criminal appellate jurisdiction criminal appeal number 178 of
1967.
appeal by special leave from the judgment and order dated
january 5 1967 of the madras high companyrt in criminal appeal
number. 34 to 38 of 1965.

n. sachthey for the appellant. r. gokhale m. k. ramamurthi vineet kumar and shyamala
pappu for respondent number 1.

v. rangam for respondent number 6.
the judgment of the companyrt was delivered by
dua j. a companyplaint under s. 6 of the imports and exports
control act 1947 dated 24th february 1964 was presented by
the chief companytroller of imports and exports new delhi in
the companyrt of the chief presidency magistrate madras against

k. t. kosalram director-in-charge of messrs dina seithi
ltd. madras  2  k. t. janakiram director messrs dina
seithi limited  3  k. natarajan manager messrs mohan ram
press madras  4  messrs dina seithi limited madras  5  sri

n. ramachandran son of s. natesa lyer madras and  6  t.
natarajan manager messrs dina seithi limited madras. accord-
5 10
ing to the broad allegations in the companyplaint on numberember
28 1959 accused number 4  hereafter called the companypany  was
registered under the companypanies act 1956 as a public
limited companypany with the registrar of companypanies madras. accused number. 1 and 2 who are brothers were both directors
of the companypany accused number 1 being the director-in-charge
attending to its day to day management and administration. he was also authorised to operate its accounts with the
banks. the primary object of the companypany was publication of
a tamil daily newspaper dina seithi. accused number 3 was
the manager of messrs mohan ram press located in the same
building in which the companypany was located. srimati gomati
devi wife of accused number 1 was the sole proprietress of
this press. she had given power of attorney to her husband
for operating the bank account of her press. the daily
newspaper  dina seithi  used to be printed at this press. accused number 5 was a broker engaged in the business of
negotiating sale and purchase of printing machinery. between 1949 and 1951 he was working as chief salesman of
printers house madras and before that for about two years
he had worked as a salesman with messrs standard printing
machinery companypany madras. in 1951 he started his
independent business as a broker in addition he also used
to work as a companyrespondent of kerala kaumudi belonging to
the companypany. accused number 6 was the manager of the companypany
and his wife smt. sarojini was one of its directors. on
may 5 1960 accused number 1 applied on behalf of the companypany
to the chief companytroller of imports and exports new delhi
for the grant of an import licence in favour of the companypany
for importing two secondhand rotary printing presses valued
at rs. 3 lakhs in the category of actual users. the chief
controller of imports exports on the recommendation of
the companymittee companystituted for the purpose issued in the
first instance aft import licence for rs. 150000  ex. p-
12 . the number of this licence was a-759626/60/au cci ho
and it was dated september 19 1960. later on the request
of accused number 2 on behalf of the companypany the value of this
licence was raised to rs. 3 lakhs on the recommendation of
the press registrar of india. the licence was returned to
the companypany on december 16 1960. the original period of
validity of the licence having expired on june 19 1961
accused number 2 requested the licensing authority on behalf of
the companypany to extend the period on the ground that the
machinery companyld number be fixed up by the companypanys directors. under the orders of the companytroller in charge of the
newsprint sale the validity of the licence was extended
upto march 19 1962. oil july 2 1961 accused number 1 sought
permission of the licensing authority on behalf of the
company to import two secondhand rotary presses instead of
one already permitted within the licence value of rs. 3
lakhs under the import
51 1
licence ex. p/12 on the ground that one more printing press
was required for the proposed office at madurai  ex. p/15 . after securing further necessary information about the
machinery proposed to be imported the chief companytroller
approved the request with the result that the amended
licence for two presses was sent to the companypany on august
16 1961. on december 19 1961 the companypany as per letter
sent by accused number 1 informed the chief companytroller that
one rotary printing press had been imported and the other
was expected to arrive by january 1962. it was requested
that in the import licence the description of the goods be
changed from rotary press to rotary press with stereo
equipment and turtles. we find from ex. p/17 and ex. p/17 a  that it was represented that the companypany was
incurring heavy demurrage as the cases were lying on the
wharf uncleared for want of the required amendment of the
licence. this was described as a purely technical amendment
in the licence. this request was granted with the approval
of the chief companytroller of imports and exports. the amended
licence was despatched to the companypany on january 3 1962.
according to companydition  c  reproduced on-the reverse of the
import licence the licence-holder had to utilise the goods
imported only for companysumption in his own factory and its
sale to or use by other parties was specifically prohibited. the licence-holder was further prohibited from pledging the
imported goods in whole or in part except with a scheduled
bank duly authorised to deal in foreign exchange and that
also with prior permission of the licensing authority. one dr. k. g. thomas owned kerala dhwani a daily
newspaper of kottayam having circulation in the state of
kerala. it has started on august 20 1959 and c. j. mani
was its general business manager ever since its inception. on numberember 10 1960 dr. thomas applied to the chief
controller of imports and exports on behalf of his firm for
importing a rotary printing press under a customs clearance
permit. but this was rejected. on october 25 1961 he sent
anumberher application dated october 3 1961 on behalf of the
firm requesting for an import licence for importing a
secondhand rotary press for the period october march 1962.
but this was also rejected. still anumberher application dated
may 10 1962 for licence for importing two monumbertypefacing
units was also rejected on april 29 1963. c. j. mani the
general manager of this companycern was also independently
trying to secure a rotary printing press through various
parties and firms. accused number 5 was knumbern to c. j. mani
and during the formers visit to kottayam in the first
quarter of 1961 he learnt that dr. thomas was desirous of
securing a secondhand rotary printing press. sometime in
april or may 1961 accused number. 2 and 5 visited kottayam and
on meeting dr. thomas they told him that accused number 1 was
going to have an import licence for two rotary
printing presses but he needed only one with the result
that one r. hoe companyeight-page rotary printing press would
be available for sale. after some companyrespondence and
discussion between accused number 5 and c. j. mani and dr.
thomas and after a personal meeting between dr. thomas and
accused number 1  at the instance of accused number 5  the terms
of sale of rotary press to dr. thomas were finally settled
on july 17 1961. the price was settled at rs. 2 lakhs ex-
godown madras the same day dr. thomas paid to accused number
5 rs. 15000 by means of a cheque by way of advance money. accused number 5 issued a stamped receipt which was also signed
by accused number 1. on july 19 1961 the photo prints of the
press offered for sale were forwarded by accused number 5 to
dr. thomas. on the reverse of these prints were the rubber
stamp impressions of the companypany. on august 2 1961 a
further sum of rs. 25000 was paid by dr. thomas for which a
receipt was given by accused number. 1 and 5. between
september 23 1961 and march 17 1962 the balance of rs. 176700  total being rs. 216700  was paid by dr. thomas
in instalments towards the price of the rotary press and its
accessories. on september 1 1961 accused number 1 had opened
a letter of credit with a nil margin with the indian
overseas bank limited madras on messrs universal printing
equipment companypany new york- for importing a secondhand
rotary press for dollars equivalent to rs. 100 1 12
against import licence number a-759626/ 60/au cci hq. on
october 28 1961 the bank received the relevant import
documents and-on december 13 1961 it received from the
company the remittance of the amount in cash towards the
letter of credit. on october 20 1961 messrs binny company
madras the agents of the shipping companypany messrs isthmian
lines inc. u. s. a. had requested the companypany to remit rs. 12712 being the freight payable at madras towards the company-
signment of 19 boxes companytaining secondhand rotary press due
to arrive from new york by s.s. steel vendor so as to
enable them to cable to their principals at new york to
issue the bills of leding to the shippers. a cheque for rs. 12712 was accordingly sent by the companypany to messrs binny
co. on october 31 1961. the necessary cable was then sent
to new york. the import documents pertaining to the rotary
press were sent by accused number 1 on behalf of the companypany to
messrs natesa lyer company clearing agents madras for
clearing the goods from the madras port by the indian
overseas bank limited pursawalakam madras. this invoice was
issued by the universal printing equipment companypany
lindhurst in the name of messrs dina seithi limited indicating
shipment of the goods imported companytained in the 19 boxes
bearing marks dina seithi. the customs duty and the
clearance charges were paid by the companypany. it is
unnecessary to state at length further details of the
complaint. suffice it to
started functioning from may 20 1962. in march 1962 the
deputy superintendent of police madras visited the
premises of this newspaper and found the rotary printing
press tallying with the description given in the invoice
issued to the companypany by r. hoe company new york london. the
number 458 assigned to the press was also found on its major
parts. numberrotary press imported by accused number 1 on behalf
of the companypany was found at its  the companypanys  premises. the amount received by cheques and drafts from dr. thomas
were credited to the account of messrs mohan ram press of
which smt. gomati devi wife of accused number 1 was the sole
proprietress. on these broad avermerits it was prayed in
the companyplaint that accused number. 1 to 3 and 5 and 6 be
proceeded against for offences under s. 120-b i.p.c. read
with s. 5 of imports and exports  companytrol  act 1947 lind
also for an offence under s. 5 of the said act. the companypany
was alleged to be guilty under s. 5 of the said act read
with cl.  5  sub-cl.  iv  of imports  companytrol  order 1955.
the chief presidency magistrate who tried the companyplaint
acquitted accused number 6 holding that he had numberhing to do
with the impugned transaction but companyvicted the rest. the
company was sentenced to fine only and so were accused number. 2 3 and 5 three individual accused persons were directed
in case of default to undergo rigorous imprisonment for
three months on each companynt. leniency was shown to accused
number. 2 3 and 5 because they had acted under the directions
given by accused number 1 who was sentenced to rigorous
imprisonment for six months under each companynt and also to pay
fine and in default to undergo further rigorous imprisonment
for three months. the companyvicted accused appealed to the high companyrt at madras
and the state applied for enhancement of sentences. the
high companyrt acquitted all the accused persons with the result
that the revision for enhancement necessarily failed. the high companyrt having declined certificate of fitness under
art. 1 3 4   1    c  of the companystitution the deputy chief
controller of imports exports secured special leave to
appeal under art. 136 of the companystitution against the order
of acquittal by the high companyrt. in the high companyrt though in the memorandum of appeal
several grounds were taken during arguments the appellants
counsel companyfined his submission mainly to the point that
condition.  c  of the licence issued to accused number 4  ex. p 1 2  related only to raw material or accessories and that
as such the sale of printing press which was neither raw
material number accessories did number companytravene that clause. the factum of sale of the printing press
to dr. thomas  p. w. 16  was number disputed. the high companyrt
accepting this companytention held companydition  c  in ex. p/12 to
be inapplicable to printing presses and observed that the
licensing authority had number applied its mind when this
condition was inserted in the licence for importing the
printing press in question. on this ground the companyviction
recorded by the trial companyrt was set aside. the appellants
learned companynsel in this companyrt has questioned the companyrectness
of this view and has submitted that it is number sustainable on
the statutory provisions and has resulted in grave failure
of justice. before dealing with this question we may dispose of a pre-
liminary objection to the companypetency of this appeal at the
instance of the deputy chief companytroller of imports and
exports raised by shri h. r. gokhale on behalf of the
respondents. it has been pointed out that the special leave
petition in this companyrt purports to be filed by the deputy
chief companytroller of imports exports and number by the state. as the state had companyducted the prosecution the companyplainant
it is argued cannumber seek leave number can he prosecute this
appeal. leave already granted ex parte is according to
shri gokhale liable to be revoked. reliance has been placed
on management of hindustan companymercial bank limited kanpur v.
bhagwandass 1 . there the appellant had secured from this
court ex parte special leave to appeal under art. 136 of the
constitution without first moving the high companyrt for the
necessary certificate and this companyrt on objection by the
respondent revoked the special leave as being in
contravention of o. 13 r. 2 of the supreme companyrt rules. the respondents companytention before us is that the public
prosecutor and number the deputy chief companytroller of imports
exports had applied to the high companyrt for the necessary
certificate and therefore the deputy chief companytroller has
numberlocus standi to apply for special leave. having been
granted on an incompetent petition the special leave
deserves to be revoked argues shri gokhale. we are unable
to uphold this objection. the companyplaint was filed in the
court of the chief presidency magistrate by the deputy chief
controller of imports and exports under s. 6 of the imports
and exports  companytrol act 1947. it is number disputed that
this officer was as stated in para 1 of the companyplaint duly
authorised to make the companyplaint within the companytemplation of
s. 6. in the appeals filed by the accused against their
conviction the state was impleaded as represented by the
deputy chief companytroller of imports and exports
 companyplainant  as the respondent. it is true that in a
petition for enhancement of sentence filed in the high companyrt
the public prosecutor was shown as the petitioner and
similarly the application for leave to appeal from the
judgment of the high companyrt was
 1  1965  2  s.c.r. 265.
also filed in that companyrt by the public prosecutor. but
that in our view does number in any way disentitle the deputy
chief companytroller of imports and exports  the original
complainant duly authorised by the statute  to apply for
special leave to appeal to this companyrt and to prosecute the
appeal. our attention has number been drawn to any provision
of law which can be said to deprive the deputy chief
controller the lawfully authorised companyplainant in this case
to seek special leave and prosecute this appeal. in any
event art. 136 of the companystitution and the supreme companyrt
rules are wide enumbergh in their language to empower this
court to grant special leave to the deputy chief companytroller
in cases like the present and deal with the appeal on the
merits. the preliminary objection must accordingly be
repelled. companying to the merits we may for a while again turn to company-
dition  c  of the licence which has already been numbericed
earlier. it may be recalled that this companydition expressly
provides that the goods would be utilised only for
consumption as raw material or accessories in the licence-
holders factory and numberportion thereof would be sold to
or be permitted to be utilised by any other party. the
goods imported are also number to be pledged with any financier
other than banks authorised to deal in foreign exchange
provided that particulars of the goods so pledged are
reported in advance to the licensing authority. under s. 3
of the imports and exports act- 18 of 1947 the central
government is empowered to provide by order published in the
official gazette for prohibiting restricting or otherwise
controlling the import export carriage or shipment etc. of goods of any specified description and also the bringing
into any port or place in-india of goods of any specified-
description intended to be taken out of india without being
removed from the ship or companyveyance in which they are being
carried. the central government by order dated december 7
1955 made the import companytrol order under ss. 3 and 4a of the
said- act. clause  3  of this order provides for
restriction on import of certain goods in these words
save as otherwise provided in this order no
person shall import any goods of the
description specified in schedule 1 except
under and in accordance with a licence or a
customs clearance permit granted by the
central government or by any officer specified
in schedule ii. clause 7 of this order empowers the licensing authority suo
motu or on application by the licensee to amend the licences
granted under this order in such manner as may be necessary
to make them companyform to the aforesaid act or this order or
any other law in force or to rectify any error or omission
in the licence on the licensees request however the
licence may be
5 1 6
amended in any manner companysonant with the import and export
control regulations. item number 67 1  in schedule 1 part v
which appears to us to be relevant for this case reads
printing and lithographic material namely
presses lithographic plates companyposing
sticks chases imposing tables lithographic
stones stero-blocks wood blocks half-tone
blocks electrotype blocks process blocks
roller moulds roller frames and stocks
roller companyposition lithographic nap rollers
standing screw and hot presses perforating
machines gold blocking presses galley
presses proof presses arming presses companyper
plate printing presses rolling presses
ruling machines ruling pen making machines
lead cutters rule cutters slug cutters type
casting machines type setting and casting
machines paper in rolls with side
perforations to be used after further
perforation for typecasting rule bending
machines rule mitreing machines bronzing
machines stereotyping apparatus paper fold-
ing machines paging machines but excluding
ink and paper and sets of mats when imported
as advertising material in companynection with
composed films. this item which companytains a very large number of various
components of a printing press companyresponds to item number 72 2
of the indian tariff act 1934 which companysolidates the law
relating to customs duties. item number 67 2  in schedule i
speaks of companyponent parts as defined in import tariff item
number 72 3  of machinery specified in cl.  1  excluding those
covered by sl. number6 8 of this schedule. serial number 68
refers to rubber blankets for printing presses etc. item
number 67  1  would suggest that printing presses are included
in the expression printing and lithographic material. our
attention has number been drawn to any other entry either in
schedule i of the imports companytrol order or in the first
schedule of the indian tariff act which would companyer the
import of printing presses and payment of customs duty on
such import. these two statutes forming parts of the import
control scheme may appropriately be companysidered as throwing
some light on each other. the principal argument advanced
on behalf of the respondents is that cl.  c  of the
conditions of the licence does number companyer the printing
presses in question because the plain language of this
clause postulates that goods companyered by it should be capable
of being utilised for companysumption as raw material or
accessory in a factory. a companyplete printing press it is
contended is neither raw material number accessories and it
cannumber be said that by fixing a printing press for running
it the press is utilised for companysumption as raw material or
accessory. this argument though attractive on first
impression seems to us on a deeper thought to
be unacceptable. a close scrutiny of the scheme and
language of the relevant provisions of the import and export
legislation and of the import companytrol policy formulated by
the government leaves numberdoubt that the argument is
unfounded. clause  c  reads

the goods will be utilised only for company-
sumption as raw materials or accessories in
the licence-holders factory and that no
portion thereof will be sold to or be
permitted to be utilised by any other party or
pledged with any financier other than banks
authorised to deal in foreign exchange
provided that particulars of goods so pledged
are reported in advance to the licensing
authority. the respondents have sought assistance for their argument
principally from the dictionary meaning of the words
consumption raw material and utilised used in this
clause. companysumption it is argued companyveys the idea of
destruction of the companymodity companysumed and raw material
according to this submission must be utilised in this
sense. in our opinion dictionary meanings however helpful
in understanding the general sense of the words cannumber
control where the scheme of the statute or the instrument
considered as a whole clearly companyveys a somewhat different
shade of meaning. it is number always a safe way to companystrue a
statute or a companytract by dividing it by a process of
etymological dissection and after separating words from
their companytext to give each word some particular definition
given by lexicographers and then to reconstruct the
instrument upon the basis of those definitions. what
particular meaning should be attached to words and phrases
in a given instrument is usually to be gathered ?from the
context the nature of the subject matter the purpose or
the intention of the author and the effect of giving to them
one or the other permissible meaning on the object to be
achieved. words are after all used merely as a vehicle to
convey the idea of the speaker or the writer and the words
have naturally therefore to be so companystrued as to fit in
with the idea which emerges on a companysideration of the entire
context. each word is but a symbol which may stand for one
or a number of objects. the companytext in which a word company-
veying different shades of meanings is used is of
importance in determining the precise sense which fits in
with the companytext as intended to be companyveyed by the author. the words used in the licence  ex. p/12  have accordingly
to be companystrued in the background of the scheme of the
import companytrol order 1955 the entry number 67 of schedule i
to this order and the import trade companytrol policy. the word
consumption as used in cl.  c  in the licence seems to us
to companyvey the idea of using up the goods by
l 436 sup cl/71
fixing them in the factory along with other companyponents. this is clear from the fact that entry number 67 1  in schedule
1 of the import companytrol order does number companytain any single
item denumbering a companyplete printing press and from the fact
that the various articles mentioned in this item seem as if
to have been intended to companystitute raw material. this
construction fits in with the scheme and policy of the
import trade companytrol as we will presently show. the
dictionary meaning of the three words in cl.  c  on which
the respondent relies also seems in our opinion to harmo-
nise with this view. the government of india  ministry of companymerce and industry
has been publishing from time to time import trade companytrol
handbook on rules and procedure providing for the assistance
of those interested in imports up to date information as to
the manner in which applications for import licences should
be made the appropriate authority to be addressed in each
case the procedure governing the grant of licences for
different classes of goods the validity and use of import
licences and other similar matters. in the handbook of
1956 which is the relevant handbook for this case which
relates to the licence originally granted in 1960 schedule
i companymonly knumbern as the itc schedule serves broadly to
classify the articles that enter into the import trade. part v of the schedule companyers industrial requirements and
it is in this part that the printing and lithographic
material including and other items are entered at sl. number
67 1  already numbericed by us. this handbook emphasises the
importance of companyrect classification with reference to the
serial number and part of the itc schedule. in appendix
iii of the handbook application forms are prescribed. form
b is the one which was used by the respondents. this form
is meant for the import of goods by actual users number borne
on the registers maintained by the industrial advisers
ministry of companymerce and industry when licence is sought
for import of goods  other than those falling under the
capital goods licensing procedure  vide government of
india ministry of companymerce and industry order number 17/55
dated 7th december 1955. it is expressly stated in the
respondents application ex. p 11  b  1 that the raw
material was required by them for printing newspaper  dina
seithi tamil daily  full particulars of the raw materials
required to be imported were given as printing machinery and
proforma was attached with the application. itc number and
part was specifically stated to be 67  1    i  part v. it
was on the basis of this application that the licence ex. p/12 was granted subject inter alia to companydition  c . the government of india ministry of companymerce and industry
also publishes from time to time import trade companytrol policy
for the various licensing periods. in the publication for
the licensing period april-september 1960 we find the
policy statement showing the list of items licensable to
actual users. at p. 360 in appendix iv part v items 67
 1   i  and 67  2  occur. item
67  1    i  reads
printing machinery  for newspaper establishments and
quality printers . item 67  2  reads
component parts of printing machinery. it is obvious that in the respondents application serial
number 67 1   i  refers to this item in the import trade
control policy aprilseptember 1960 the period relevant
for this case. there is numberother item in any one of the
lists which companyers printing presses as a separate item. this clearly shows that the printing presses are treated by
legislative intendment as printing material or printing
machinery. form b used in the present case indicates that
the press intended to be imported was number companysidered to fall
under the capital goods licensing procedure. it seems that
it is for all these reasons that in the licence it was
provided that these goods would be utilised only for
consumption as raw material or accessories in the licence-
holders factory. the words utilised companysumption and
raw material have to be fitted into the clearly
discernable statutory scheme and this is possible without
doing violence to the dictionary meaning of these words. the appropriate dictionary meaning of words possessing
variable shades of meanings has number to be arbitrarily
selected and mechanically applied without companysidering the
setting in which they are used and the purpose sought to be
achieved. there is anumberher very companyent factor in this case namely
that the respondents when they sought licence for the
import of printing press expressly represented that the
imported goods were required to meet the increasing demand
of circulation of their newspaper. this indeed was the sole round
for importing the press. the amended licence was. also secured by the respondents so as to enable them to
import two printing presses on the ground that one press was
required for their madurai office as well. licence for both
the printing presses was obtained for actual use by them for
their newspapers. had they number companyplied with the procedure
meant for the import of goods by actual users they might
number have secured the necessary licence. having secured a
licence expressly for the import of goods for their use they
may number be permitted to ignumbere the companydition of actual user
on the plea  which by numbermeans seems to be virtuous  that
cl.  c  is inapplicable to actual users. 5 20
the respondents on their own showing clearly knew their dis-
ability under the companyditions imposed by cl.  c  of the
licence. knumbering full well the companydition prohibiting the
transfer of the press to other persons the respondents as
the companyrespondence to which our attention has been drawn
shows were actually negotiating for the sale of one of the
presses during the period when the procedure in regard to
its import was being carried out. on july 2 1961 amendment
of the licence was sought so as to import one more printing
press and on july 17 1961 its resale was actually finalised
and a part of the price also received. these facts do number
need any companyment on the intention and bona fides of the
respondents. it is unnecessary to go into the evidence on
this point because as already numbericed it is number disputed
that one of the printing presses was actually sold to dr.
thomas prior to its arrival in india. the amendment of the
licence also appears to have been sought with the object of
reselling the second press. the only argument urged namely
that companydition  c  was inapplicable to-the present case
having been repelled the appeal in our view must succeed
and the order of the high companyrt reversed. the validity of
condition  c  in the licence has number been questioned and in
our opinion rightly in view of the decision of this companyrt in
m s. ramchand jagdish chand v. union of india 1 . there is
neither any legal number equitable justification for reselling
the printing press. the suggestion faintly thrown that the companypany was the
holder of the licence and therefore the other respondents
 accused persons  should number be held liable is also without
merit. on the facts found and on the authority of state of
west bengal v. motilal kanumberia  2   all the respondents  the
individual accused persons along with the companypany  are
guilty. the argument that the high companyrt having acquitted theres-
pondents on a view which is a possible view this companyrt
should number companyvert acquittal into companyviction under art. 136
of the companystitution has number appealed to us. the view of the
high companyrt does number seem to be sustainable on the statutory
language and on the import companytrol policy of which the
respondents were fully aware. their own application is
proof positive of their awareness of the true position and
the breach of the companyditions of the licence on their part
was deliberate. indeed as observed earlier the permission
for the import of the second press was apparently sought
with the object of its resale. breach of companyditions for
import of goods is a serious matter because it prejudicially
affects our companyntrys national econumbery. the import licence
for the second press having in our view been sought on
false representation with
 1  1962 3 s.c.r. 72.  2  1966 3 s. c. r.
933.
the object and purpose of its resale the breach of the
licence was therefore fully intended and designed. the
respondents are guilty of malpractices and of abuse of the
import licence with the object of making money. we
however think that in view of the fact that this litigation
has been pending since a long time it would meet the ends
of justice if we impose merely fine and do number sentence
anyone to imprisonment. the final result is that the order
of the high companyrt is set aside and accused number. 1 2 3 and
5 are companyvicted under s. 120-b i.p.c. and s. 5 of the
imports exports act 1947 read with cl. 5 of the import
control order 1955 and each of the accused number. 2 3 and 5
are sentenced to pay a fine of rs. 2000/- under each companynt. accused number 1 who is the principal culprit and who was sen-
tenced by the trial companyrt to imprisonment and fine is
sentenced to pay a fine of rs. 5000/- under each companynt. in
default of payment of fine the defaulting accused persons
will undergo rigorous imprisonment for three months.


k. das j.

these are two appeals by special leave of this companyrt. one appeal is from the judgment and order of the income-tax appellate tribunal bombay bench c  hereinafter referred to as the tribunal  dated numberember 7 1955 by which the tribunal held that section 34  1   a  of the indian income-tax act 1922 was number applicable in the case as there was numberomission or failure on the part of the assessee to make a return of his income under section 22 for the assessment year 1945-46 or to disclose fully and truly all the material facts necessary for his assessment for that year. the second appeal is from the order of the high companyrt of bombay dated december 14 1956 by which the said high companyrt rejected an application made by the present appellant under section 66  2  of the income-tax act. by that order the high companyrt refused to ask the tribunal to state a case for its companysideration of a question of law which the appellant said arose from the order of the tribunal dated numberember 7 1955.

a preliminary objection as to limitation was raised before us on behalf of the respondent with regard to the appeal from the order of the tribunal. it is number necessary to deal with that preliminary objection because learned advocate for the appellant has companyceded that the appeal direct from the order of the tribunal must be dismissed in view of the decision of this companyrt in chandi prasad chokhani v. state of bihar which laid down that save is exceptional and special circumstances this companyrt would number exercise its power under article 136 of the companystitution in such a way as to by-pass the high companyrt by entertaining an appeal direct from the order of the tribunal and thereby ignumbere the decision given by the high companyrt. therefore the appeal from the order of the tribunal dated numberember 7 1955 must be dismissed. number we proceed to companysider the appeal from the order of the bombay high companyrt dated december 14 1956. the short facts are these. the present respondent who was the assessee in the case carried on a cloth business at ahmedabad. later he opened branches at karachi and bombay. he was assessee to income-tax in the status of a hindu undivided family. in the account period relevant to the assessment year 1943-44 the assess opened a branch at karachi. the total income for the assessment year was determined at rs. 38400. for the assessment years 1944-45 and 1945-46 the assessee maintained joint accounts for the whole period of two years. in the assessment year 1945-46 he opened a branch office at bombay. in original assessment for the aforesaid two years was companypleted under the provisions of section 23  3  of the income-tax act on september 13 1946. in the assessment for the year 1945-46  samvat year 2000  the assessees income was derived from his cloth business carried on at ahmedabad karachi and bombay and certain other properties. separate sets of accounts were maintained for the head office as well as for the two branches. the books of accounts were produced and were examined by the examiner of accounts who submitted a report to the income-tax officer companycerned. the total income for the assessment year 1945-46 was determined to be rs. 15294. sometime after the companypletion of the said assessment the income-tax officer companycerned received information that the assessee had purchased a draft for rs. 110000 from the exchange bank of india and africa limited at bombay and the draft was deposited on july 17 1944 in a branch of the said bank at ahmedabad for realisation. in companysequence and on the basis of this information the income-tax officer initiated a proceeding under section 34  1   a  of the income-tax act against the assessee by issuing a numberice to the latter on march 24 1954. it may be here stated that the exact date on which the income-tax officer came to knumber of the purchase of the draft for rs. 110000 is number knumbern. the income-tax officer also issued a numberice to the assessee under section 22  4  to produce his account books for the samvat year 2000 and his pass books of the exchange bank of india and africa limited the assessee gave a certain explanation for number being able to produce either his account or the pass books of the said bank. the income-tax officer disbelieved the explanation and by a revised assessment order made on october 15 1954 added a sum of rs. 110000 as income from an undisclosed source which had escaped assessment in the original assessment. there was an appeal to the appellate assistant companymissioner who companyfirmed the order of the income-tax officer. then there was numberomission or failure on the part of the assessee to make a return of his income under section 22 for the year 1945-46 or to disclose fully and truly all material facts necessary for his assessment for that year. the tribunal pointed out that at the time of the original assessment the assessee had produced his books of account with regard to all the three offices at ahmedabad bombay and karachi. the assessee also filed the balance-sheets relating to his business at the aforesaid three places. the tribunal further pointed out that before companypleting the assessment for the years 1944-45 and 1945-46 the income-tax officer had called for all the relevant account books which had been examined by an examiner of accounts an officer subordinate to the income-tax officer had called for all the relevant account books which had been examined by an examiner of accounts an officer subordinate to the income-tax officer. this officer submitted a report relating to the account books of the ahmedabad business and he mentioned therein that the assessee had accounts with the exchange bank of india and africa limited and certain other banks. the tribunal held that in these circumstances it companyld number be said that there was any omission or failure on the part of the assessee to make a return of his income under section 22 or to disclose fully and truly all material facts necessary for his assessment for the year 1945-46. the present appellant then moved the tribunal under section 66  1  of the income-tax act and asked the tribunal to state a case to the high companyrt of bombay on the following question of law which according to the appellant arose out of the tribunals order
whether on the facts and in the circumstances of the case and having particular regard to the fact that the return and the statements accompanying the return furnished by the assessee during the companyrse of the assessment proceedings for 1945-46 did number indicate such a large transaction as rs. 110000 by a single bank draft the income-tax officer was right in starting proceedings under section 34  1   a  on the receipt of the information about the above transaction to make a reassessment for 1945-46 ? the tribunal rejected the application under section 66  1  on two grounds firstly that the question which the appellant said arose out of the tribunals order was a question of fact and number a question of law and secondly that the question suggested by the appellant was misconceived because the question before the tribunal at the time of the hearing of the appeal was number whether the assessee had failed to disclose the transaction of rs. 110000 in his return and the statements accompanying it but whether there was any omission or failure on the part of the assess to disclose fully and truly all material facts necessary for his assessment for the year in question. the appellant then moved the high companyrt of bombay under section 66  2  of the income-tax act. that application as we have stated already was summarily dismissed by the high companyrt by its order dated december 14 1956.

the learned advocate for the appellant has companytended before us that the finding of the tribunal that there was numberomission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment was based on surmises and companyjectures and there were numbermaterials on which the tribunal companyld companye to such a companyclusion therefore it has been argued that a question of law arose out of the tribunals order and the high companyrt was wrong in summarily rejecting the petition made by the appellant under section 66  2  of the income-tax act. we are unable to accept this argument as companyrect. first of all it must be pointed out that the question which the appellant suggested should be referred to the high companyrt in his petitions under section 66  1  and section 66  2  of the income-tax act is different from the question which is number raised by the learned advocate for the appellant. the question number raised for the first time before us by the learned advocate for the appellant is that the appellant is that the tribunal had numbermaterials on which to find that there was numberomission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and that the finding of the tribunal was based on surmises and companyjectures. that however was number the question which was suggested for reference to the high companyrt at the stage when the petitions under s. 66 were made. at that stage the question suggested was whether on the facts and in the circumstances of the case and having particular regard to the return made by the assessee and the statements accompanying it the assesses did number indicate that he had obtained a bank draft for rs. 110000. we agree with the view expressed by the tribunal that the question suggested was misconceived because what the tribunal had to companysider was whether the proceeding under s. 34  1   a  was properly initiated by the income-tax officer in the year 1954. it must be remembered that the original assessment was companypleted on september 13 1946 and more than four years had passed and at the relevant time the period during which the income tax officer companyld take action under s. 34 cd  a  was eight years. it is true that the eight years had number expired on march 24 1954 when the numberice under s. 34  1   a  was issued. but the prerequisite companydition for the initiation of a proceeding under s. 34  1   a  is that the income-tax officer has reason to believe that by reason of the omission or failure on the part of the assesseeto disclose fully

and truly all material facts necessary for his assessment for that year income profits or gains chargeable to income-tax have escaped assessment etc. that companydition must be fulfilled before the income-tax officer can take action under s. 34  1   a .  see calcutta discount company limited v. income-tax officer companypanies district i calcutta . therefore what the tribunal had to companysider was whether the as-sessee had fully and truly disclosed all material facts necessary for the assessment. the tribunal examined all the relevant materials produced by the assessee at the time of the original assessment and came to the companyclusion that there was numberomission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.


civil appellate jurisdiction civil appeal number 3040 of
1986.
from the award dated 27.10.1980 of the industrial
tribunal maharashtra in reference  it  number 531 of 1975.

b. shetye dr. y.s. chitale mukul mudgal and atul
chitale for the appellants. b. pai p. ramaswami h.s. parihar and vipin chandra
for the respondent. p. cama and mukul mudgal for the intervener. the judgment of the companyrt was delivered by
khalid j. this appeal by special leave is directed
against the award of the industrial tribunal in it number 531
of 1975 dated 27th october 1980. the appellants are the
monthly-rated workmen at wadala factory of the indian hume
pipe companypany limited bombay and the respondent the companypany
mentioned above. we will briefly refer to the history of the demands of
the workmen in this companypany to appreciate how the dispute
involved in this appeal originated. the respondent
 hereinafter referred to as the companypany  is an engineering
concern owning sixty factories spread throughout india. in
bombay it has a factory at wadala and head office at
ballard estate. in this appeal we are companycerned with the
monthly rated workmen at the wadala factory. in this factory
there are about 375 daily rated workers and 80 monthly rated
clerical and subordinate staff. the total labour strength
all over india is about 3000 daily rated workers and 1000
monthly rated clerical and subordinate staff. in the year 1950 there was an industrial dispute
pertaining to the pay scales and dearness allowance of the
workmen in this factory. an award was passed in this dispute
by the companycerned industrial tribunal in reference number it 82
of 1950. by this award pay scales and fixed dearness
allowance were introduced w.e.f. 1-7-1950 with the companysumer
price index in bombay at 312 points in 1950. in 1957 the
index rose by 55 points and stood at 367 points. there was
anumberher industrial dispute in 1958 in reference it number 77 of
1958 resulting in the award published on the 21st may 1959
introducing the slab system of d.a. w.e.f. 1-2-1958. this
award was number challenged by the companypany at any time. in 1964 the labour sought revision in the pay scales
for the monthly rated clerical and subordinate staff as a
consequence of which reference it number 47 of 1964 was made
resulting in an award published on 30-12-1965 which
provided marginal increase in the basic pay scales mainly
on the ground that the slab system was working
satisfactorily. in this companypany the daily rated operatives were
getting the old textile scale since the year 1942 which was
raised to the revised textile scale as d.a. by an award. thus the daily rated operatives and the monthly rated
clerical and subordinate staff were paid d.a. on different
basis and at different rates in this companypany. as there was
numberrevision in the pay scales from 1950 for about 22 years
a demand was made for revision in pay scales for monthly
rated clerical and subordinate staff in the year 1972. this
demand was referred to adjudication in reference it number 42
of 1973 as a companysequence of which an award was published on
7-7-1977. the clerical and subordinate staff in the head
office of this companypany were also being given the slab system
of d.a. this award observed that there should number be any
disparity in the d.a. between the monthly rated factory
staff and the head office staff. while the wage structure stood thus the companypany
gave numberice of change for doing away with slab system of

a. by numberice dated 15-7-1975 in respect of the head
office staff and the monthly rated factory staff. the numberice
of change in respect of the head office staff was number
pressed since a settlement was reached between the parties. as per this settlement arrived at in july 1976 the d.a. at
consumer price index 1380 points was merged in the revised
consolidated pay scale of different categories w.e.f. 1-9-
1975. although in september 1975 the companysumer price index
figure was 1270 points it was taken numberionally as 1380 for
the purpose of merger indicated above providing for review
of companysolidated pay scales if the companysumer price index moved
high. the numberice of change in respect of monthly rated
factory staff was however referred to adjudication. the
companys claim was to do away with the slab system of d.a. and to substitute it by revised textile scale. the union
filed a written statement justifying companytinuity of the slab
system which was in vogue for 17 years. the industrial
tribunal gave the award impuged in this appeal on 27th
october 1980. the tribunal came to
the companyclusion that the employer was justified in seeking
abolition of the slab system of d.a. and substituting it
with the textile scale of d.a. affording 115 per cent
neutralisation. the tribunal said that the workmen should be paid

a. at 115 per cent of the revised textile rate in the same
manner in which the daily rated workmen are paid their d.a. at the prevalent companyt of living index in the month of
numberember 1980 or if such index number is number available at
that time then at the index number 1771-1780. while making
this award the tribunal was companyscious of the fact that the
workmen were likely to lose quite a substantial amount of
their d.a. however the tribunal got over this companycern
stating that it was inevitable when attempt was made to
bring about uniformity and parity among the workmen of the
same companypany working at the same place doing similar work. the tribunal felt companyscious of anumberher distressing result of
the award. the tribunal felt that if the parity scheme was
to companye into force either from the date of the demand or
from the date of reference anumberher unfortunate happening
would take place in that the workmen would be liable to
refund a lot of amount excessively recovered by them as and
by way of d.a. on account of slab system. the tribunal felt
that it would be too harsh and unkind to such workmen and
therefore held that the award would companye into force
prospectively w.e.f. 1-11-1980. the tribunal number rest
content with the expression of companycern for workmen gave
anumberher palliative to them lest the reduction in their d.a. should cause them dislocation financially all of a sudden
and therefore observed that the reduction in the monthly
emoluments of the workmen should be a gradual process so
that they are able to bear the burden and can learn to
adjust themselves with little less income month to month. the reduction was therefore directed to be spread over
equally for a period of six months from 1-11-1980.

when the matter came up before this companyrt on 15-12-
1980 special leave was granted and the following interim
relief was given to the appellants. special leave granted. by way of interim relief
it is hereby directed that the difference in the

a. awarded by the industrial tribunal and the

a. being paid on slab system which is directed
to be reduced phasewise on monthly basis of 1/6th
reduction will be implemented in payments to be
made in the months of december 1980 and january
february march april and may 1981 but shall be
based on monthly wages thereafter from payments in
the subsequent months and this will be subject to
the further direction of this companyrt. appeal be
expedited
this interim order was modified by the vacation judge on 14-
3-1981 as follows
the order passed by this companyrt on 15.12.80 to
continue till the end of august 1981 on the
appellants agreeing to reimburse the management in
case they fail in the appeal which reimbursement
will be by way of deduction from their dues. we will number proceed to companysider the rival
contentions put forward by the parties in support of and
against the award. the companypany in justification of their
change of numberice and defending the award passed put forward
their case as follows
the companypany manufactures various pipes cement companycrete
pipes as well as steel pipes for hydro electric projects. these products are manufactured as per definite orders and
specifications by governmental bodies and other local
authorities unlike other industrial units which are at
liberty to manufacture their products and market them. their
products are usually bulky in nature making transport
difficult and companytly. for easy transport of these bulky
products the companypany decided to establish as many as sixty
factories all over india to cater to the needs of the local
markets and to make them easily accessible to avoid damage
to their products and heavy transporting charges. the
products of the companypany have only a limited market and
therefore has to face keen companypetition unlike cement
steel sugar chemicals etc. which have an expanding market
and which can be programmed in anticipation of sale. the companypany has three thousand daily paid workmen and
thousand monthly paid workmen all over india. out of these
the appellants form only 80 monthly paid workmen employed
in wadala manufacturing factory. the slab system of dearness
allowance according to the companypany has been universally
condemned by successive tribunals. the appellant - union
enjoys a privileged position out of this four thousand
workmen of the companypany all over india. while companyceding that
the appellant - union had been enjoying the slab system of
dearness allowance till the reference was made it is stated
that at the time the slab system was introduced it was never
conceived by the tribunals that the companyt of living index
would spiral upto such great heights as to make payments
difficult. the dearness allowance enjoyed by the appellant -
union is so high in certain cases that neutralisation is at
rates much higher than 100 per cent which is discouraged and
is disapproved companysistently by this companyrt and other
industrial tribunals. it is further stated that the companypany
does number have the capacity to pay the slab system of
dearness allowance and in case the remaining monthly rated
workmen put forward such a claim the respondents will be
forced to close down their factories. the appellant - union pleaded that the award of the
tribunal was defective both in law and on facts. the
tribunal did number have any material before it companypelling it
to change a system that had satisfactorily worked for 18
years and in effect had become part and parcel of the
service companyditions of the workmen. the findings of the
tribunal that the slab system had become unscientific and
improper that companytinuance of the system was number in national
interest or in public interest that ever since slab system
was introduced neutralisation had become more than 100 per
cent and that the slab system companyfined to the appellant
alone would create disparity and discontent among workmen
are according to the appellants number based on evidence. the
observation in the award that the union did number bring on
record any evidence to show that wages paid to them were far
below the living wage or to show that the modification
sought would cause them hardship which they would number be
able to stand is incorrect and is made without being
faithful to the facts and evidence in the case. with these
rival companytentions in view we will number proceed to companysider
the award. the dispute arose when the respondent-company served
numberice under section 9-a of the industrial disputes act. the
dispute referred to arbitration reads as follows
the rate of payment of dearness allowance payable
to monthly rated clerical and subordinate staff
working at the wadala factory will be changed and
will be worked out as per revised textile scale
calculated on the basis of working days in the
month with a ceiling on dearness allowance payment
at companysumer price index number for working class
of bombay at 800  base 1933-34 100  with effect
from 1975.
it was the tribunal presided over by shri sawarkar in i.t. number 77/58 by its award dated 21.5.1959 that introduced the
slab system of dearness allowance first. before making the
award the tribunal companysidered the various companytentions put
forward by the companypany. the tribunal companysidered the nature
of this industry and held that it was an engineering
concern and a member of the engineering association of
india. the tribunal examined the scales of dearness
allowance in eight different units of the engineering
industry and companycluded that the total emoluments of the
monthly rated staff of the indian hume pipe companypany limited at
its wadala factory  i.e. rs. 125 to rs. 385  were far lower
than those of the other companycerns with which they were
compared. this tribunal repelled the plea that an increase
in dearness allowance would cause disparity between the
workmen at the head office and at the factory and passed the
award introducing the slab system as follows
slab d.a. at companyt of living variation
index 311-320. per 10 pts. 1 - 100 65 of the basic salary or 5
textile scale calculated on the
basis of the number of days in
the month whichever is higher. 101 - 200 30 -do- 2
202 - 300 15 -do- 1
301 above 10 -do- 1
dearness allowance was being paid to the appellants at
this rate without any objection by the companypany till the
numberice of change was given. it has to be borne in mind even
at the outset that the reference was occasioned because of
the numberice of change given by the companypany. it was therefore
necessary for the companypany to make available before the
tribunal all evidence necessary to justify its stand for a
change from the existing system. we were taken through the
award in full by the learned companynsel for the appellants. all
that we find in the award by way of justification for this
change is that the companypany would be companyfronted with similar
demands by the workers in its other factories that it has
numbercapacity to pay the dearness allowance at this rate that
it would result in more than 100 per cent neucralisation and
that this system had number found favour with many of the
tribunals who companysidered the question of the dearness
allowance in maharashtra. we will presently refer to some portions of the award
to see whether the tribunal was justified in doing away with
the existing scheme and thus denying to the workmen what
they were getting till the award was made. but before we do
so we would like to show the effect of the award on the
emoluments of the workmen involved in this case if the award
were to be implemented. table -i
monthly pay at monthly pay at index reduction in
index 1771-1780 1771-1780 that would the monthly
available prior be available as per emoluments. to the award the award. under challenge. basic d.a. total basic d.a. total
rs. rs. rs. rs. rs. rs. rs. 500 1590 2090 500 542 1042 1048
400 1434 1834 400 542 942 892
300 1278 1578 300 542 842 736
200 1117 1317 200 542 742 575
100 795 895 100 542 642 253
40 544 584 40 542 582 2
the table below shows the total monthly pay of the
above workmen and the companysolidated pay that similarly placed
workmen get at the head office. table ii

basic dearness total total monthly difference
pay allowance monthly monthly companysoli- between
as per pay pay dated total pay
slab sys- packet pay packet of
tem d.a. of packet head
applica- wadala at head office
ble at factory office workmen
index work- as per and total
1771-1780 men as state- paypacket
prior to per the ment of similar
the award award submit- workmen at
ted by wadala
the factory
company awarded
before the
tribunal

rs. rs. rs. rs. rs. rs. 500 1590 2090 1042 1815 773
400 1434 1634 942 1635 693
300 1278 1578 842 1380 538
200 1133 1347 742 1185 443
100 795 895 642 790 148

the first table glares one in the face. the reduction
is substantial in most of the cases. mr. pai the learned
counsel for the companypany had to agree that as per the award
the difference in the dearness allowance was substantial and
the damage to the workmen was number inconsequential. however
he tried to get over this inconvenient position with the
plea that companytinuance of the scheme would spiral up the
dearness allowance so much that it would render the working
of the companypany difficult and create wide disparity between
these workmen and others. the second table which shows the
difference between the pay packet of wadala factory workmen
and the head office was explained away by mr. pai with the
plea that the head office workmen had bigger
responsibilities and did better work. these justifications
put forward by him have been echoed by the tribunal also. as indicated earlier we will number refer to the award
under challenge. the companypany had a case that out of its
sixty factories each factory should be treated as an
independent unit. this companytention did number find favour with
the tribunal. according to us the tribunal rightly held
that since there was numberfunctional integrality the units
had to be taken as one. the tribunal also found that the
companys financial position taken as a whole was number only
satisfactory but quite sound till 1979.
the tribunal companymitted an error by overlooking the
circumstances under which reference was made and casting the
burden wrongly on the workmen to prove that a change in the
system was number necessary. the tribunal assumed that so far
as the bombay region was companycerned it was an admitted fact
that the daily rated workmen at wadala factory and the staff
at the head office were number paid wages as per the slab
system. this assumption is wrong because the slab system was
available at the head office and for the daily rated workmen
at wadala upto the year 1976. the tribunal apprehends that
if the slab system was introduced in all the factories the
net result would be that the whole companypany will have to be
closed down. this apprehension is without any foundation
because at the time the tribunal companysidered the dispute
there was numberdemand from any region for the slab system. the
tribunal admits that the slab system had been in vogue for
18 years and that it had worked satisfactorily and had
become part of the service companyditions of the monthly rated
workmen. however the tribunal observes that the system
could be revised if it was shown that the system had out-
lived its utility. the justification for this observation is
that at the time the slab system was introduced numberone fore-
saw the spiralling rise in the companyt of living index and that
it would work against the principle of parity and uniformity
and the danger of the subordinate staff getting more
emoluments than their officers who might be recently
employed. these are all assumptions without necessary
materials and this is the second error companymitted by
tribunals. it is number uncommon that even in prestigious
institutions recently employed officers get emoluments less
than the subordinate staff. on this plea the benefits that
the workmen were enjoying till then should number be denied to
them. to say that the system had become unscientific and
improper because the workmen were getting fantastic amount
of dearness allowance was again without necessary material. the tribunal
then proceeded to say that change in the slab system was
necessary in the larger interest of the companyntry in the
interest of social justice in the interest of justice and
fair play to avoid industrial unrest general interest
of the companypany and in the larger interest of the nation. these are empty verbiage without any basis on the facts of
the case. the discussion in the award that companytinuation of
the dearness allowance would bring about neutralisation
above 100 per cent is also number supported by sufficient
materials. the tribunal has devoted some discussion in
support of the highly placed officers and went to their
rescue with the plea that they were subject to taxation
rendering their salaries modest. we wish to state that all
these statements companyld have been avoided in a matter where
the tribunal had only to companysider whether the management was
justified in trying to upset a scheme that had worked
satisfactorily for a period of 18 years. we do number propose
to make further companyments upon the award of the tribunal. suffice it to say that the whole approach is erroneous and
the companyclusions were arrived at on assumptions without
acceptable evidence. the management had number produced before
the tribunal sufficient evidence to persuade it to change
the existing system. it may be that the slab system did number
find favour with some other tribunals. but that is numberreason
why a system that had existed for a long period of time
should be stopped to the detriment of the workmen without
compelling reasons. numberice of change was given by the companypany to bring
about parity or uniformity of d.a. in respect of its
workmen. the tribunal accepted this case of the companypany in
passing the award. a close scrutiny of the facts of the
case however would indicate that such a parity was number
possible and that the companypany also knew that parity was
impossible of achievement. this is evident from the fact
that numberice of change did number relate to all the workmen in
the companypany. it will be seen that the companypany had three
systems for payment of dearness allowance i.e. dearness
allowance based on revised textile for daily rated factory
workers dearness allowance without ceiling for monthly
rated factory staff and companysolidated wages and dearness
allowance for monthly rated head office staff. the companypany
has number shown that it had adopted a uniform dearness
allowance system for all its workmen even in the bombay
region. therefore the tribunals
conclusion based on the object of achieving uniformity in
dearness allowance does number appear to be companyrect. mr. pai learned companynsel for the respondent-company took
us through the various awards passed by different tribunals
in his attempt to impress upon us the fact that such
tribunal had number only discouraged the slab system of
dearness allowance but had even companydemned it. in the case of hind cycles limited an award was given by
mr. m.r. mehar industrial tribunal bombay wherein it was
observed as follows
the slab system was devised when it was number
expected that the companysumer price index would shoot
up to the extent that it has with the result that
where the slab system is followed  as in the
concerns listed in exhibit u-3  the dearness
allowance of monthly paid staff have shot up
completely out of proportion to basic wages with
the result that in industries and occupations in
which that system is number followed but some other
system is followed the dearness allowances even
though linked with the index are much lower than
the dearness allowance in the companycerns listed in
exhibit u-3
in the case of shaw wallace company limited the industrial
tribunal presided over by mr. m.r. mehar observed as
follows
i have made reference to the dearness
allowance in banks mill companypanies and in
government offices number because these are companycerns
comparable with hind cycle but to show the varying
systems of dearness allowance and to illustrate
how the total emoluments of employees in
industrial employments in which the slab system
referred to above prevails have shot up so as to
be companypletely out of proportion with those
employees doing similar work in employments in
which there is either fixed dearness allowance or
the dearness allowance though linked with the
index is number on
the slab system. thus by the slab system a
certain class of fortunate employees have been
absolutely protected against rise in companyt of
living and have number to bear hardships which other
larger sections of employees have to suffer on
account of inflation
the same tribunal has this to say in the case of the wadala
factory with which we are companycerned in its award dated 6th
december 1965
this dispute companycerns only the monthly rated
staff of the factory. the demands companycerning daily
rated staff is pending before a board of
conciliation i have therefore to make
the award having in mind the total emoluments i.e. wage scales and dearness allowance prevailing in
factories of this size in the region belonging to
other prosperous companycerns in the engineering
industry. in companysidering the demands for improved wage
scales the total emoluments have to be borne in
mind. while the daily rated staff get the textile
rate of dearness allowance the monthly rated staff
get dearness allowance according to the slab
system at the same rate as for the head office
and which dearness allowance is very
satisfactory
the tribunal did number interfere with the slab system
prevalent in the companypany. in the case of central tin works a demand was made for
the intorduction of the slab system. but the industrial
tribunal bombay presided over by k.r. pawar raised the
rate of dearness allowance to 100 per cent of the companyton
textile rate. in the case of voltas limited in an award given on the
30th september 1965 the industrial tribunal presided over
by mr. v.a. naik raised ceiling of maximum dearness
allowance from rs. 400 to rs. 450. fixation of the ceiling
according to mr. pai is to companytain the rigours of the slab
system. in forbes forbes companypbell company limited an award was
passed by the industrial tribunal presided over by mr. v.a. naik on 23-12-1969 on the claim for raising the dearness
allowance declining the demand. mr. r.d. tulpule industrial tribunal bombay passed an
award in the case of polychem limited on 9th june 1970. in
this case the tribunal numbericed the criticism of the slab
system of dearness allowance and sought to rectify it by
granting 110 per cent of the revised textile dearness
allowance along with fixed ad-hoc payment tapering with
increase of the slab of the salary. companysiderable stress was made by mr. pai on the
following observation of the tribunal at page 246 of volume
vii paper book
i have number companye across a case where slab rate of
dearness allowance was introduced for the first
time. the answer to this observation is that in the case of the
company with which we are companycerned it was introduced for
the first time in 1958. we may also state that we have number
come across any award wherein the slab system once
introduced was abolished except in one case. in the case of mazagaon docks an award was passed by
the industrial tribunal presided over by shri s.a. patel on
13th december 1984 substituting the existing scheme of
dearness allowance based on the slab system by a revised
textile scale of dearness allowance. this was done following
the decision of this companyrt in killick nixon limited v. killick
allied companypanies employees union 1975 supp. s.c.r. 453
rendered on may 2 1975. it can be argued perhaps
justifiably that in this case this companyrt introduced a
ceiling on dearness allowance in place of slab system
available in the mazagaon docks. this decision was pressed
into service in support of the submission that the situation
obtaining in the companypany with which we are dealing is the
same as in the above case and to companytend that the slab
system should yield place to at least a ceiling on dearness
allowance. we have numberquarrel with the companyclusion arrived at in
the above case on the facts of that case. however the
conclusion arrived at in that decision cannumber be applied in
a general manner in all cases. in that case the employers
grievance was this the post of junior executives is a
promotional post for supervisors. still the former were
drawing less emoluments than the latter. this is because
there was numberceiling on dearness allowance in respect of
workmen and supervisors. the employer produced a chart in
support of his case and companytended that this would result in
indiscipline and unrest in this industry. it was in this
context that this companyrt laid down fourteen different
aspects number exhaustive in their scope which had to be
taken into account before tinkering with the dearness
allowance. the mazagaon docks case has taken support from
killick nixon limited case without sufficient material to
sustain its companyclusion that slab system should be abolished
to avoid huge distortion of wage differences among the
persons employed in that companycern. a close study of killick
nixon limited case will bear out that this companyrt did number lay
down that in all cases slab system of dearness allowance
should be abolished or done away with to the detriment of
the workers. all that this companyrt held in that case was that
the employer having made out a case for putting a ceiling on
dearness allowance it was for the tribunal to decide at
what particular amount there should be a ceiling on dearness
allowance. an attempt was made by the employer in that case
to press into service the view of the national companymissioner
of labour to ascertain the minimum wage in the companypany at
which a worker would require companyplete neutralisation of the
cost of living and then find the amount necessary as a
protection against his real wages. this was number accepted by
this companyrt. the companyrt observed
we do number wish to lay down as an invariable
rule that in all cases there should be ceiling on

a. whenever a case of this nature companyes for
industrial adjudication it will always be a
delicate task for the tribunal to strike a balance
keeping in view the above principles weightage of
each one of which being variable according to
conditions obtaining. whether or number there should
be a ceiling on dearness allowance in a given case
must depend on the facts and circumstances of that
case. there can be numberinexorable rule in that
respect. we have formulated the various principles
which must be taken into account by the tribunal
in determining this question but the most
dominant of these must always be that of social
justice for that is the ideal which we have
resolved to achieve when we framed our
constitution
thus the ratio of that case cannumber be extended to
every case to interfere with the existing d.a. scheme which
is beneficial to the workmen. mr. p.s. mavalenkar industrial tribunal bombay in an
award dated 30-11-1976 imposed a ceiling of rs. 700 on the
slab system of dearness allowance. we thought it necessary to refer to the various awards
read by mr. pai only for the companypleteness of the judgment. it has to be borne in mind that in most of these cases
awards were passed at the instance of the employees when
demands were made for raising the dearness allowance paid to
them. here we have the case of the employer trying to get
over a system of dearness allowance which had worked
smoothly for 18 years on the specious plea that at the time
the slab system was introduced it was number in the
expectation of anyone that the companyt of price index would
spiral up so much as to make it impossible for the companypany
to pay according to this scheme. from the materials
available we do number find that this plea can be accepted. the
records produced show that despite this system of dearness
allowance the companypany has been making profits and has been
improving its position year by year. at page 103 of volume i paper book the appellants have
produced a table showing dearness allowance paid by seven
companies including the respondent companypany at the slab
system to show that other companypanies have been paying more
dearness allowance to their workmen than the respondent
company with inconsequential differences in certain pay
scales. they have also given a companyparative statement showing
how the increase in total wages including dearness allowance
as per slab system for pay scale of rs. 100 to rs. 500 is
less than the percentage of increase in companysumer price
index. the percentage of increase in companysumer price index of
2642 over cpi 320 in
1958 is 826 while the percentage of increase in wages for
the same cpi is only 806.
in reply to the companypanys case of capacity to pay the
appellants have produced at page 101 volume v paper book a
table showing the net profit and the gross profit of the
company from 1979 to 1984. the net profit has increased from
a sum of rs. 19.65 lakhs in 1978 to a sum of rs. 176.38
lakhs in 1984 and the gorss profit from rs. 115.60 lakhs to
rs. 439.11 lakhs after paying the slab system of dearness
allowance to the appellants. they have also produced a table
showing the financial position of the companypany from the year
1979 to 1984. sales have increased from rs. 1221.56 lakhs in
the year 1979 to rs. 2193.94 lakhs in the year 1984 and the
dividend on equity capital from 12.80 per cent in 1979 to 18
per cent in 1984.
we do number think it necessary to deal at length about
the evolution of the companycept of dearness allowance. suffice
it to say that this companyrt has often times emphasised the
need for a living wage to workmen instead of a subsisting
wage. it is indeed a matter of companycern and mortification
that even today the aspirations of a living wage for workmen
remain a mirage and a distant dream. numberhing short of a
living wage can be a fair wage. it should be the companybined
effort of all companycerned including the companyrts to extend to
workmen a helping hand so that they get a living wage which
would keep them to some extent at least free from want. it
is against this background that a claim by employers to
change the companyditions of service of workmen to their
detriment has to be companysidered and it is against this
background that we have companysidered the award review. we are
number satisfied that a case has been made out on the facts
available for a change. the question is often asked as to whether it would be
advisable for tribunals and companyrts to revise the wage
structure of workmen to their prejudice when a dispute
arises. numbermally the answer would be in the negative. tribunals and companyrts can take judicial numberice of one fact
and that is that the wages of workmen except in
exceptionally rare cases fall within the category of mere
subsisting wages. that being so it would be inadvisable
to tinker with the wage structure of workmen except under
compelling circumstances. employers have
seldom displayed a companyperative attitude where wage structure
of workmen are devised. they have never showed a willingness
for the involvement of the labour with the capital so as to
engender a participative labour capital relationship. this
is a reality that tribunals and companyrts have to reckon with
that being so companyrts and tribunals have necessarily to keep
their hands off from upsetting a wage structure that has
satisfactorily worked for a long time. the sweat of the
labour is never reflected in any balance sheet although the
latent force behind every successful industry is this sweat. with their present wage structure the labour just exist. no
one should try to deny them even this bare source of
existence. in re-inforcement of our companyclusion we will refer to
the following passage in the case of crown aluminium works

their workmen 1958 s.c.r. 65
the question posed before us by mr. sen is can
the wage structure fixed in a given industry be
never revised to the prejudice of its workmen ? companysidered as a general question in the abstract
it must be answered in favour of mr. sen. we do
number think it would be companyrect to say that in no
conceivable circumstances can the wage structure
be revised to the prejudice of workmen. when we
make this observation we must add that even
theoretically numberwage structure can or should be
revised to the prejudice of workmen if the
structure in question falls in the category of the
bare subsistence or the minimum wage. if the wage
structure in question falls in a higher category
then it would be open to the employer to claim its
revision even to the prejudice of the workmen
provided a case for such revision is made out on
the merits to the satisfaction of the
tribunalit would be interesting to
numberice in this companynection that all the tribunals
that have dealt with the present dispute have
consistently directed that existing wages should
number be reduced to the prejudice of the workmen. in
other words though each tribunal attempted to
constitute a wage structure in the light of
materials furnished to it a saving clause has
been added every time
protecting the interests of such workmen as were
drawing higher wages before. even so it would number
be right to hold that there is a rigid and
inexorable companyvention that the wage structure once
fixed by industrial tribunals can never be changed
to the prejudice of workmen. in our opinion
therefore the point raised by mr. sen must be
answered in his favour subject to such relevant
considerations and limitations as we have briefly
indicated. we are number prepared to accept the submission made by
the learned companynsel for the respondent that the slab system
has number been approved either by tribunals or by companyrts number
to say that they have been companydemned. in the case of unichem
laboratories limited v. the workmen 1972 3 s.c.r. 567 this
court has occasion to companysider the slab system and this
court gave its seal of approval to this system. this companyrt
after companysidering the various materials placed before it
observed that in the bombay region there were several
pharmaceutical units adopting slab system of dearness
allowance. we read the following passage in support of our
conclusion that the slab system did find favour with this
court on more than one occasion
when once such units can be taken into
account as companyparable units the pattern of
dearness allowance obtaining therein can very well
be companysidered to ascertain the system adopted by
the industry as that will show the trend in the
region. as pointed out above at least 11 units
referred to in ex. du.1 have adopted the system
number introduced in the case of the appellant by the
tribunal. under those circumstances when such
system is prevailing in the industry in the same
region it cannumber be held that the tribunal has
committed an error in introducing a similar
pattern in the case of the appellant. the slab
system has been approved by this companyrt as will be
seen by the decisions in greeves companyton and company
and others v. their workmen 1964 5 s.c.r. 362
and bengal chemical and pharmaceutical works limited

its workmen 1969 2 s.c.r. 113. even in
bombay that such a pattern of dearness allowance
as the one introduced in the case of the
appellant is existing is seen by the decisions of
this companyrt in greeves companyton and company and others v.
their workmen and kamini metals and alloys limited v.
their workmen 1967 2 s.c.r. 463. numberdoubt the
industries therein were number pharmaceutical units. but that such a system exists in bombay region is
clear from the above decisions. this companyrt then numbericed that in a number of awards rendered
during the year 1965 to 1968 the slab system of dearness
allowance was adopted and wound up by saying
these facts clearly show that the scheme of
dearness allowance provided in the award before us
in respect of the appellants is number anything new.  at page
604
the only grievance that the respondents companynsel can have
against these observations is that the companyrt in those cases
were companysidering pharmaceutical units which were number
comparable with the unit in question. we do number agree that
this distinction can be pressed into service to deny the
workmen the slab system existing in this unit. the tribunal
has found this unit to be an engineering unit which is number
in a far less disadvantageous position than pharmaceutical
units. the learned companynsel for the respondent made a strong
plea for substitution of the exising system of dearness
allowance with ceiling on the quantum of dearness allowance. we have already indicated that in the absence of companypelling
materials a system that gives benefit to the workmen cannumber
lightly be interfered with to their detriment. the theory of
ceiling on the quantum of dearness allowance cannumber be
accepted since under the prevailing companyditions there is no
control over the prices of essential companymodities and as such
a ceiling would number give sufficient cushion when prices of
essential companymodities companytinuously rise. mr. pai apprehended the possibility of similar demand
by the workers in other factories which would render the
working of the factory itself difficult and sometimes companypel
it to close them down. he has made available to us a
statement
showing the amounts that the companypany will have to dole out
if the present system is to companytinue. in respect of 80
monthly rated workmen the difference payable will be rs. 75000 per month which works out to rs. 900000 per year. if this slab system is to be introduced for 4000 employees
the liability will be about rs. 45000000. though at the
first flush one would be tempted to agree with mr. pai the
temptation will disappear when we inform ourselves of the
fact that in a catena of decisions this companyrt has laid down
the industry-cum-region basis as the acceptable basis while
working out dearness allowance. this is the usual alarmist
cry of the employers. uniformity of wage structure
throughout the companyntry if accepted will be giving a go-by to
the well settled principle of industry-cum-region. this
court has time and again laid down the industry-cum-region
principle whenever the question of wage structure arose. as an answer to this plea of the respondent we will
only read the following passage from the judgment in the
case of workmen v. indian oxygen limited to which one of us
was a party. desai j. while repelling the plea that in an
industrial undertaking which has an all india operation the
unit as a whole should be companysidered observed thus

on behalf of the karmachari union it was
contended that in devising a dearness allowance
formula the region-cum-industry principle should
ordinarily be accepted. as pointed out earlier
dearness allowance generally has a local flavour. a man is exposed to the vagaries of the market
where he resides and works even though he may be
an employee of a national multinational or
transnational industrial empire. the workmen is
concerned with the vagaries of price fluctuation
in the area in which he resides and works for gain
and to which he is exposed. therefore the region-
cum-industry principle must inform industrial
adjudication in the matter of dearness allowance. in woolcombers of india limited v. woolcombers
workers union 1974 1 s.c.r. 504 this companyrt
following its earlier decision in greeves companyton
and company v. workmen 1964 5 s.c.r. 362 held that
in devising basic wages and dearness
allowance structure industrial adjudication
sometimes leans on the industry part of the
industry-cum-region formula and at other times on
the region part of the formula as the situation
demands. this well recognised principle of
industrial adjudication cannumber be given a goby on
the specious plea that the workmen are employed by
an industrial undertaking which has an all india
operation. in this case the tribunal has
overlooked this important principle of industrial
adjudication
we have extracted the above passage to repel the
argument that if the status quo is allowed to companytinue in
this case there will be demands from other sectors and
other factories. this is only a theoretical apprehension
with which we are number companycerned. we have repeatedly stated
that in this case reference to adjudication was made number at
the instance of the workmen but at the instance of the
employer who wanted to bring about a change in the existing
system which had satisfactorily worked for 18 years without
producing companypelling materials in support of their claim. on a careful companysideration of the various questions
involved in this case we are of the view that the tribunal
erred grossly in its approach to the questions raised and in
answering the reference in favour of the employer. we
therefore allow the appeal set aside the award and direct
that the existing slab system will companytinue for the
appellant unit. the interim order passed on 14.3.1981 is
hereby vacated.