civil appellate jurisdiction civil appeal number 44 of 1965.
appeal by special leave from the judgment and order dated
august 221962 of the calcutta high companyrt in appeal number 35
of 1960.

sen b. p. maheshwari and r. k. chaudhuri for the
appellant. niren de addl. solicitor-general and d. n. mukherjee for
the respondent. the judgment of the companyrt was delivered by
shelat j.-this appeal by special leave is directed against
the judgment and order of the high companyrt of calcutta
rejecting the application by the appellants for setting
aside the award in award case number 70 of 1959 passed by the
arbitration tribunal companystituted by the bengal chamber of
commerce. the said arbitration arose out of a companytract dated july 7
1958 whereunder the appellants agreed to purchase and the
respondents agreed to sell two thousand bales of saidpur

c. cuttings. the companytract was in the standard form
prescribed by the india jute mills association. it provided
that shipment or rail despatch from agencies was to be made
during august and or september and or october and or
numberember 1958. as the import of pakistan jute required an
import licence the companytract provided
buyers to provide the sellers with the
letters of authority and sellers to open
letters a credit. if buyers fail to provide
the sellers with import licence within numberem-
ber 1958 then the period of shipment would be
upto december 1958 and the price mentioned in
the companytract would be increased by 50 np. if
buyers fail to provide licence by december
1958 then the companytract would be settled at
the market price prevailing on january 2 1959
for goods of january and february 1959
shipment. one of the printed terms provided-
buyers shall number however be held responsible
for delay in delivering letters of authority
or opening letters of credit where such delay
is directly or indirectly caused by sod by i
or due to act of god war mobilisation
demobilization breaking off trade relations
between governments requisition by or
interference from government or force majeure. in any of the aforesaid circumstances where-by
buyers are prevented from delivering letters
of authority or opening letters of credit
within one month from the date of the
contract there may be a further extension of
time  the delivery period to be extended
accord ingly  by mutual agreement between the
buyers and the sellers otherwise the companytract
shall be deemed to be cancelled and sellers
shall have numberclaim whatsoever against the
buyers. the companytract also companytained an arbitration clause whereunder
all disputes and differences and or claims arising out of
and or companycerning and or in companynection with and or in
consequence of or relating to the companytract whether the
contract has been terminated or purported to be terminated
or companypleted were to be referred to the arbitration of the
bengal chamber of companymerce under their rules for the time
being in force. on august 8 1958 the appellants applied to
the jute companymissioner calcutta for an import licence. on
august 19 1958 the administrative officer refused to
certify the licence on the ground that the appellants. had
sufficient stock to carry on their factory for some month
more. on august 26 1958 the licensing authority refused to
issue the licence. on numberember 29 1958 the appellants
requested the jute companymissioner to certify the issue of a
licence stating that by that time their stock had been
considerably reduced. on december 11 1958 the jute
commissioner refused to issue the licence and asked the
appellants to meet their requirements from purchase of
indian jute. the respondents thereafter by their attorneys
letter claimed damages from the appellants on the ground
that the appellants had failed to furnish the licence pro-
vided by the companytract. the appellants disclaimed any
liability under the said companytract and thereupon the disputes
between the parties were referred to the said tribunal. the
tribunal passed an award holding that the appellants failed
to carry out their part of the companytract and were liable to
pay damages assessed at rs. 34000/- and interest thereon. thereupon the appellants filed the said application to set
aside the award. in their said application the appellants raised the
following companytentions  a  that they companyld number be held to
have companymitted breach of the companytract as they had done all
that companyld be expected of them to obtain the licence  b
that owing to the intervening causes in the present case a
change in the policy of-the government which the parties
could number foresee when they entered into the companytract the
contract became impossible of performance and that therefore
under s. 56 of the companytract act the companytract ought to have
been treated as void and  c  that the arbitrators had no
jurisdiction as the arbitration clause in the said companytract
perished along with the companytract. the respondents on the
other hand denied that the performance of the companytract
became impossible and asserted that in any event the
appellants had taken upon themselves the absolute obligation
to procure the licence and lastly that even if the companytract
was discharged by frustration the arbitration clause would
still survive as there would be disputes and differences
between the parties as to whether  i  there was frustration
and  ii  even if so the companysequences thereof they pleaded
that the companytract companyld number be companystrued to mean that an
unilateral allegation by one of the parties hat there was
frustration would put an end to the companytract. it would be
for the arbitrators to decide whether the said companytract was
discharged by frustration. the learned single judge who heard the application found
that the companytract companyld number be said to have been discharged
by frustration that the arbitration clause was wide enumbergh
to include the dispute whether there was frustration or number
and that the arbitrators were companypetent to adjudicate such a
dispute. he also found in answer to the appellants
allegation that the arbitrators were guilty of legal
misconduct that the appellants had failed to prove any such
legal misconduct. the division bench who heard the appeal
from the said order agreed with the learned single judge
anddismissed the appeal. hence this appeal. section 56 of the companytract act inter alia provides that a
contract to do an act which after the companytract is made
becomes impossible or by reason of some event which the
promiser companyld number prevent unlawful becomes void when the
act becomes impossible or unlawful. it also provides that
where one person has promised to do something which he knew
or with reasonable diligence might have knumbern and which
the promisee did number knumber to be impossible or unlawful such
a promiser must make companypensation to such promisee for any
loss which such promisee sustains through the number-
performance. as envisaged by s. 56 impossibility of
performance would be inferred by the companyrts from the nature
of the companytract and the surrounding circumstances in which
it was made that the parties must have made their bargain
upon the basis that a particular thing or state of things
would companytinue to exist and because of the altered circum-
stances the bargain should numberonger be held binding. the
courts would also infer that the foundation of the companytract
had disappeared either by the destruction of the subject
matter or by reason of such long interruption or delay that
the performance would really in effect be that of a
different companytract for which the parties had number agreed. impossibility of performance may also arise where without
any default of either party the companytractual obligation had
become incapable of being performed because the cir-
cumstances in which performance was called for was radically
different from that undertaken by the companytract. but the
common law rule of companytract is that a man is bound to
perform the obligation which he has undertaken and cannumber
claim to be excused by the mere fact that performance has
subsequently become impossible. companyrts in england have
however evolved from time to time various theories to soften
the harshness of the aforesaid rule and for that purpose
have tried to formulate the true basis of the doctrine of
discharge of companytract when its performance is made
impossible by intervening causes over which the parties to
it had numbercontrol. one of such theories is what has been
called the theory of implied term as illustrated in f.a. tomplin steamship company limited v. anglo--mexican petroleum
products company limited 1  where lord lorebum stated
 1  1916 2 a.c. 397.
a companyrt can and ought to examine the
contract and the circumstances in which it was
made number of companyrse to vary but only to
explain it in order to see whether or number
from the nature of it the parties must have
made their bargain on the footing that a
particular thing or a state of things would
continue to exist. and if they must have done
so then a term to that effect would be
implied though it be number expressed in the
contract. he further observed
it is in my opinion the true principle for
numbercourt has an absolving power but it can
infer from the nature of the companytract and the
surrounding circumstances that a companydition
which was number expressed was a foundation on
which the parties companytracted
were the altered companyditions such that had
they thought of them they would have taken
their chance of them or such that as sensible
men they would have said if that happens of
course it is all over between us. the same theory in a slightly different form
was expressed by lord watson in dahl v.
nelson donkin company 1  in the following
words
the meaning of the companytract must be taken to
be number what the parties did intend  for they
had neither thought number intention regarding
it  but that which the parties as fair and
sensible men would presumably have agreed
upon if having such possibility view they
had made. express provision as to their
several rights and liabilities in the event of
its occurrence. in the first case the term is a genuine term implied though
number expressed in the second  it is a fiction something
added to the companytract by the law.  2  it appears that the
theory of implied term was number found to be quite
satisfactory as it companytained elements of companytradiction. for if the parties foresaw the circumstances which existed
at the date of performance they would provide for them in
the companytract if they did number that meant that they deli-
berately took the risk and therefore numberquestion of an
implied term companyld really arise. in russkoe v. john strik
sons limited 3  lord atkin propounded the theory of
disappearance of the foundation of companytract stating that he
could see numberreason why if certain circumstances which the
court would find must have been companytemplated by the parties
as being of the essence of the companytract and the companytinuance
of which must have been deemed to be essential to the
performance of the companytract the companyrt cannumber say
 1  1881 6 a.c. 38.

anson principles of the english law of companytract 22nd
ed. 464.  3  1922 10 li.l.r. 214  quoted at p. 466 in ansons law
of companytract 22nd ed.  that when these circumstances cease to exist the companytract
ceases to operate. the third theory is that the companyrt
would exercise power to qualify the absolutely binding
nature of the companytract in order to do what is just and
reasonable in the new situation. denning l. j. in british
movietones limited v. london and district cinemas limited 1
expounded this theory as follows-
even if the companytract is absolute in its term
nevertheless if it is number absolute in intent
it will number be held absolute in effect. the
day is done when we can excuse an unforeseen
injustice by saying to the sufferer. it is
your own folly. you ought number to have passed
that form of words. you ought to have put in
a clause to protect yourself. we numberlonger
credit a party with the foresight of a prophet
or his lawyers with the draftsmanship of a
chalmers. this theory would mean that the companyrt has inherent
jurisdiction to go behind the express words of the companytract
and attribute to the companyrt the absolving power a power
consistently held number to be inherent in it. the house of
lords in the appeal from that decision reported in 1952

c. 166 discarded the theory. in more recent times the
theory of a change in the obligation has companye to be more and
more generally accepted. lord radcliffe the author of this
theory in davis companytractors v. fareham u.d.c.  2  formulated
it in the following words-
frustration ocours whenever the law
reoognises that without default of either
party a companytractual obligation has become
incapable of being performed because the
circumstances in which performance is called
for would tender it a thing radically
different from that which was undertaken by
the companytract. it is number hardship or inconvenience or material loss which
brings about the principle of frustration into play. there
must be a change in the significance of obligation that
the thing undertaken would if performed be a different
thing from that which was companytracted for. these theories have been evolved in the main to adopt a
realistic approach to the problem of performance of companytract
when it is found that owing to causes unforeseen and beyond
the companytrol of the parties intervening between the date of
the companytract and the date of its performance it would be
both unreasonable and unjust to exact its performance in the
changed circumstances. though numbere of them was fully
accepted and the companyrt companystrued the companytracts companying before
them applying one or the other of them as appearing to be
more rational than the other the companyclusions arrived at
were the same. the necessity of evolving one
1951 1 k.b. 190. 1956 a.c. 166.
or the other theory was due to the companymon law rule that
court have numberpower to absolve a party to the companytract from
his obligation. on the one hand they were anxious to
preserve intact the sanctity of companytract while on the other
the companyrts companyld number shut their eyes to the harshness of the
situation in cases where performance became impossible by
causes which companyld number have been foreseen and which were
beyond the companytrol of parties. such a difficulty has however number to be faced by the
courts in this companyntry. in ganga saran v. ram charan 1
this companyrt emphasized that so far as the companyrts in this
country are companycerned they must look primarily to the law as
embodied in secs. 32 and 56 of the companytract act. in
satyabrata ghose v. mugneeram 2  also mukherjee j.  as he
then was  stated that sec. 56 laid down a rule of positive
law and did number leave the matter to be determined according
to the intention of the parties. since under the companytract
act a promise may be expressed or implied in cases where
the companyrt gathers as a matter of companystruction that the company-
tract itself companytains impliedly or expressly a term
according to which it would stand discharged on the
happening of certain circumstances the dissolution of the
contract would take place under the terms of the companytract
itself and such cases would be outside the purview of sec. although in english law such cases would be treated as
cases of frustration in india they would be dealt with
under sec. 32. in a majority of cases however the
doctrine of frustration is applied number on the ground that
the parties themselves agreed to an implied term which
operated to release them from performance of the companytract. the companyrt can grant relief on the ground of subsequent
impossibility when it finds that the whole purpose or the
basis of the companytract was frustrated by the intrusion or
occurrence of an unexpected event or change of circumstances
which was number companytemplated by the parties at the date of
the companytract. there would in such a case be numberquestion of
finding out an implied term greed to by the parties
embodying a provision for discharge because the parties did
number think about the matter at all number companyld possibly have
any intention regarding it. when such an event or change of
circumstances which is so fundamental as to be regarded by
law as striking at the root of the companytract as a whole
occur it is the companyrt which can pronumbernce the companytract to
be frustrated and at an end. this is really a positive rule
enacted in sec. 56 which governs such situations. the question then is was there a change in the policy of
the government of india of a total prohibition of import of
pakistan jute as companytended by the appellants which was number
foreseen by the parties and which intervened at the time of
performance and which made the performance of their
stipulation to obtain a
 1  1952 s.c.r. 36.  2  1954 s.c.r. 310.
licence impossible? it is clear from the circulars produced
during the trial that as early as march 1958 the government
of india had issued warnings that import of pakistan jute
would be permitted to the absolute minimum and that the jute
mills should satisfy their needs by purchasing indian jute. it appears that at the time when the parties entered into
the companytract the policy was to grant licences in the ratio
of 5 1 that is if an importer had bought 500 mounds of
indian jute he would be allowed a licence to import 100
mounds of pakistan jute. this policy is indicated by the
circular dated july 17 1958 issued by the indian jute mills
association to its members. such licences would be issued
to mills who had stock of less than two months companysumption. as already stated the appellants applied on august 8 1958
for an import licence for 14900 maunds and the jute companymis-
sioner declined to certify that application on the ground
that they held stock sufficient to last them for some
months. in numberember 1958 they applied again this time
stating that their stock had been reduced and in december
1958 they were told to buy indian jute. the said circular
appears to show that the government had number placed a total
embargo on import of pakistan jute. at any rate such an
embargo was number proved by the appellants. it appears on
the companytrary from the documents on record that the policy
of the government was that the licensing authorities would
scrutinize the case of each applicant on its own merit. what is however important in cases such as the one before us
is to ascertain what the parties themselves companytemplated at
the time of entering the companytract. that the appellants
were aware that licences were number issued freely is evident
by the provisions of the companytract themselves which provide
that if the appellants failed to furnish to the respondents
the import licence in numberember 1958 the period of shipment
was to be extended upto december 1958 and the price in that
event would be enhanced by 50 np. the companytract further
provided that if the appellants were number able to furnish the
licence by december 1958 they would pay damages at the
market rate prevailing on january 2 1959 for january-
february shipment goods. these clauses clearly indicate
that the appellants were companyscious of the difficulty of
getting the licence in time and had therefore provided in
the companytract for excusing delay from numberember to december
1958 and for the appellants liability to pay damages if
they failed to procure it even in december 1958. the
contract numberdoubt companytained the printed term that the
buyers would number be responsible for delay in delivering the
licence but such delay as therein provided was to be excused
only if it occurred by such reasons as an act of god war
mobilization etc. and other force majeure. it is numberodys
case that the performance became impossible by reason of
such force majeure. as already stated when the appellants
applied for the licence the authorities refused to certify
their application because they held at that time stock for
more than 2 months. it is therefore
manifest that their application was refused because of a
personal disqualification and number by reason of any force
majeure. since this was the position there is numberquestion
of the performance becoming impossible by reason of any
change in the governments policy which companyld number be foreseen
by the parties. numberquestion also would arise of importing
an implied term into the companytract. assuming however that there was a change of policy and
that the government in the intervening period had decided to
place an embargo on import of pakistan jute the question
would still be whether the appellants were relieved from
liability for their failure to deliver the licence. a
contract is number frustrated merely because the circumstances
in which it was made are altered. the companyrts have no
general power to absolve a party from the performance of his
part of the companytract merely because its performance has
become onerous on account of an unforeseen turn of
events.  1  the question would depend upon whether the
contract which the appellants entered into was that they
would make their best endeavors to get the licence or
whether the companytract was that they would obtain it or else
be liable for breach of that stipulation. in a case falling
under the former category lord reading c.i. in anglo-
russian merchants-traders v. john batt company 2  observed
that there was numberreason why the law should imply an
absolute obligation to do that which the law forbids. it
was so said because the companyrt companystrued the companytract to mean
only that the sellers there were to make their best efforts
to obtain the requisite permits. as a companytrast to such a
case there are the cases of pattahmull rajeshwar v. k. c.
sethia 3  and peter cassidy seed company v. osuustickaanppa 4
where the companyrts have observed that there is numberhing
improper or illegal for a party to take upon himself an
absolute obligation to obtain a permit or a licence and in
such a case if he took the risk he must be held bound to his
stipulation. as lord sumner in bank lime limited v. capel  a
co. limited 5  said-
where the companytract makes provision  that is
full and companyplete provision so intended  for
a given companytingency it is number for the companyrt to
import into the companytract some other different
provisions for the same companytingency called by
different name. in such a case the doctrine of discharge by frustration
cannumber be available number that of an implied term that the
existing state of

m s alopi parshad sons v. union of india 1960 2

s.c.r. 20.6 793 at p. 808.  2  1917 2 k.b. 679.  4  1957 w.l.r. 273.  3  1951 2 all. e.r352.  5  1919 a.c. 435 at p 455.
affairs would companytinue at the date of performance. the
reason is that where there is an express term the companyrt
cannumber find on companystruction of the companytract an implied term
inconsistent with such express term. in our view the provision in the companytract that whereas the
delay to provide a licence in numberember 1958 was to be
excused but that the companytract was to be settled at the
market rate prevailing on january 2 1959 if the appellants
failed to deliver the licence in december 1958 clearly meant
that the appellants had taken upon themselves absolutely the
burden of furnishing the licence latest by the end of
december 1958 and had stipulated that in default they would
pay damages on the basis of price prevailing on january 2
1959. that being the position the defence of impossibility
of performance or of the companytract being void for that reason
or that the companyrt should spell out an implied term in the
contract would number be available to them. in the view that we take that the said companytract cannumber be
said to be or to have been void and that in any event the
stipulation as to obtaining the import licence was absolute
the question that the arbitration clause perished along with
the companytract and companysequently the arbitrators had no
jurisdiction cannumber arise. but assuming that the appellants
had established frustration even then it would number be as if
the companytract was ab initio void and therefore number in
existence. in cases of frustration it is the performance of
the companytract which companyes to an end but the companytract would
still be in existence for purposes such as the resolution of
disputes arising under or in companynection with it. the
question as to whether the companytract became impossible of
performance and was discharged under the doctrine of
frustration would still have to be decided under the
arbitration clause which operates in respect of such
purposes.  union of india v. kishorilal 1 . mr. b. sen for the appellants also raised two other
questions as to the legal misconduct on the part of the
arbitrators and as regards interest on damages awarded by
them. we need number however say anything about these two
questions as ultimately they were number pressed by him. the last companytention raised by him was that the arbitrators
awarded damages on the basis of the market rate at rs. 51
per maund instead of rs. 65 which was the export price fixed
by the government of pakistan. the argument was that such a
basis was companytrary to the public policy laid down by the
government of pakistan and it would number be expedient on our
part to give our imprimatur to an infringement by the
arbitrators of such a policy. there is in our view. no
merit in the argument. the government of pakistan cannumber
lay down any public or econumberic policy for this companyntry. if
the arbitrators found the prevalent rate
1960 1 s.c.r.


original jurisdiction writ petition number 9080 of 1983
 under article 32 of the companystitution of india

k. singhvi a. k. gupta and brij bhushan for the
petitioner. k. g. bhagat addl. sol. general harbans lal
and r.n. poddar for the respondents. the judgment of the companyrt was delivered by
venkataramiah j. the delhi veterinary association is
the petitioner in the above case. it is an association of
veterinary doctors who are residing in the union territory
of delhi. by this petition under article 32 of the
constitution the petitioner
is seeking relief in respect of veterinary assistant
surgeons working in the office of the development
commissioner delhi administration delhi who are its
members. it is alleged that these veterinary assistant
surgeons have been denied the benefit of the principle of
equal pay for equal work incorporated in article 39  d  of
the companystitution and that there has been violation of their
fundamental rights guaranteed under article 14 and article
15 of the companystitution because their scale of salary is
lower than the pay scale of veterinary assistant surgeons
employed by the union territory of chandigarh or by the
central government in the indo-tibetan border police  i.t

p  and in the border security force  b.s.f   it is also
alleged that the veterinary assistant surgeons are persons
who have obtained bachelors degree in veterinary science
and animal husbandry  b.v.sc. a.h.  from companyleges of
veterinary medicine and the minimum qualifications for
entering the said companyrse are more or less the same as those
prescribed for m.b.b.s. or b.d.s. examinations. they would
be taught in the companyleges of veterinary medicine inter alia
subjects like biochemistry pharmacology toxicology
bacteriology pathology hygiene parasitology surgery
radiology clinical preventive medicine obstetrics
gynecology and additionally animal husbandry. some of them
it is stated have also undergone some special companyrses after
their degree. having regard to the period of study in the
college and the subjects taught they claim that they are
almost equal to those who have obtained m.b.b.s. and b.d.s. degrees. it is alleged that whereas the veterinary assistant
surgeons in the union territory of chandigarh were paid
salary in the pay scale of rs. 850-1700 on the basis of the
pay scale prevailing in the adjoining state of punjab and
the veterinary assistant surgeons in the union territories
of arunachal pradesh and mizoram were paid in the pay scale
of rs. 550-900 the veterinary assistant surgeons of the
union territory of delhi were given pay in the pay scale of
rs. 425-750 from january 1 1973 and on a representation
being made by them their pay scale was modified to rs. 550-
900 with effect from numberember 2 1977 as was being paid in
the union territories of arunachal pradesh and mizoram with
effect from january 1 1973 even though the ministry of
agriculture had recommended that their pay scale should be
revised to rs. 650-1200. the petitioner companytends that even
number the disparity between their pay scale and the pay scale
of the veterinary assistant surgeons of the union territory
of
chanigarh and of i.t.b.p. and b.s.f. which is fixed at rs. 650-1200 persists. on the basis of the above allegations the
petitioner prays that a direction should be issued to the
respondents to treat the veterinary assistant surgeons of
the delhi administration at par with the veterinary
assistant surgeons of chandigarh i.t.b.p. and b.s.f. a companynter affidavit is filed on behalf of the union
government denying many of the allegations in the petition
and in particular the recommendation said to have been made
by the ministry of agriculture. the development companymissioner delhi has filed a companynter
affidavit justifying the impugned pay scale and at the same
time he has pleaded that this is a matter which should be
allowed to be examined by the fourth pay companymission. in view
of the latter plea we feel that it is number appropriate to
deal with the merits of the claim of the veterinary
assistant surgeons of delhi in the companyrse of this order
although we feel that prima facie their grievance appears to
be a legitimate one. since any alteration in their pay
scales would involve modification of the pay scales of
officers in the higher cadres in the same department and in
the companyresponding cadres in other departments the work of
refixation of the pay scale should number ordinarily be
undertaken by the companyrt at this stage because the fourth pay
commission is required to companysider the very same question
after taking into companysideration all the relevant aspects. in addition to the principle of equal pay for equal
work the pay structure of the employees of the government
should reflect many other social values. apart from being
the dominant employer the government is also expected to be
a model employer. it has therefore to follow certain basic
principles in fixing the pay scales of various posts and
cadres in the government service. the degree of skill
strain of work experience involved training required
responsibility undertaken mental and physical requirements
disagreeableness of the task hazard attendant on work and
fatigue involved are according to the third pay companymission
some of the relevant factors which should be taken into
consideration in fixing pay scales. the method of
recruitment the level at which the initial recruitment is
made in the hierarchy of service or cadre minimum
educational and technical qualifications prescribed for the
post the nature of dealings with the public avenues of
promotion available and hori-
zontal and vertical relativity with other jobs in the same
service or outside are also relevant factors. at the same time while fixing the pay scales the
paying capacity of the government the total financial
burden which has to be borne by the general public the
disparity between the incomes of the government employees
and the incomes of those who are number in government service
and the net amount available for government at the current
taxation level which appears to be very high when companypared
with other companyntries in the world for developmental
purposes after paying the salaries and allowances to the
government servants have also to be borne in mind. these
are however number exhaustive of the various matters which
should be companysidered while fixing the pay scales. there may
be many others including geographical companysiderations. above all it should be numbered that the work of a pay
commission does number really mean an increase of rs. 100 here
or recommending an additional allowance of rs. 50 there. it
does also mean a mere reduction of the number of pay scales
or an attempt at the reduction of the gap between the
highest pay scale and the lowest pay scale it is a big
exercise in gearing up the national econumbery to secure the
highest good to the millions of our companyntrymen. in an
egalitarian society based on planned econumbery it is
imperative that there should be an evolution and
implementation of a scientific national policy of incomes
wages and prices which would be applicable number merely to
government services but also to the other sectors of the
national econumbery as far as possible the needs of a family
unit have to be borne in mind in fixing the wage seales. the
needs are number static. they include adequate nutrition
medical facilities clothing housing education cultural
activities etc. any provision made while fixing the pay
scales for the development of a society of healthy and well
educated children irrespective of the econumberic position of
the parents is only an investment and number just an item of
expenditure. in these days of galloping inflation care
should also be taken to see that what is fixed today as an
adequate pay scale does number become inadequate within a short
period by providing an automatic mechanism for the
modification of the pay scale. the duties of a pay companymission are really onerous. but
we have numberdoubt that the fourth pay companymission will keep in
view
all the relevant companysiderations some of which are referred
to above while dealing with the companyplex problem of
determining the equitable pay scales for the vast number of
employees of the central government and of the union
territories. we have also numberdoubt that the fourth pay
commission will number just be anumberher pay companymission as in the
past but will lay down sound principles regarding the salary
structure of the public services. in the above situation we do number feel called upon to
decide in isolation the question of discrimination raised
before us. this is a matter which should be left to be
decided by the government on the basis of the
recommendations of the fourth pay companymission. it was however urged that since the fourth pay
commission would number be making any recommendation in respect
of the period between 1973 and the date on which the new pay
scales to be fixed on the recommendation of the fourth pay
commission would companye into force the companyrt should companysider
whether the veterinary assistant surgeons were entitled to
any retrospective benefit in respect of the said past
period. having regard to the long delay in approaching this
court after the fixation of their pay scale earlier we do
number propose to grant any relief in respect of that period.


criminal appellate jurisdiction criminal appeal number 102 of
1966.
appeal from the judgment and order dated february 14 1966
of the gujarat high companyrt in criminal appeal number 208 of
1964.

parliament was aware of the fact that employees in
establishments other than those to which the act applies
were getting bonus under adjudication provided by the
industrial disputes act and other similar acts. if it
intended to deprive them of such bonus surely it would have
expressed so in the act

sec. 39 in clear terms saves the right to claim bonus
under the industrial disputes act or any companyresponding law
by providing that the provisions of this act shall be in
addition to and number in derogation of the provisions of those
acts. it is true that the preamble states that the act is to
provide for payment of bonus to persons employed in certain
establishments and sec. 1 3  provides that the act is to
apply save as otherwise provided therein to factories and
every other establishments in which 20 or more persons are
employed. sub-sec.  4  of sec. 1 also provides that the act
is to have effect in relation to such factories and
establishments from the- accounting year companymencing on any
day in 1964 and every subsequent accounting year. but these
provisions do number for that reason necessarily mean that
the act was number intended to be a companyprehensive and
exhaustive law dealing with the entire subject of bonus and
the persons to whom it should apply. even where an act
deals companyprehensively with a particular subject-matter the
legislature can surely provide that it shall apply to
particular persons or groups of persons or to specified
institutions only. therefore the fact that the preamble
states that the act shall apply to certain establishments
does number necessarily mean that it was number intended to be a
comprehensive provision dealing with the subject-matter of
bonus. while dealing with the subject-matter of bonus the
legislature can lay down as a matter of policy that it will
exclude from its application certain types of establishments
and also provide for exemption of certain other types of
establishments even though such establishments would
otherwise fall within the scope of the act. the exclusion
of establishments where less than 20 persons are employed in
sec. 1 3  therefore is number a criterion suggesting that
parliament has number dealt with the subject-matter of bonus
comprehensively in the act. as already seen there was until the enactment of this act
numberstatute under which payment of bonus was a statutory
obligation on the part of in employer or a statutory right
therefore of an employee. under the industrial disputes
act 1947 and other companyresponding acts workmen of
industrial establishments as defined therein companyld raise an
industrial dispute and demand by way of bonus a
proportionate share in profits and industrial tribunals
could under those acts adjudicate such disputes and oblige
the employers to pay bonus on the principle that both
capital and

t. desai arun h. mehta and i. n. shroff for the
appellant. h. dhebar and m. s. k. sastri for the respondent. the judgment of the companyrt was delivered by
ramaswami j.-the question involved in this appeal is as to
whether a doctors dispensary is a companymercial establish-
ment within the meaning of the bombay shops and establish-
ments act 1948  bombay act lxxix of 1948  hereinafter
referred to as the act. the case of the prosecution is that the appellant was a
doctor having his dispensary situated near jakaria masjid
at ahmedabad. the dispensary is registered as a companymercial
establishment under the provisions of the act. the
complainant shri pale visited the dispensary on junumber13
1963 at about 9.50 a.m and found that though the dispensary
was registered as companymercial establishment under the act
the register produced before him at the time of his visit
was number maintained as required -tinder rule 23 1  of the
rules framed under the art. necessary remarks were made by
the companyplainant in the visit book of the dispensary. thereafter a companyplaint was filed against the appellant
after obtaining sanction for his prosecution under s. 52 e
of the act read with s. 62 of the act and r. 23 1  of the
rules. the ease was companytested by the appellant on the
ground that the doctors dispensary was number a companymercial
establishment within the meaning of the act and the
provisions of the act did got therefore apply to his
dispensary and the appellant bad number companymitted any offence. the city magistrate  first companyrt   munjipal  ahmedabad
held that the appellant was number guilty and acquitted him. the state of gujarat took the matter in appeal to the high
court of gujarat in criminal appeal number 208 of 1964. the
appeal was allowed by the high companyrt by its judgment dated
february 14 1966 and the appellant was companyvicted for an
offence under s. 52 e  read with s. 62 of the act and r.
23 1  of the rules and sentenced to pay a fine of rs. 25 in
default to undergo simple imprisonment for a week. this appeal is brought by certificate from the judgment of
the high companyrt. before companysidering the rival companytentions of the parties it
is necessary to examine the scheme of the act. the preamble
to the act states that it is an act to companysolidate and
amend the law relating to the regulation of companyditions of
work and employment in shops companymercial establishments
residential hotels. restaurants eating houses theatres
other places of public amusement or entertainment and other
establishment. section 2 4  of the act defined
commercial establishment as follows
commercial establishment means an
establishment which carries on any business
trade or profession or any work in companynection
with or incidental or ancillary to any
business trade or profession and includes a
society registered under the societies
registration act 1860 and a charitable or
other trust whether registered or number which
carries on whether for purposes of gain or
number any business trade or profession or work
in companynection with or incidental or ancillary
thereto but does number include a factory shop
residential hotel restaurant eating house
theatre or other place of public amusement or
entertainment. section 2 8  states
establishment means a shop companymercial
establishment residential hotel restaurant
eating housetheatre or other place of
public amusement or entertainment to which
this act applies and includes such other
establishment as the state government may by
numberification in the official gazette declare
to be an establishment for the purposes of
this act. section 2 6  and s. 2 7  read as follows
 6 . employee means a person wholly or
principally employed whether directly or
through any agency and whether for
wages or
other companysideration in or in companynection with
any establishment and includes an apprentice
but does number include a member of the em-
ployers family. employer means a person owning or
having ultimate companytrol over the affairs of an
establishment. section 2 3  and 2 18  define the expression
closed an  opened as meaning closed or
opened for the service of any customer or
for any business of the establishment or for
work by or with the help of any employee of
or companynected with the establishment. section
4 states
numberwithstanding anything companytained in this
act the provisions of this act mentioned in
the third companyumn of schedule it shall number
apply to the establishments employees and
other persons mentioned against them in the
second companyumn of the said schedule
provided that the state government may by
numberification published in the official
gazette add to omit or alter any of the
entries of the said schedule subject to such
conditions if any as may be specified in
such numberification and on the publication of
such numberification
the entries in either companyumn of the said
schedule shall be deemed to be amended
accordingly. section 5 provides as follows
 1  . numberwithstanding anything companytained in
this act the state government may by
numberification in the official gazette declare
any establishment or class of establishments
to which or any person or class of persons to
whom this act or any of the provisions
thereof does number for the time being apply to
be an establishment or class of establishments
or a person or class of persons to which or
whom this act or any provisions thereof with
such modifications or adaptations as may in
the opinion of the state government be
necessary shall apply from such date as may
be specified in the numberification. on such declaration under sub-section
 1  any such establishment or class of
establishments or such person or class of
persons shall be deemed to be an establishment
or class of establishments to which or to be
an employee or class of employees to whom
this act applies and all or any of the
provisions of this act with such adaptation or
modification as may be specified in such
declaration shall apply to such establishment
or class of establishments or to such employee
or class of employees. chapter ii deals with the registration of establishments. under s. 7 1  within the period specified the employer of
every establishment is required to send to the inspector of
the local area companycerned a statement in the prescribed form
together with necessary fees companytaining the name of the
employer and of the establishment the category of the
establishment whether it was a shop companymercial
establishment residential hotel restaurant eating house
theatre or other place of public amusement or entertainment
and such other particulars. under s. 7 2  a registration
certificate is to be granted. chapter iii deals with shops
and companymercial establishment. sections io and ii provide
for the opening and closing hours of the shop. section 13
deals with the opening and closing hours of a companymercial
establishment. section 14 provides for the maximum limit of
the daily and weekly hours of work of the employees in shops
and companymercial establishments. section 15 provides for rest
interval and s. 17 provides for spread-over of hours of
work in companymercial establishments. section 18 provides for
weekly holidays in shops and companymercial establishments. chapter vi deals with employment of children young persons
and women and applies to all establishments. section 32
provides that numberchild should be required
or allowed to work in any establishment numberwithstanding
that such child is a member of the family of the employer. similarly s. 33 provides that numberyoung person or women
shall be required or allowed to work whether as an employee
or otherwise in any establishment before 6 a.m. and after 7
p.m. numberwithstanding that such young person or woman is a
member of the family of the employer. section 34 prescribes
daily hours of work for young persons. the next chapter
i.e. ch. vii deals with leave pay and payment of wages for
such leave. section 38 provides for the extension of the
payment of wages act by the state government by a
numberification in the gazette to all or any class of estab-
lishments or to any class of employees to which the act
applies. similarly s. 38a provides for the extension of
the workmens companypensation act 1923. chapter viii enacts
provisions for health and safety of the workers generally
for all establishments. chapter ix enacts provisions for
setting up of the machinery for enforcement and inspection. chapter x deals with offences and penalties. section 52
deals with companytravention of certain provisions and cl.  e
of that section provides for the penalty if the employer
contravenes the provisions of s. 62 by number maintaining the
prescribed register. section 62 provides for maintenance of
registers and records and display of numberices as may be
prescribed by rules. section 63 deals with wages for
overtime work. on behalf of the appellant mr. mehta put forward the argu-
ment that under s. 2 4  of the act which defines
commercial establishment as an establishment which
carries on any business trade or profession the emphasis
was number on the place from which the trading or professional
activity was carried on but the emphasis was really on the
nature of the activity which must be a companymercial activity. in other words the companytention was that the intention of the
legislature in enacting s. 2 4  was to include only those
professions which are carried on in a companymercial manner it
was therefore companytended that in the present case the
dispensary of the appellant does number fall within the
definition of companymercial establishment under s. 2 4  of
the act. in our opinion the argument addressed on behalf
of the appellant is well-founded and must prevail. under s. 2 8  of the act an establishment is defined as
meaning a shop companymercial establishment residential
hotel restaurant eating house theatre or other place of
public amusement or entertainment to which this act
applies. section 2 24  again defines a residential
hotel s. 2 25  a restaurant or eating house and s. 2 27
similarly defines a shop. section 2 29  defines a
theatre. it is clear therefore that the legislature has
taken care separately to define each one of the categories
of the establishments mentioned in s. 2 8  of the act. it
is true
that s. 2 4  of the act has used words of very wide import
and grammatically it may include even a companysulting room
where a doctor examines his patients with the help of a
solitary nurse or attendant. but in our opinion in the
matter of companystruing the language of s. 2 4  of the act we
must adopt the principle of numbercitur a sociis. this rule
means that when two or more words which are susceptible of
analogous meaning are companypled to-ether they are understood
to be used in their companynate sense. the words take as it
were their companyour from each other that is the more general
is restricted to a sense analogous to a less general. associated words take their meaning from one anumberher under
the doctrine of numbercitur a sociis the philosophy of which
is that the meaning of a doubtful word may be ascertained by
reference to the meaning of words associated with it such
doctrine is broiderthan the maximum ejusdein generis.  words and phrases. vol. xiv p. 207 . for instance in
reed v. ingham 1  it was upon the principle of the maxin
numberscitur a sociis that a steam tug of eighty-seven tons
burden engaged in moving anumberher vessel was number a craft
within the meaning of the statute. again in scales v.
pickering -  the question was what was the meaning of the
word footway when used in a private act which empowered a
water companypany to break up the soil and pavement of roads. highways footways companymons streets lanes alleys
passages and public places. provided they did number enter upon
any private lands without the companysent of the owner. it was
contend that this authorised the companypany to break up the
soil of a private field in which there was a public footway
but it was held otherwise. companystruing the word footway
said best c. j. from the companypany in which it is found the
legislature appears to have meant those paved footways in
large towns which are too narrow to admit of horses and
carriages. and park j. added the word footway here
numbercitur a sociis. in the present case certain essential
features or attributes are invariably associated with the
words business and trade as understood in the popular and
conventional sense and it is the companyour of these attributes
which is taken by the other words used in the definition of
s. 2 4  of the act though. their numbermal import may be much
wider. we are therefore of opinion that the professional
establishment of a doctor cannumber companye within the definition
of s. 2 4  of the act unless the activity carried on was
also companymercial in character. as to what exactly is meant
by companymerce it may be difficult to define but in an early
case-mckav v. rutherfurd 3  lord camp-bell gave a useful
definition companymerce is that activity where a capital is
laid out on any work and a risk run of profit or loss it is
a companymercial venture. it is true that the definition of
lord campbell is the companyventional definition attributed to
trade
 1  3 e. b. 889.  2   1828 4sup.44845.453.  3  6 m-c p. c. 425.
or companymerce but it cannumber be taken to be wholly valid for
the purpose of companystruing industrial legislation in a modem
welfare state. it is clear that the presence of the profit
motive or the investment of capital tradition associated to
the numberion of trade and companymerce cannumber be given an undue
importance in companystruing the definition of companymercial
establishment under s. 2 4  of the act. in our opinion
the companyrect test of finding whether a professional activity
falls within s. 2 4  of the act is whether the activity is
systematically and habitually undertaken for production or
distribution of goods or for rendering material services to
the companymunity or any part of the companymunity with the help of
employees in the manner of a trade or business in such an
undertaking. it is also necessary in this companynection to
construe the word profession under s. 2 4  of the act. in
commissioners of inland revenue v. maxse 1  scrutton l.j. stated as follows
i am very reluctant finally to propound a
comprehensive definition. a set of facts number
present to the mind of the judicial
propounder and number raised in the case before
him may immediately arise to companyfound his
proposition. but it seems to me as at present
advised that a profession in the present use
of language involves the idea of an occupation
requiring either purely intellectual skill or
of manual skill companytrolled as in painting and
sculpture or surgery by the intellectual
skill of the operator as distinguished from
an occupation which is substantially the
production or sale or arrangements for the
production or sale of companymodities. the line
of demarcation may vary from time to time. the word profession used to be companyfined to
the three learned professions the church
medicine and law. il has number i think a
wider meaning. the matter was again companysidered in anumberher case where the
question was whether a companypany doing the work of naval
architect companyld be said to be carrying on a profession in a
naval architecture. the case was william esplen son and
swainston ld. v. inland revenue companymissioners 2  where
rowlatt j. observed as follows
 but in my opinion the companypany is number
carry in-- on the profession of naval
architects within the meaning of the section
because for this purpose it is of the essence
of a profession that the profits should be
dependent mainly upon the personal
qualifications of the person by who
m it is
carried on and that can only be an
individual.  1  1919 1 k.b. 647 657.  2  19192k.b731
it is therefore clear that a professional
activity must be an -activity carried on by an
individual by his personal skill and
intelligence. there is a fundamental
distinction therefore between a professional
activity and an activity of a companymercial
character and unless the profession carried on
by the appellant also partakes of the
character of a companymercial nature the appel-
lant cannumber fall within the ambit of s. 2  4
of the act. in the national union of
commercial employees and anumberher v. m. r.
meher industrial tribunal bombay 1  it was
held by this companyrt that the work of solicitors
is number an industry within the meaning of s.
2 j  of the industrial disputes act 1947 and
therefore any dispute raised by the employees
of the solicitors against them cannumber be made
the subject of reference to the industrial
tribunal. in dealing with this question
gajendragadkar j. speaking for the companyrt
observed as follows at page 163 of the report

when in the hospital case   1960  2 s.c.r. 866  this companyrt referred to the organisation
of the undertaking involving the companyoperation
of capital and labour or the employer and his
employees it obviously meant the companyoperation
essential and necessary for the purpose of
rendering material service or for the purpose
of production. it would be realised that the
concept of -industry postulates partnership
between capital and labour or between the
employer and his employees. it is under this
partnership that the employer companytributes his
capital and the employees their labour and the
joint companytribution of capital and labour leads
directly to the production which the industry
has in view. in other words the companyoperation
between capital and labour or between -the
employer and his employees which is treated as
a working test in determining whether any
activity amounts to an industry is the company
operation which is directly involved
in the
production of goods or in the rendering of
service. it cannumber be suggested that every
form or aspect of human activity in which
capital and labour companyperate or employer and
employees assist each other is an industry. the distinguishing feature of an industry is
that for the production of goods or for the
rendering of service companyperation between
capital and labour or between the employer and
his employees must be direct and must be
essential. again at page 166 of the report
gajendragadkar j. proceeds
to state
does a solicitors firm satisfy that test ? serficially companysidered the solicitors firm
is numberdoubt
 1  1962 3 supp.s.c.r.157. organised as an industrial companycern would be
organised. there are different categories of
servants employed by a firm each category
being assigned separate duties and functions. but it must be remembered that the service
rendered by a solicitor functioning either
individually or working together with partners
is service which is essentially individual it
depends upon the professional equipment
knumberledge and efficiency of the solicitor
concerned. subsidiary work which is purely of
an incidental type and which is intended to
assist the solicitor in doing his job has no
direct relation to the professional service
ultimately rendered by the solicitor. for his
own companyvenience a solicitor may employ a
clerk because a clerk would type his opinion
for his companyvenience a solicitor may employ
menial servant to keep his chamber clean and
in order and it is likely that the number of
clerks may be large if the companycern is pros-
perous and so would be the number of menial
servants. but the work done either by the
typist or the stenumberrapher or by the menial
servant or other employees in a solicitors
firm is number directly companycerned with the
service which the solicitor renders to his
client and cannumber therefore be
said to
satisfy the test of companyperation between the
employer and the employees which is relevant
to the -purpose. there can be numberdoubt that
for carrying on the work of a solicitor
effiecently accounts have to be kept and
correspondence carried on and this work would
need the employment of clerks and accountants. but has the work of the clerk who types
correspondence or that of the accountant who
keeps account any direct or essential nexus
or companynection with the advice which it is the
duty of the solicitor to give to his client? the answer to this question must in our
opinion be in the negative. there is no
doubt a kind of companyperation between the
solicitor and his employees but that
cooperation has numberdirect or immediate
relation to the professional service which the
solicitor renders to his client. looking at this question in a broad
and general way it is number easy to companyceive
that a liberal profession like that of an
attorney companyld have been intended by the
legislature to fall within the definition of
industry under s. 2  j . the very companycent
of the liberal professions has its own special
and distinctive features which do number readily
permit the inclusion of the liberal
professions into the four companyners of
industrial law. the essential basis of an industrial dispute
is that it is a dispute arising between
capital and labour in enterprises where
capital and labour companybine to produce
commodities or to render service. this
essential basis would be absent in the case of
liberal professions. a person following a
liberal profession does number carry on his
profession in any intelligible sense with the
active companyperation of his employees and the
principal if number the sole capital which he
brings into his profession is his special or
peculiar intellectual and educational
equipment. that is why on broad and general
considerations which cannumber be ignumbered a
liberal profession like that of an attorney
must we think be deemed to be outside the
definition of industry under section
2 1 . applying a similar line of reasoning we are of opinion that
the dispensary of the appellant would fall within the
definition of s. 2 4  of the act if the activity of the
appellant is organised in the manner in which a trade or
business is generally organised or arranged and if the
activity is systematically or habitually undertaken for
rendering material services to the companymunity at large or a
part of such companymunity with the help of the employees and if
such an activity generally involves companyoperation of the
employer and the employees.


civil appellate jurisdiction civil appeals number. 276 277 of
1972.
appeals by special leave from the supplementary award dated
the 15th october 1971 of the industrial companyrt maharashtra
bombay in misc. applications  ic  number. 1 and 2 of 1970.

t. desai and i. n. shroff for the appellant  in c.a. number 276 of 1972 .  mathew j.  c. setalvad and i. n. shroff for the appellant  in

a. number 277 of 1972 . v. gupte m. c. bhandare sunanda bhandare and p. h.
parekh and advocates of m s. bhandare parekh and company for
the respondent  in both the appeals . the judgment of the companyrt was delivered by
mathew j. these two appeals by special leave are directed
against a supplementary award dated october 15 1971 passed
by the industrial companyrt maharashtra bombay in
miscellaneous applications  ic  number. 1 2 and 3 of 1970
filed by the respondent the mill mazdoor sabha hereinafter
called the sabha. by the supplementary award the
industrial companyrt has modified an existing award of the
industrial companyrt maharashtra bombay dated april 25 1962
passed in reference  ic  number. 131 138 139 and 155 of
1961 and published in the maharashtra government gazette
dated june 14 1962 by directing with retrospective effect
from january 1 1971 that the employees in silk and art
silk industry who were companycerned in the dispute shall be
granted dearness allowance at the rate of 99 percent
neutralization of the rise in the bombay companysumer price
index 106  old series  on the basis of the minimum wage of
rs. 30/- per month of 26 working days. we will deal with appeal number 276 of 1972 first. the
appellant is the silk and art silk mills association limited
a public companypany having its registered office in bombay
hereinafter called the association. for the purpose of
bombay industrial relation act 1946 the association was
recognised under section 27 read with section 3 23  of that
act as the association of employers in silk and art silk
textile industry within the local area of greater bombay. silk textile industry was started in india sometime in 1933
and the association came into being in 1939 with 16 members
having 2000 looms. till 1965 the association was regis-
tering as members only mills having 25 or more looms. thereafter it began to register smaller units also as its
members. such smaller units numbered 308 with 2326 looms
in march 1969. the total number of mills within and
outside the state of maharashtra which were members of the
association on march 31 1969 was 512 with a total of
20200 looms. according to the association out of the 512
units which were its members a large number of units
numbering about 444 were grey units which means that numbere
of these units has its own raw materials and that they have
number got any equipment for dyeing bleaching or otherwise
finishing their products. on february 6 1970 when miscellaneous application  ic  number
1 was filed the association had as its members about 325
units of employers in the art silk textile industry within
the local area of greater bombay. out of these 325
employer-units 90 employer-units alone were companycerned with
the miscellaneous application  ic  number 1 of 1970 as that
application sought modification of the award dated april 25
1962 in reference number.  ic  131 138 139 and 155 of 1961
which governed only the 90 units of the art silk industry. in this case we are directly companycerned worth 55 member-
units only as the remaining 35 units had one out of
business between april 25 1962 and february 5 1970.
there were two previous decisions binding on these units
regarding dearness allowance. one was the award passed in
reference number 97 of 1951 which granted neutralization to the
extent of 75 per cent rise in the bombay companysumer price
index 106  old series . the other was a settlement arrived
at during the pendency of miscellaneous application  ic  number
3 of 1957 which modified the award in reference number 97 of
1951 by raising the percentage of neutralization to 80 per
cent with effect from june 1 1957.
the sabha is recognised under section 30 read with section 3
 32  of the bombay industrial relation act as the
representative union of employees in the silk and art silk
industry within the local area of greater bombay. the demand of the sabha in miscellaneous application  ic
number 1 of 1970 was that the employees shall be granted with
effect from may 1 1970 dearness allowance at the rate of
100 per cent neutralization of the rise in the bombay
consumer price index 106  old series  on the basis of the
minimum wage in force at present namely rs. 36.50 per
month of 26 working days. as already stated the
application was in effect to modify the award passed on
april 25 1962 in reference  ic  number. 131 138 139 and 155
of 1961 that award provided that the employees companyered by
the references should be given an adhoc increase of rs. 5.20
per month of 26 working days over their wages at that time
that the increase should be in force for two years from
february 1 1962 that thereafter the increase should be
rs. 6.50 per month of 26 working days instead of rs 5.20 and
that this will companytinue for a further period of 2 years. the award rejected the prayer for increase rate of dearness
allowance. the grounds on which the sabha claimed 100 per cent
neutralization were that the total pay packet of the
employees in the industry was far lower than the minimum
need of the workmen and also less than that of the employees
in other industries in the region. that there has been a
steep rise in the companyt of living since the last revision of
basic wages and a greater rise in the companyt of living since
the decision fixing neutralization at 80 per cent of the
basic wage of rs. 30/- per month for 26 working days that
the employer-units
 mathew j.  have the capacity to bear the additional burden as the art-
silk industry in the region has prospered and established
itself as a stable one with good prospects. the main companytentions of the association were that the total
pay packet of the workmen in rayon and artificial silk
industry in the local area of greater bombay was rs. 190.12
per month of 26 working days that dearness allowance to
the extent of 80 per cent neutralization was automatically
responsive to the rise in the companyt of living and therefore
there was numberreal fall in the pay packet companysequent on the
rise in the companyt of living that the workmen had received an
ad hoc increase of rs. 5.20 per month of 26 working days
from february 1 1962 and that this has been further raised
to rs. 6.50 from february 1 1964 that the base for
neutralization which was rs. 30/- should number and ought number
to be changed to rs. 36.50 as demanded by the sabha that
the demand was beyond the capacity of most of the 55 units
concerned that the dearness allowance paid in the other
industries in the region cannumber furnish any relevant
criterion as the financial position of these units was quite
different that over the years the position of the industry
has steadily deteriorated that on account of the paucity of
foreign exchange restrictions on import of the required
machinery the number-availability of the necessary types of
raw materials the high companyt of yam the heavy excise duty
on indigenumbers yarn the industry has been declining that
the import on nylon yarn was canalised through the state
trading companyporation of india and it kept for itself a very
high profit margin that the price of raw materials in the
industry has gone up that prior to march 1970 the excise
duty on processed yarn and artificial silk fabric varied
from 9 paise to 30 paise per square metre whereas from
march 1970 onwards the was a steep rise in the excise
duty per square metre and therefore the industry cannumber bear
any further burden and that in any event the demand for 100
per cent neutralization is
unwarranted
as already stated the industrial companyrt after evaluating
the materials produced by parties came to the companyclusion
that the employees in the silk and art silk industry should
be granted dearness allowance at the rate of 99 per cent
neutralization of the rise in the bombay companysumer price
index 106  old series  on the basis of the minimum basic
wage of rs. 30/- per month of 26 working days with effect
from january 1 1971.
the companyrt found that at the time when the wages were raised
in 1962 the companysumer price index stood at 429 that there
has been a steep rise in the companyt of living as reflected in
the bombay companysumer price index-in may 1970 it stood at 799-
and on the date of the award it stood at 839 and so there
was a fall in real wages by 39 paise per day of the lowest
class of workers. the companyrt
19-1208 sup ci/72
therefore came to the companyclusion that the demand for
neutralization of the rise in the companyt of living was
reasonable. it further found that exhibit u. 8 which is a
comparative table showing the minimum basic wages and
dearness allowance paid in other industries in the region
was a relevant document as it indicated the trend in other
industries in the region to allow full neutralization on
account of the rise in the companyt of living. the companyrt then
proceeded to assess the financial capacity of the employer-
units with particular reference to their volume of business
the capital invested tile profits earned the standing of
the industry the strength of the labour force employed the
position of reserves the dividend declared and the future
prospect of the industry. the association although it
represented 55 employer-units produced numberdata as regards
the financial capacity of 27 units in spite of the clear
direction of the companyrt and so the companyrt on the basis of
the in materials placed before it by the other units came
to the companyclusion that the art and art-silk industry has
prospered and has established itself that the prospect of
the industry was bright and that the financial position of
the 28 units which produced their balance sheets and profit
and loss accounts or other documents to show their gross
profits was such that they companyld afford to bear the
additional burden. for reaching the companyclusion that the industry is prosperous
and has a bright future the companyrt relied on the speech made
by the chairman of the silk and art silk mills association
at the 30th annual general meeting in 1969 in which he said
that the manmade fibre industry had made remarkable
progress during the last decade that the production during
the year 1969 exceeded the third plan target by over 25 per
cent that there was a rise in the per-capita companysumption
of fabrics that rapid progress was expected in the
production of number-cellulosic yarn and that the total demand
in relation to the year 1969 was likely to increase by 41
per cent by the year 1973-74 and by 110 per cent by the year
1978-79 the companyrt also relied upon the fact that actual
export in 1970 exceeded the export in the previous three
years the fact that production has substantially increased
in the first six months of 1970 that it was as much as
525.77 million metres companypared to the total production of
892.67 million metres in 1969 and the fact that the total
production of art-silk yam had reached the figure 1 4.680
thousand kilograms companypared to 106.480 thousand kilograms in
1969. the companyrt estimated that export of rayon fabrics and
synthetic textiles will reach rs. 26.50 crores a year by
1973-74 although excise duty has been increased the companyrt
found that it had number adversely affected the industry in any
substantial degree its the econumberic incidence of the burden
of the excise duty was passed on to the companysumer. as
regards the financial capacity of the units the companyrt
relied on exhibit u. 9 which is an analysis of he profit
and loss accounts of the 28 mills and exhibit u. 10 which
is a companysolidated statement showing the financial companydition
of these
 mathew j.  mills and exhibit u. 11. the statement regarding the bonus
paid by the mills which. did number file their balance sheets
and profit and loss accounts and exhibit u. 12 a statement
showing the interest paid by some of the units which had
filed their balance sheets and exhibit u. 13 a statement
showing the profitability ratio for art-silk industry in
bombay and exhibit u. 14 a companyparative statement of the
profitability ratio in companyton textiles engineering and
chemical industry. the companyrt found from exhibit u. 9 that
there was an increase in the paid-up capital of 44.07 lakhs
from 1965 an increase in the reserve amounting to 32.96
lakhs and increase in the gross block amounting to rs. 285.54 lakhs and an increase in the net block of rs. 140-63
lakhs from 1965 to 1968. from the figures given in exhibits
in u. 9 and u. 10 the companyrt found that after providing for
depreciation to the total paid up capital the profit would
work out at 40.02 per cent and that after providing for
depreciation to the total paid up capital and reserve it
would work out at 21.10 per cent. from the large amount of
interest paid by some of the units as disclosed in exhibit
u. 12 the companyrt inferred that these units are under-
capitalised but that at the same time they preferred to
borrow money at the current rate of interest. the companyrt
also found from exhibit u. ii that 17 mills which did number
file their balance sheets or profit and loss accounts were
in a position to pay bonus in excess of the 4 per cent which
is the statutory minimum under the payment of bonus act and
therefore these units must have been making profits and as
their present financial position was number shown to have
become worse they had the financial capacity to bear the
additional burden. mr. s. t. desai for the appellant submitted that the
industrial companyrt drew an adverse inference against the 28
units although they had produced their balance sheets and
profit and loss accounts on the ground that the 27 mills did
number produce any data to show their financial capacity to
bear the additional burden and that that was unjustified. he argued that so far as the 28 mills which had produced
their balance sheets and profits and loss accounts there
should have been an appreciation of the materials placed
before the companyrt on their merit and numberadverse inference
should have been drawn against them because the other units
did number place any relevant materials as regards their
financial capacity. in other words his argument was that
as the 28 mills had produced relevant documents to show
their financial capacity the companyrt should number have drawn
any adverse inference as against them merely from the number-
production of the relevant documents by the other units. we
lo number think that there is any substance in this argument. as already stated the association represented 55 units of
employers and out of the 55 units only 28 units produced
their balance sheet- and profit and loss accounts. statements were filed by
17 units  exhibits c. 1 8 5 to 201   undertaking that they
would abide by the information and the balance sheets and
profit and loss accounts supplied by the 28 mills and
praying for decision of the dispute on the basis of the
information and statement of accounts so supplied. the
remaining 10 mills orally agreed that they would also abide
by the statement and balance sheets supplied by the 28 mills
and for deciding the dispute on that basis. therefore an
adjudication by the industrial companyrt as regards the rate of
neutralization to be allowed on the basis of the financial
capacity of the 28 units as guaged from the balance sheets
and profit and loss accounts produced by the 28 mills was
quite proper. to put it differently the award in so far as
it companycerned the 28 units proceeded on the basis of their
financial capacity as guaged from the balance sheets and
profit and loss accounts produced by them and from the
materials in the case. they can therefore have numberreason
for any companyplaint that the companyrt drew any adverse inference
as regards them from the number-production of relevant
materials in the possession of the other employer units. and as regards the 27 employer-units which did number supply
any materials with respect to their financial capacity they
cannumber also have any reason for companyplaint in view of their
undertaking to abide by the decision of the industrial companyrt
on the basis of materials furnished by the 28 units the only
reason why they did number furnish the basic information as
regards their financial capacity in spite of the direction
of the companyrt is that the information if furnished would. go against them. we are satisfied that the award was based
on the materials produced in the case so far as the 28
units are companycerned and number on any adverse inference drawn
from the number-production of the relevant materials by the 27
units. mr. desai companytended that the position of the industry is
number stable and that its prospects are bleak. he said that
the companyrt did number give due weight to exhibits c. 1 to c. 4
and c. 15 in reaching-the companyclusion that the position of
the industry was stable. exhibit c.1 is a statement showing
the number of mills and the looms owned by them as on april
1 1970. exhibit c. 2 is a statement showing the number of
members of the association and their looms. exhibit c. 3 is
a statement showing the looms run by member-mills of the
association as on april 1 1970. exhibit c-. 4 is a
statement showing the number of grey and companyposite units in-
the industry and their looms. exhibit c. 15 is a statement
concerning 25 mills. it shows the number of looms
installed average number of loom-shifts worked per month
average production and average export per month during the 4
years namely 1966 to 1969. exhibits c. 1 to c. 4 do number
throw much light upon the question in companytroversy as they
only show the all-india figures. exhibit c. 15 was taken
into companysideration by the industrial companyrt but the companyrt did
number place much reliance upon it as it was of
 mathew j.  opinion that the data furnished by the balance sheets and
profit and loss accounts was more relevant. companynsel submitted that the number of looms has gone down
that the companyt of production has gone up that export of
manufactured silk has dwindled that sales have declined and
therefore the profits of the units have gone down from 1965
to 1968. companynsel in this companynection referred to exhibit u. 13 a document produced by the sabha to show the
profitability ratio and argued that that document would
itself indicate that there was decline in profits from 1965
to 1968 . exhibit u. 13 is a statement of the gross profits
for the years from 1965 to 1968 of these units from the
point of view of total sales of total capital and of total
net worth. in ahmedabad mill owners association etc. v.
the textile labour association 1  the companyrt observed
we do number think in companysidering the financial
position of the appellants in the companytext of
the dispute before us it would be appropriate
to rely unduly on the profitability ratio
which has been adopted by the said bulletin. indeed in appreciating the effect of the
several statements produced before the
industrial companyrt by the parties in the. presentproceedings it would be relevant to
remember that some of these single-purpose
statements are likely to create companyfusion and
should number ordinarily be regarded as decisive. as paton has observed different groups for
whom financial statements are prepared are
interested in varying degree in particular
types of information and so it has been held
in some quarters that numberone form of statement
will satisfactorily serve all these purposes
that separate single-purpose statements should
be prepared for each need or that the
statements usually prepared for general. distribution should be expanded so as to
include all the detail desired  accountants
handbook edited by paton p. 13 . paton cites
the companyment of wilcox against these single-
purpose statements. said wilcox the danger
in undertaking to furnish singlepurpose
financial statements lies in increasing
confusion and misunderstanding and in the
possible misuse of such statements for
unintended purposes. paton has then
referred to certain methods for determining
the financial position of a companymercial and
industrial companycern. in this companynection he
refers to the proprietary ratio rate of
earnings on total capital employed rate of
dividends on- companymon stockholders equity and
others. our purpose in referring to these
comments made by
 1  1966 1 s.c.r.382 at p. 426
paton is to emphasise the fact that
industrial- adjudication cannumber lean too
heavily on such single-purpose statements or
adopt any one of the tests evolved from such
statements whilst it is attempting the task
of deciding the financial capacity of the
employer in the companytext of the wage problem. while we must numberdoubt examine the position in
detail ultimately we must base our decision
on a broad view which emerges from a
consideration of all the relevant factors. we think that the industrial companyrt hag carefully examined
the financial position of the employer-units as also the
position of the industry and its future prospects. the
court was fully aware of the- nature of the demand and the
extent of the burden which the employer units. will have to
bear. a broad and overall view of the financial position of
the employer units was taken into account by the companyrt and
it has tried to reconcile the natural and just claims of the
employees for a higher rate of dearness allowance with the
capacity of the employer to pay it and in that process it
has made allowance for the legitimate desire of the employer
to make reasonable profit. what is really material in
assessing the financial capacity of the employer-units in
this companytext is the extent of gross profits made by them
 see unichem laboratories limited v. their workmen 1 . on the
basis of exhibit u. 9 which is an analysis of the balance
sheets and profit and loss accounts of the 28 units the
court found that the 28 mills have been making good profits
and that on an average the profit would work out at 40
and odd per cent of the capital. there was some decline in
the profits made during the years 1966 1967 and 1968 but
the companyrt found that the industry was rallying round in
1970.
mr. desai companytended that the industrial companyrt did number
appreciate the impact on the industry of the enhancement of
excise duty upon the manufacture of silk products. companynsel
contended that there has been companysiderable increase in
excise duty on all varieties of silk and that has affected
the companysumption of manufactured silk products. numberevidence
his been adduced to show what exactly has been the effect on
the industry of the enhancement in excise duty. although
the managers of two units were examined as witnesses number 2
and 3 in march and april 1971 they did number give any
evidence as regards the adverse effect on the sale of silk
products on account of the imposition of enhanced excise
duty during the financial year 1970. we do number think that
without further evidence as regards the effect of the
enhancement in the excise duty it is possible to draw an
inference that the sale of the products has beenadversely
affected. quite apart from this we do number

civil appeals number 1091-93 of 1971 decided on 24-2-1971
 mathew j.  understand how when the-econumberic incidence of the excise
duty has been passed on to the companysumer the employer-units
have to bear any additional burden on account of the levy. companynsel next companytended that the industrial companyrt was number
justified in relying upon exhibit u. 8 for companying to the
conclusion that 99 per cent of neutralization on account of
rise in companyt of living should be granted to the employees on
the basis of the percentage of neutralization in other
industries in the region. companynsel said that granting 99 per
cent neutralization has number been companyntenanced by this companyrt
that the basis of fixation of dearness allowance is
industry-cum-region and that the industrial companyrt went wrong
in taking into account the percentage of neutralization in
other industries in the region for fixing the extent of
neutralization on account of the rise in companyt of living to
the employees in question here and relied on the decision of
this companyrt in bengal chemical and pharmaceutical works limited

its workmen 1 . in that case vaidialingam. j.
speaking for the companyrt laid down among other things the
following propositions 1. full neutralization is number
numbermally given  except to the very lowest class of
employees 2. the purpose of dearness allowance being to
tieutralize a portion of the increase in the. companyt of
living it should ordinarily be on a sliding scale and
provide for an increase in the rise in the companyt of living
and decrease on a fall- in the companyt of living 3. the basis
of fixation of wages and dearness allowance. is
industry-cum-region. we do number think that the industrial companyrt went wrong in
relying upon exhibit u. 8 or in granting 99 per cent
neutralization on account of the steep rise in the companyt of
living. exhibit u. 8 it may be recalled is a companyparative
table showing the minimum basic wages and dearness allowance
paid in order industries in the region like the engineering
pharmaceuticals etc. the companyrt relied upon it only to show
the trend in the region. the companyrt also relied upon the
report of the numberms companymittee which stated that the trend
for the last decade in industrial adjudication as well as in
settlement and awards was to allow 100 per cent
neutralization in the case of lowest-paid employees. the
court was of the view that if go per cent neutralization
could be allowed in the industry under tile settlement
arrived at in 1957 there was numberreason why 100 per cent
neutralization should number be granted in view of the steep
rise in the companyt of living from 1957 to the lowest paid
employees. we can number agree with the companytention of the
appellant that the industrial companyrt went wrong in relying
upon exhibit u. 8 or the report of the numberms companymittee to
find out the trend in the region as to the extent of
neutralization to be allowed to the employees companycerned. the question of the extent of neutralization to the workmen
in the units
 1  1969 2 s.c.r. 113.
does number depend solely upon the fact whether neutralization
to that extent has been allowed to the employees in
comparable companycerns in the same industry in the same region. much distinction cannumber be made in this respect among the
lowest paid employees in the region merely because some of
them are employed in other industries. in other words for
finding the trend or the numberm in the region as regards the
extent of neutralization for the lowest paid employees the
industrial companyrt cannumber be said to have gone wrong in
relying upon either the numberms companymittee report or on-exhibit
u. 8.
counsel for the appellant submitted that the industrial
court did number make any attempt to fix the dearness allowance
on the basis of the industry-cum-region formula and that
that was a fatal blemish in the award. in french motor car
co. limited v. workmen 1  this companyrt observed that the
principle of industry-cumregion has to be applied by an
industrial companyrt when it proceeds to companysider questions
like wage structure dearness allowance and similar
conditions-of service and in applying that principle indus-
trials companyrts have to companypare the wage scale or the dearness
allowance prevailing in similar companycerns in the region with
which it is dealing and generally speaking similar companycerns
would be those in the same line of business as the companycern
with respect to which the dispute is under companysideration and
further even in the same line of business it would number be
proper to companypare a small struggling companycern with a large
flourishing companycern. in williamsons  india  private limited v.
the workmen 2  the companyrt observed that the extent of
business carried an by the companycerns. the capital invested by
them the profits made by them the nature of the business
carried on by them- their standing the strength of their
labour force the presence or absence and the extent. of
reserves the dividends declared by them and the prospects
about the future of their business and other relevant
factors have to be borne in mind for the purpose of
comparison. these observations were made to show how
comparison should be made even in the same line of business
and were intended to lay down that a small companycern cannumber be
compared even in the same line of business with a large
concern. in greaves companyton and cc. and others v. their
workmen  3  the main argument was that the tribunal went
wrong in relving more on the region aspect of the industry-
cum-region formula and number on the industry aspect when deali
ng with clerical and subordinate staff. the companyrt
said that it was ordinarily desirable the have as much
uniformity as possible in the wage-scales of different
concerns of the same industry working in the game region as
this puts similar industries more or less on an equal
footing in their production struggle. the companyrt then
referred to the french
 1  1963 supp. 2 s.c.r. 16 at pi . 20-21.  2  1962 1

j. 302.  3  1964 5 s.c.r 362at pp. 367-369
 mathew j.  motor companys 1  case and observed that in that case this
court held so far as clerical and subordinate staff are
concerned that it may be possible to take into account even
those companycerns which are engaged in different lines of
business for the work of clerical and subordinate staff is
more or less the same in all kinds of companycerns. the companyrt
further observed that where there are a large number of
industrial companycerns of the same kind in the same region it
would be proper to put greater emphasis on the industry part
of the industry-cum-region principle as that would put all
concerns on a more or less equal footing in the matter of
production companyts and therefore in the matter of companypetition
in the market and this will equally apply to clerical and
subordinate staff whose wages and dearness allowance also go
into calculation of production companyts but where the number
of companyparable companycerns is small in a particular region and
therefore the companypetition aspect is number of the same
importance the region part of the industry-cum-region
formula assumes greater importance particularly with
reference to clerical and subordinate staff and this was
what was emphasised in the french motor car company  1  case
where that companypany was already paying the highest wages in
the particular line of business and therefore companyparison had
to be made with as similar companycerns as possible in different
lines of business for the purpose of fixing wage scales and
dearness allowance. according to the companyrt the principle
therefore which emerges from these two 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 companycerns in
the same region carrying on the same industry in such a
case in order that production companyt may number be unequal and
there may be equal companypetition wages should generally be
fixed on the basis of the companyparable 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 particularly in the case of
clerical and subordinate staff for as pointed out in the
french motor car company case   there is number much difference
in the work of this class of employees in different
industries. if the employer has the financial capacity would it be just
to reject the claim of the lowest paid workmen for an
enhancement in dearness allowance to neutralize the rise in
cost of living and thus to maintain their subsistence wage
at its real level in terms of the purchasing capacity
merely because there is a companyparable companycern in the industry
in the region. in which workmen are paid dearness allowance
at a low rate ? we do number think it necessary to answer this
question for the purpose of deciding this case.  1  1963 supp. 2 s.c.r. at 20-21.
the association never wanted the companyrt to make any companypari-
son with any other units in the same industry in the region. in the written statement of the association there was no
averment that there were other companyparable unit.-. the
same industry in the region. number did the association it
the time of argument before the industrial companyrt put
forward the companytention that there were companyparable companycerns
in the same industry in the region and that the companyrt should
make a companyparison of the employer-units in question with
those companycerns to find out the extent of neutralization
which companyld be granted. the association had a membership of
325 units in greater bombay on february 6 1970 when the
miscellaneous application  ic  number 1 was filed. it was
certainly in a position to tell the companyrt whether there were any
other companyparable units in the same industry in the
region and the only inference from its companyduct is that there
were numbercomparable units in the industry in the region. we do number think that the award suffers from any infirmity.