justification for interfering with the directions given by the tribunal in the matter of adjustments.
" In this case also the fixation of scales has been very cautious.
The increase from Rs. 1.16 to Rs. 1.35 in the lowest category is not very high considering that these wages had existed for 12 years before they were so adjusted.
Similarly, the starting wage in all the other three categories cannot be considered to be very high.
The same is the case with monthly rated workmen.
The annual increment is not unduly high and in these circumstances it cannot be said that the Tribunal was in error in departing from a point to point adjustment.
to grant one or two increments, based on the (1) [1964] 1 S.C.R. 234, 249: 115.
473 length of service.
The discretion was exercised on sound judicial lines.
It was finally contended that the Tribunal was in 'error in making the Award retrospective from October 1, 1962, when the reference was made on December 14, 1962.
This objection has no force.
In the charter of demands the workmen had claimed retrospective revision from July 1, 1961.
The matter was referred to the Board of Conciliation on September 8, 1962.
When conciliation was frustrated because of the arrest of some of the workers of the Union under the Defence of India Rules, the present reference was made to the Tribunal.
The Tribunal could have easily chosen September 8, 1962 but chose an intermediate date to be fair to both sides.
In our judgment, the choice of October 1, 1962 by the Tribunal cannot be characterised as either illegal or unfair.
The question of incentive bonus revision was not mooted before us and the direction that incentive bonus should be calculated on the new scale from 1st January, 1964 is more in favour of the employers than the workmen and no grievance can be made about it.
This brings us to the question of the monthly rated workers.
Most of the points which we have discussed in relation to the daily rated workmen are common.
We have seen the scales which have been fixed and compared them with the rates obtaining in Indian Smelting and the Kamani Engineering and other concerns and are satisfied that they have not been put so high as to merit interference at our hands.
It is, however, contended that the Tribunal has gone beyond the Reference inasmuch as the Reference was in respect of special categories of monthly rated employees by designation but the Tribunal has fixed the new scales not only for those workmen but for all clerical and other workmen which were classified as Grades A, B, C and D in 1950.
It is true that the Tribunal has not only fixed the new scales for those categories of monthly paid employees who were named in the order of reference but has also provided that those scales shall apply to clerks in the A, B, C and D Grades.
It is, however, clear that even the monthly paid employees mentioned by name belong to one category or another.
in the Grades A to D. It would have been highly invidious if some persons in the Grades were to receive more pay than the others in the same Grade.
The Award, therefore, treats the Reference as referring to the 4 Grades although only some of the class who go by special designations in each Grade have been mentioned.
The intention, however, was to have a general revision of the scales of payment to all workers paid monthly and the Tribunal was, therefore, right in not reading the Reference as restricted to only a few classes.
By doing so the Tribunal has avoided further industrial unrest and disputes and has really given effect to the underlying object of the reference.
474 This brings us to the last question which is related to the dearness allowance payable to the monthly rated workmen.
Previous to the present Award the dearness allowance was payable in this company in the following manner : "On the 1st Rs. 100 (upto Rs. 100) 60 per cent with a minimum of the D.A.paid to the Textile Operatives by the Bombay Mill owners Association.
On the 2nd Rs. 100 (upto Rs. 200) 20 per cent of the 2nd hundred rupees.
On the 3rd Rs. 100 (upto Rs. 300) 15 per cent of the 3rd hundred rupees.
On the 4th Rs. 100 (upto Rs. 400) 10 per cent of the 4th hundred rupees.
On the 5th Rs. 100 (upto Rs. 500) 10 per cent of the 5th hundred rupees.
On every hundred above Rs. 500 of 5 percent of basic every hundred rupees.
The above percentage of dearness allowance, is applicable when the Bombay Cost of Living Index rests between 311 to 320.
Variation in the above percentage to be allowed per 10 point movement in the index.
First slab 3 per cent of dearness allowance ; 2nd slab 1 1/2 per cent of dearness allowance; 3rd slab 1 per cent of dearness allowance ; 4th slab 3/4 per cent of dearness allowance and the last slab 1/2 per cent of the dearness allowance." In the Award this has been altered to a scheme which is as follows On the first Rs. 100 basic pay (upto Rs. 100) 60% On the second Rs. 100 basic pay (upto35% of the 2nd 100 Rs. 200) rupees.
On the third Rs. 100 basic pay (upto15 % of the 3rd 100 Rs. 300) rupees.
On the Rs. 301 basic and above10 % of the balance.
NOTE The minimum dearness allowance will be the revised textile scale.
The above percentage of dearness allowance is applicable when the Bombay Consumer Price Index is between 311 and 320.
Variation per 10 point movement in the index should be as follows 475 First slab of Rs. 100 basic pay 5 % (e.g. dearness allowance will be 65 % of basic pay when index is between 321 and 330).
Second slab of 100 basic pay 1 1/2% Subsequent slabs 1 %".
It is contended that linking the dearness allowance, after the consumer price index 321 to wages has made a departure from the fixation of dearness allowance fixed in tie Kamani Engineering Corporation in which, under the same circumstances, the percentage after the consumer price in 0 321 is that of the dearness allowance and not of the basic salary.
On the other side, we were shown a number of awards in which dearness allowance has been fixed in the same manner as by this Award.
It appears that the case of Kamani Engineering was treated as a special case because the incentive bonus there was yielding a third of the total earnings of the workmen and it was considered that if the dearness allowance was also raised then a very great burden would be thrown upon the employer by reason of the incentive bonus.
We cannot, therefore, use the precedent of the award in the Kamani Engineering Corporation because of these special facts.
We are satisfied that in many other companies dearness allowance has been ordered to be calculated in the same manner as has been done by this Award and we see no reason, therefore, to interfere.
For these reasons we find no force in this appeal.
It fails and will be dismissed with costs.
V.P.S. Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The award of the Industrial Tribunal in an industrial dispute between the appellant company (manufacturing products of non ferrous metals and alloys) and its workmen, was challenged in appeal to this Court on the following grounds: (1) There was no change of circumstances justifying a revision of Wages, pay scales and dearness allowance, (2) while making such revision by its award, many of the matters stated in the judgment of this Court in Novex Dry Cleaners vs Its Workmen, were not considered by the Tribunal; ' (3) the Tribunal 'had com.
pared dissimilar concerns and not compared similar ones; (4) the Tribunal took into account an irrelevant factor, namely, the yield from incentive bonus; (51 no case was made out for adjustment of the workmen in the new time scale after granting them one additional increment after every 3 years service and two additional increments, after 5 years ' service (6) the Tribunal was in error in making the award retrospective from 1st October 1962, when the reference was made to it only on 14th December 1962; (7) the Tribunal had gone beyond the reference inasmuch as the reference was in respect of special categories of monthly rated employees by designation, whereas the Tribunal had fixed the new scales of pay not only for those workmen but for all clerical and other workmen who were classified as Grades A, B, C, and D; and (8) the linking of dearness allowance, after the consumer price index 321, to wages, has made a departure from the fixation of dearness allowance fixed in another concern, where the percentage was that of the dearness allowance and not of the basic salary.
HELD : In an appeal brought by special leave against the award, before a party can claim redress, it must be shown that the award was defective by reason of an excess of jurisdiction, or of a substantial error in applying the law or some settled principle, or of some gross and palpable error occasioning substantial injustice.
[471 A C] (1) There was no revision of wages or dearness allowance in the last 20 years,, even though commodity prices level of wages had gone up, and there had in some industries, while in some revise or fix wages.
There a revision was justified.
[466 F 14] (2) In order to make the fair wage meet the increase in the cost of living dearness allowance is paid to make up the disparity to a certain extent.
When, in course of time, it is found that it is not sufficient, because of a further increase in the cost of living, a revision of wages and dearness allowance becomes necessary.
This Court in its decisions has merely laid down the principal guide lines to be followed in industrial adjudica 464 tion.
The various observations are not intended to operate with the rigidity of a statutory enactment.
Each case must be considered on its own facts and only relevant circumstances should enter into the determination of the wage structure.
The fundamental principles to be considered are: (a) how the wages of the workers concerned compare with those paid, to workers of similar grade an( skill by other employers in similar or other industries in the 'region, and b) what wages the establishment or industry can afford to pay.
In the present case, taking into account the increase in its net profits and the fact that the burden of the increased wage bill would not be more than 1/10th of the net profits, the Tribunal was right in holding that the appellant had the capacity to pay the increased wage bill.
[467 B C, H; 468 A B, G H; 469 A D] (3) The Tribunal compared the appellant company with four engineering concerns.
One of them belonged to the same group of industries as the appellant.
There were common awards in respect of both of them.
Further, there was an award given at the same time by the same Tribunal in the connected concern also, the charter of demands being the same as in the appellant company and based on several common exhibits.
Since the number of industries in the region was small, it was open to the Tribunal to take into consideration the conditions existing in the engineering concerns in the region, particularly those in a concern where there is affinity, even though the appellant company could not be described as a general engineering industry.
Smaller concerns,.
where the scale of pay is considerably lower, do not furnish a just basis for comparison.
[470 A, B, D. F G] Greaves Colton & Co. vs The Workmen, ; , followed.
(4) The Tribunal fixed lower wages in the reference relating to the connected concern, because, a substantial ment by way of incentive bonus.
But in the case of the appellant company, finding the yield from incentive bonus, low, the Tribunal fixed the wages at the proper level without considering the yield from incentive bonus, that is, without being influenced by it in any way.
[471 E, G H; 472 A B] (5) In the present case the fixation of scales of pay has been very cautious, the starting wage and the annual increment were not high, and therefore, it cannot be said that the Tribunal was in error in departing from point to point adjustment in granting increments based on the length of service.
[472 G H] Observations in Hindustan Times V. Their Workmen, [1964] 1 S.C.R. 234 at p. 249, followed.
(6) In view of the facts that the workmen demanded retrospective revision from 1st July 1961, and that the matter was referred to the Conciliation Board in 'September 1962, the choice of 1st October 1962 by the Tribunal cannot be characterised 'as either illegal or unfair.
[473 C] (7)The monthly paid employees mentioned by name in the order of reference belong to one category or another in the Grades A to D.
The intention was to have a general revision of the scale of payment to all workers paid monthly; otherwise, it would have been invidious for some persons in the same Grade to receive more pay than others.
The Tribunal was therefore right in treating the, reference 'as referring to all the four Grades and not reading it as restricted only to a few classes.
[473 F H] (8) There have been a number of awards in which dearness allowance was fixed in the same manner as by the present award.
The award in the connected concern could not be used as a precedent.
, because of the special 'facts ' obtaining in that concern.
[475 C, E] 465


judgement:
Appeal No. 2340 of 1966.
Appeal from the judgment and order dated October 7, 1966 of the Bombay High Court, Nagpur Bench in Special Civil Appli cation No. 940 of 1965.
M. C. Setalvad, N. section Bindra and R. H. Dhebar, for appellant No. 1.
A. section Bobde, and section G. Kukdey, for respondent No. 1.
M. M. Kinkhede, G. L. Sanghi and A. G. Ratnaparkhi, for respondents Nos.
3 16, 19 31, 33, 34, 36 45, 47 53, 55 and 57.
The Judgment of the Court was delivered by Bachawat, J.
This appeal arises out of a writ petition filed by respondent No. 1 before the Nagpur Bench of the Bombay High Court, challenging the show cause notice dated July 21, 1965 and the order dated September 29, 1965, superseding the municipal corporation of the city of Nagpur.
In July, 1962, the term of office of the present Councillors commenced.
On July 21, 1965, the Government of Maharashtra issued a notice to respondent No. 1, the Mayor of the Nagpur Municipal Corporation, asking him to show cause why the corporation should not be superseded.
On August 1, 1965, respondent No. I filed his reply to the show cause notice.
On September 29, 1965, the State Government passed the impugned order superseding the corporation under sections 408 and 409 of the City of Nagpur Corporation Act 1948 (C. P. & Berar Act 11 of 1950).
On September 30, 1965, respondent No. I filed a writ petition challenging the show cause notice and the order of supersession.
The High Court allowed the writ petition and quashed the order of supersession.
The High Court held that the State Government exercised its power under section 408 on grounds which were not reasonably related to its legitimate exercise and the finding upon which the order was passed was rationally impossible on the materials before the State Government.
The State of Maharashtra now appeals to this Court on a certificate granted by the High Court.
By an order of this Court, the Administrator of the City of Nagpur appointed under the order of supersession of September 29, 1965, has been joined as the second appellant.
585 Section 408 of the City of Nagpur Corporation Act 1948 is in 'these terms: "408.
(1) If at any time upon representations made or otherwise it appears to the State the Corporation is not competent to perform or persistently makes default in the performance of the duties imposed on it by or under this Act or any other law for the time being in force, or exceeds or abuses its powers the State Government may ', after having given an opportunity to the Corp oration to show cause why such an order should not be made, or if it" appears to the State Government that the case is one of emergency, forthwith issue an order directing that all the Councillors shall retire from office as and from such date as may be appointed and declare the Corporation to be superseded.
Such order shall be published in the Gazette and the reasons for making it shall be stated therein.
(2) Notwithstanding anything contained in sections 17 and 20, all Councillors shall vacate their office from the date mentioned in any order under sub section (1).".
The consequence of supersession of the corporation under section 408 is that all its members vacate their office, all powers and duties of the; corporation; the Standing Committee and the chief executive officer may be exercised by the administrator of the city appointed by the State government, and all property vested in the corporation vests in the administrator (section 408).
The conditions for the exercise of he power under section 408 are clearly stated in the section.
It must appear to the State government that the corporation is not competent or persistently makes default in the performance of the duties imposed on it by or under the Act or any other law for the time being in force, or exceeds or abuses its powers.
Except in cases of emerge icy, the State government must give to the corporation an opportunity to show cause why the order under the section should not be made.
If on a consideration of the explanation submitted by the corporation, the State government considers that there is no ground for making the order, the Government may drop the proceeding.
Otherwise, it may issue an order declaring the corporation to 'be superseded and directing that all the Councillors shall retire from office.
The order must be published in the Gazette and the reasons: For making it must be stated therein.
There is no appeal to the court from the order under section 408.
in a writ application the court will not review the facts as an appellate body.
But the order is liable to be set aside if no reasonable person on a proper consideration of the materials before the State government could form the opinion that the corporation "is not competent to perform, or persistently makes default in the performance of the duties imposed on it by or under this Act or any other law for the 586 time being in force, or exceeds or abuses its powers".
Likewise, the order is liable to be set aside if it was passed in bad faith or if in a case which was not one, of emergency, due opportunity to show cause was not given to the corporation.
In all such cases, the order is in excess of the statutory power under section 408 and is invalid.
On the question whether the order under section 408 is an administrative or quasi judicial act, our attention was drawn to the decisions in Municipal Committed, Karali and Another, vs The State of Madhya Pradesh(1) and Shri Radheshyam Khare and Anr.
vs The State of Madhya Pradesh and Others.(2) These cases turned on the construction of sections 53A and 57 of the C. P. & Berar Municipalities Act 1922 (Act 11 of 1922).
The point whether the order under section 408 is quasi judicial or administrative act is not very material, for it is common ground,that the present case was not one of emergency and the State government was bound to give opportunity to the corporation to show cause why the order should not be made.
The order dated September 29, 1965 was in these terms: "Whereas it is reported to the Government of Maharashtra that the Municipal Corporation of the City of Nagpur (hereinafter referred to as 'the Municipal Corporation ') constituted under the City of Nagpur Municipal Corporation Act, 1948 (C.P. & Berar Act 11 of 1950) (hereinafter.
referred to as 'the said Act ') (a) has, since the present Councillors entered upon their office, planned its expenditure on the basis of uncertain receipts as shown below, that is to say Year Receipts in budget as Actual of previous passed by Corporation year Rs. in lacs Rs. in lacs.
1963 64 351 173 1964 65 221 190 1965 66 258 (200 to 215 lacs anticipated.
and without exercising the proper controls provided by or under the said Act has allowed its financial position to deteriorate rapidly and seriously to such an extent that the free cash balance of Rs. 5.81 lacs approximately in March 1962 was reduced to Rs. 53,000 approximately on the 12th July, 1965: and that the Corporation had no funds even to (1) A.I.R. 1958 M.P. 323.
(2) 587 disburse the salaries of its officers and 'servants as is noticed from the Resolution of the Municipal Corporation No. 98, dated the 4th September, 1965; and (b) has neglected to under take the improvement of water supply and to provide a sufficient supply of suitable water for public and private purposes; And whereas, an opportunity was given to the Municipal Corporation to show cause why in the aforesaid circumstances an order of supersession under sub section (1) of section 408 of the said Act should not be made , And whereas, after considering the reply of the Municipal Corporation and subsequent it submissions made by it the Government of Maharashtra is of the opinion that the Municipal Corporation is not competent to perform the duties imposed on it by or under the said Act; Now ' therefore, in exercise of the powers conferred by sub section (1) of section 408 and subsection (1) of section 409 of the said Act, and of all other powers enabling it in this behalf, the Government of Maharashtra for the reasons specified aforesaid, hereby (1) directs that all the Councillors of the Municipal Corporation shall retire from office as and from the 1st day of October, 1965; (2) declares the Municipal Corporation to be superseded from that date; and (3) appoints Shri D. H. Deshmukh to be the Administrator of the City of Nagpur From the order it appears that there were two grounds on which the State government formed the opinion that the corporation was not competent to perform the duties imposed on it by or under the Nagpur Municipal Corporation Act, 1948.
Annexure 2 to the show cause notice dated July 21, 1965 Set out the following facts relatable to the first ground mentioned in paragraph 1(a) of the order: "II.
(1) In March 1962, the free cash balance with the Corporation was Rs., 5.
81 lacs.
On 12 7 65, the opening cash balance of the Corporation ",as Rs. 53,821.
The Statement 'A ' appended hereto will reveal the financial.
position of the Corporation.
On the basis of average daily receipts the Corporation will have an opening balance of Rs. 7 74 lacs on 1 8 65 as against that their immediate liabilities are of the order of Rs. 30 84 lacs. 'It is 588 thus clear that the Corporation is heading for a grave.
financial crisis and it will not be in a position even to pay fully the salaries and wages of their permanent and temporary employees.
Under Chapter IV of the City of Nagpur corporation Act, the Corporation is required to pay salaries to their officers and servants as provided for in Sections 47, 49 and 50 of the said Act.
The liability arising out of the payment of salaries; and wages is the third charge on the municipal fund the.
previous two charges being repayment of all loans payable by the Corporation under Chapter IX of that Act and the second being the payment for discharge of all liabilities imposed on the Corporation in respect of debts ' and obligations and contracts of ' the Municipality, of Nagpur, to whom the Corporation is a successor.
It is assumed that such liabilities do not any ' longer exist.
Thus the payment of salaries etc., is the ,second charge on the municipal fund, and it is very obvious from the figures in Statement `A ' that the Corporation is not in a position to discharge that liability.
" The opinion of the State, government so far as it is based on the first ground cannot be supported.
The show cause notice did not mention the charge that the Councillors planned the expenditure on the basis of uncertain receipts or that they did not exercise .proper controls provided by or under the Act.
No opportunity was given to the corporation to explain the charge.
Without giving such an opportunity, the State government could not lawfully and that the charge was proved.
The cash balances of the cor poration vary from day to day.
No reasonable person could possibly come to the conclusion hat the financial position of the corporation had deteriorated from the fact that the cash balances were Rs. 5,81,000 in March 1962 and Rs. 53,000 on July 12, 1965.
The, statement that the corporation had no funds to disburse the salaries of its officers and servants had no factual basis.
As a matter of fact, the corporation paid the salaries.
The dearness allowance was not paid because the bills were not scrutinized. ' The resolution dated September 4, 1965 referred to in the order was passed long after the show cause notice was issued and the corporation was not given an, opportunity to explain it.
The resolution did not say that the co ' oration had no ' funds even to disburse ' the salaries of its officers and servants.
The, corporation resolved to raise a loan of Rs. 15 lacs from the State; Government, but, the; loan was not raised.
The High Court also pointed out that many of the statements in the. statement "A" referred to in the show cause notice were factually incorrect.
The opinion of the State government, based on the first ground cannot be sustained, firstly because the corporation had no, opportunity to show cause against the charge, and secondly, because no reasonable Person on the materials 589 before the State government could possibly form the opinion that the charge was proved: The second.
ground referred to in paragraph 1 (b) of the order dated September 29, 1965 is more serious.
Section 57(1)(k) of the City of Nagpur Corporation Act, 1948 provides that the corporation shall make adequate provision by any means or measures which it may lawfully use or take for. . . "(k) the management and maintenance of all municipal water works and the construction and maintenance of new works and Means for providing sufficient supply of suitable water for public and private purposes.
" The charge was that the corporation neglected to undertake the improvement of water, supply and to provide a sufficient supply of suitable water for public and private purposes.
The relevant facts were set out in annexure 1 1(1) to (4) and annexure 11 to the show cause notice.
It is ' common ground that the water supply of the city of Nagpur was inadequate.
The population of the city was fast increasing and it was the duty of the corporation to augment the supply.
The improvement of the head works at the Kanhan Stage III and also the re modelling and redesigning of the distribution system was necessary for augmenting and,improving the water supply.
The work at Kanhan Stage.111 commenced in 1964 and.
for that purpose the Government sanctioned an ad hoc loan of Rs. 21 lacs.
The cost of the remaining work at Kanhan Stage III and the work of re modelling and redesigning of distribution system was estimated to be Rs. 70 lacs.
The corporation could not meet the cost without.
raising a loan.
II had the power to raise a loan for this purpose with the previous sanction of the State government under section 90 of the City of Nagpur Corporation Act 1948.
The corporation was not in a position to raise 1 he loan in the open market unless the repayment of the loan was guaranteed by the Government.
It approached the.
Government to give the guarantee.
The Government was willing to give the guarantee if two conditions were fulfilled (1) the co oration would meter the water supply immediately, and (2) in the annual budget, the budget of the water works department for the supply of water would be shown separately.
The Government was not willing to, give the guarantee unless conditions were fulfilled.
In May/June,.965, these conditions were communicated by, the minister in charge to the municipal commissioner and the chairman of the standing committee.
On June 5, 1965, the standing committee resolved: "(i) The Corporation may raise in the open market loan of Rs. 70 lacs for the purpose of completing the Kanhan Stage III head works and provision of Alteration plant and for re modelling and redesigning the water distribution system in Nagpur Corporation are.
590 (ii) The principle of universal meterisation should be accepted and all water connection in future should only be in the meter system ' (iii) The principle of providing a separate subsidiary budget for water supply should be accepted.
" At a meeting held on June 30, 1965, the corporation appears to have disapproved of the standing committee 's resolution regarding the principle of universal meterisation and setting up a separate subsidiary budget for water supply though no specific resolution to that effect was passed.
A meeting of the corporation on July 5, 1965 was convened to discuss the matter of raising a loan of Rs. 70 lacs.
In the notice calling the meeting, the following office note appeared at the foot of the relevant agenda: "In this connection the State Government demanded the following two assurances from the Corporation, (1) Nagpur Corporation should meter the water supply immediately.
(2) In the annual budget of the Corporation,budget of the water works department should be shown separately for supply of water.
In the said budget provision for payment of loans, sinking.
fund and future increase, in expenditure should be made separately.
After making these provisions the Corporation can expend the money for other works.
" On July 5, 1965, the meeting was adjourned.
On July 1,2, 1965, the corporation passed the, following resolution: "The Corporation gives its approval to the raising of a loan of Rs. 70 lakhs, in the next three years.
Such a loan comprising of Rs. 24 lakhs for Kanhan 3 Stage scheme and Rs. 45 lakhs for improvement in the Distribution System necessitated in view of the additional 29 million gallons of water that will be available after completion of the Kanhan 3 Stage Scheme.
The office should take necessary action to obtain the guarantee of the State Government for raising this loan in the open market in accordance with the above Resolution.
" The resolution is not printed in the paper book, but an agreed copy of the resolution was filed before us.
:The State government was of the view that by the resolution dated July 12, 1965, the corporation refused to accept the two conditions mentioned in the office note and thereby made it impossible for the corporation to meet the cost of construction of the head works and the.
remodelling and 591 redesigning of the distribution system and to provide a sufficient supply of water for the public and private purposes.
The corporation could not raise the loan without the Government guarantee and the government could, not reasonably guarantee the loan unless the two conditions of universal meterisation and the separate budget for the water supply were accepted.
The two conditions were reasonable.
The adoption of universal meterisation would have curtailed the wastage of water and secured adequate revenues necessary for the repayment of the loan and the setting up of an adequate sinking and development fund for the water supply.
A separate budget for the supply of water would have ensured that the receipts from the/ supply of water were a located to the expenditure on the water supply scheme.
The answer of the corporation was twofold.
The corporation said firstly that the resolution dated July 12, 1965 neither accepted nor rejected the two conditions and the question of accepting the conditions was left for future negotiations with the government after the government would be approached for the sanction of the loan under section 420(2)(r) of the City of Nagpur Corporation Act 1948, read with City of Nagpur Corporation Loans Rules 1951.
The corporation said secondly that the cost of immediate meterisation of the old connections would be Rs. 52 lacs and it was impossible for the corporation to raise this sum, nor could it lawfully divert any portion of the loan of Rs. 70 lacs for meeting this cost.
The High Court accepted the contention that at the meeting held on July 12, 1965, the corporation had resolved that the matter with regard to the conditions imposed by the government for giving the loan should be left for further negotiations with the government.
But it is to be noticed that the resolution dated July 12, 1965 did riot state that there should be any further negotiations with the government on the matter, nor did it disclose the financial problem with regard to meterisation or the basis upon which further negotiations should take place.
On June 30, 1965, he corporation had talked out the recommendation of the standing committee with regard to the universal meterisation and separate budget.
In this background, the State government.
could reasonably hold that the passing of the resolution excluding the office note amounted to virtual rejection of the conditions mentioned in the note.
The High Court was in error in accepting the first contention.
The High Court was also in error in holding that the Govern ment passed the order of September 29, 1965 without considering that universal meterisation posed a formidable problem which could not be overcome without a loan of Rs. 52, lacs in addition to the loan of Rs. 70 lacs.
The resolution of July 12, 1965 did not state that the corporation wanted an additional loan of Rs. 52 lacs for meeting the cost of universal meterisation.
Even in the answer to the showcause notice, the corporation did not say that it wanted to raise 592 an additional loan of Rs. 52 lacs.
The answer stated that the raising of this sum for the present was an impossibility.
There is nothing to show that the State, government would not have guaranteed repayment of this additional loan or that it was not possible to raise the loan backed, by a government guarantee.
In the writ petition respondent No.1 gave a summary of the reply to the show cause notice.
But there was no specific averment in the petition supported by affidavit that Rs. 52 lacs was necessary for the meterisation and that the raising of this sum was an impossibility.
That is why the point was not dealt with in the return to the writ, petition.
Even assuming that the meterisation would cost Rs. 52 lacs, there is nothing to show that the government would not have guaranteed the loan for this sum or that the corporation could not have raised the loan with this, guarantee.
Moreover, if the Government was right in assuming that the corporation had refused to entertain the proposal of meterisation, the question of raising funds for the meterisation would not arise and would be irrelevant.
The government passed the order after taking into consideration the reply to the show cause notice.
There were materials be "ore the State Government upon which it could find that the corporation had neglected to undertake an improvement of water supply and to provide a sufficient supply of water for private and public purpose.
On the basis of this finding, the State government could form the opinion that the corporation was not competent to perform the duties imposed on it by or under the Act.
Mr. Bobde contended that the opinion of the State government was based on two grounds arid as one of them is found to be non existent or irrelevant, the order is invalid and should be set aside.
The cases relied on by him may, be briefly noticed.
In a number of cases, the Court has quashed orders of preventive detention based on several grounds one of which is found to be irrelevant or illusory.
After reviewing the earlier cases Jagannadhadas J, in Dwarka Dass Bhatia vs The State of Jammu and Kashmir (1) said: "The principle underlying all these decisions is 'this.
Where power is vested in a statutory authority to deprive the liberty of a subject on its subjective satisfaction with reference to specified matters, if that satisfaction is stated to be based on a number of grounds or for a variety 'of reasons all taken together, and if some out of them are found to be non existent or irrelevant, the very exercise of that power is bad.
This is so because the matter being one for subjective satisfaction, it must be properly based on all the reasons on which it purports to be based.
If 'some out of them are found to be non existent or irrelevant, the Court cannot pre dicate what the subjective satisfaction of the said authority would have been on the exclusion of those grounds or (1) ; ,955.
593 reasons.
To uphold the validity of such an order in spite of the invalidity of some of the reasons or grounds would be to substitute the objective standards of the Court for the subjective satisfaction of the.
statutory authority.
In applying these principles, however, the Court must be.
satisfied that the vague or irrelevant grounds are such as, if excluded, might reasonably have affected the subjective satisfaction of the appropriate authority.
It is not merely because some ground or reason of a comparatively un essential nature is defective that such an order based on subjective satisfaction can be held to be invalid.
The Court, while anxious to safeguard the personal liberty of the individual will not lightly interfere with such orders." In Maursinha vs State of Madhya Pradesh(1), the Madhya Pradesh High Court, following the principle of the preventive detention cases, held that an order of supersession of the municipality under section 208 of the Madhya Bharat Municipal ties Act 1954, based on several grounds, most of which were found to be irrelevant, was invalid.
In Dhirajlal Girdharilal vs Commissioner of Income tax(2) Mahajan, C. J., said with reference to the order of an income tax tribunal "The learned Attorney General frankly conceded that it could not be denied that to a certain extent the Tribunal had drawn upon its own imagination and had made use of a number of surmises and conjectures in reaching its result.
He, however, contended that eliminating the irrelevant material employed by the Tribunal in arriving at its conclusion, there was sufficient material on which the finding of fact could be supported.
In our opinion, this contention is not well founded.
It is well established that when a court of facts acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the 'mind of ' the court was affected by the irrelevant material used by it in arriving at its finding.
Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises.
" In State of Orissa vs Bidyabhushan Mahapatra(3) an administrative tribunal in a disciplinary proceeding against a public servant found the second charge and four out of the five heads under the first charge proved and recommended his dismissal.
The Governor after giving him a reasonable opportunity to show cause against the proposed punishment dismissed him.
The High Court held that, the findings on two of the heads under the first charge could not be sustained as in arriving at those findings the tribunal had violated rules of natural justice.
It held that the second charge and only (1) A.I.R. 1958 M.P. 397 (2) A.I.R. 1956 S.C., 271 273.
(3) [1963] Supp.
I S.C.R. 618,665 6.
594 two heads of the first charge were established and directed the Governor to reconsider whether on the basis of these charges the punishment of dismissal should be maintained.
On appeal, this Court set aside the order of the High Court.
In the course of the judgment, Shah, J, observed: "If the High Court is satisfied that if some but not all of the findings of the Tribunal were 'unassailable ', the order of the Governor on whose powers by the rules no restrictions in determining the appropriate punishment are placed, was final, and the High Court had no jurisdiction to direct the Governor to review the penalty, for as we have already observed the order Of dismissal passed by a competent authority on a public servant, if the conditions of the constitutional prote ction ha* been complied with, is not justiciable.
Therefore if the order may be supported on any finding as to substantial misdemeanour for which the punishment can lawfully be imposed, it is not for the Court to consider whether that ground alone would have weighed with the authority in dismissing the public servant.
The Court has no jurisdiction if the findings of the enquiry officer or the Tribunal prima facie make out a case of misdemeanour, to direct the authority to reconsider that order because in respect of same of the findings but not all it appears that there had been violation of the rules of natural justice.
" The principle underlying these decisions appears to be this.
An administrative or quasi judicial order based on several grounds, all taken together, cannot be sustained if it be found that some of the grounds are non existent or irrelevant, and there is nothing to show that the authority would have passed the order on the basis of the other relevant and existing grounds.
On the other hand, an order based on several grounds some of which are found to be non existent or irrelevant, can be sustained if the court is satisfied that the authority would have passed the order on the basis of the other relevant and existing grounds, and the exclusion of the irrelevant or non existent grounds could not have affected the ultimate opinion or decision.
Now, the opinion of the State government that the corporation was not competent to perform the duties imposed on it by or under the Act, was based on two grounds one of Which is relevant and the other irrelevant.
Both the grounds as also other grounds were set out in paragraphs 1 and 2 read with annexures 1 and 2 of the showcause notice dated July 21, 1965.
Para 3 of the show cause notice stated, "And whereas the grounds aforesaid jointly as well as severally appear serious enough to warrant action under section 408(1) of the said Act".
The (order dated September 29, 1965, 595 read with the notice dated July 21, 1965 shows that in the opinion of the State government the second ground alone was serious enough to warrant action under section 408(1) and was sufficient to establish that the corporation was not competent to perform its duties under the Act.
The fact that the first ground mentioned in the order is now found not to exist and is irrelevant, does not affect the order.
We are reasonably certain that the State government would have passed the order on the basis of the second ground alone.
The order is, therefore, valid and cannot be set aside.
In the result, the appeal is allowed, the order of the High Court is set aside and the writ petition is dismissed.
In all the circumstances, there will be no order as to costs in this Court and, in the court below.
Y.P. Appeal allowed.

summary/full:
By section 408 of the City of Nagpur Corporation Act, 1948 the State Government may, after giving an opportunity to the Corporation to show cause, pass an order superseding the Corporation, if it is of opinion that the Corporation is not competent or persistently makes default in the performance of the duties imposed on it by or under the Act.
After the requisite show cause notice the State Government passed the impugned Order superseding the Nagpur Municipal Corporation.
The High Court, in a writ petition, quashed the Order holding that the State Government exercised its power ' under section 408 on grounds which were not reasonably related to its Legitimate exercise and that the finding upon which the Order was passed was rationally impossible on the materials before the State Government.
On appeal to this Court: HELD:The Order of supersession was valid and could not be set aside.
(i)Of the two grounds on which the opinion of the State Government was based the first ground could not be sustained, firstly because the Corporation had no opportunity to show cause against the charge, and secondly, because no reasonable person on the materials before the State Government could possibly form the opinion that the charge was proved.
Regarding the second ground there were materials before the State Government upon which it could find that the Corporation was not competent to perform the duties imposed upon it.
[588H; 592D] In a writ application the court will not review the facts as an appellate body.
But the Order of supersession is liable to be set aside, as in excess of the, statutory power under section 408, if no reasonable person on a proper consideration of the materials before the State Government will form the opinion that the Corporation is not competent to perform or persistently defaults in the performance of the duties imposed on it. 'Me Order is also liable to be set aside if it was passed in bid faith or due opportunity to show cause was not given.
[585H] (ii)The Order cannot be set aside for the reason that one of the grounds is found to be non existent or irrelevant.
The Order, read with the show cause notice shows that in the opinion of the State Government the second ground by itself was serious enough to warrant action under s.408.
[595 A B] An administrative or quasi judicial Order based on several grounds, all taken together, cannot be sustained if it be found that some of the grounds are non existent or irrelevant and there is nothing to show that the authority would have passed the Order on the basis of the other relevant and 584 existing grounds.
But, an Order based on several grounds some of which are found to be non existent or irrelevant can be sustained if the Court is satisfied that the authority would have passed the Order on the basis of other relevant and existing grounds and the exclusion of the irrelevant or non existent grounds could not have affected the ultimate 'opinion or decision.
[594 E G] Dwarka Das Bhatia vs State of Jammu and Kashmir, [19651 S.C.R, 948.
Dhirajilal Girdharilal vs Commissioner of Income tax, A.I.R. 1956 S.C. 271, State of Orissa vs Bidyabhushan Mahapatra, [1963] Supp.
I S.CR.
648 and Naursinha vs State of Madhya Pradesh, A.I.R. [1958] M.P. 397.
referred to.