HINDUSTAN LEVER LTD. versus B.N. DONGRE AND ORS. ETC. ETC.

Citation: [1994] SUPP. 2 S.C.R. 217 · Decided: 26-07-1994 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Disposed off
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Judgment (excerpt)

HINDUSTAN LEVER LTD. 
A 
\'. 
B.N. DONGRE AND ORS. ETC. ETC. 
JULY 26, 1994 
IA.M. AHMADI, K. RAMASWAMY AND R.M. SAHA!, JJ.j 
B 
Industrial Disputes Act, 1947-Sections JO( l)(d) & 10(2)---lmposition 
of ceiling on deamess allowance-Validity of-Slab system deamess fomtula 
linked to wage and CPJ-Conipany's case of neutralization .exceeding 
100%-Not correct-Method adopted in ca/culati11g 11eutralizatio11 percemage C 
being 1vrong-Financial position of Conzpany was sound-Neutralization 
varied from 97.4% to 86o/u-Present deamess fonnula being i11 vogue since 
/011~Justificatio11 of placi11g ceili11g. 
Labour Law-Wages-Deamess Allowa11ce-<:oncept of-Tapering or 
sliding 11eutralizatio11 system with fixed maxima at different levels of pay D 
belts-Upward revisio11 of wages or deamess a/lowa11ce--Effect of-Revision 
of wage stnicture to prejudice of worknten-Not pennitted if wage structure 
is of n1inin1unt wage leveJ-Systen1 of n1erger of dean1ess a_llowance in basic 
parSalary structure must be cost effectiv,,.-Jmposition of Ceiling on dear-
ness allowance when justified. 
Co11stitution of btdia-Alticle 43-0bjective of 'living wage'-When 
workers enjoying benefit under a scheme without a ceilin~Tribunal or Coult 
should be slow to interfere. 
E 
Altic/es 226/227-Writ jurisdiction-Award of !11dustrial Tribunal-Writ F 
petition challenging award-Maintainable-- Appeals under Letters Patent 
against decision of Single Judge-Maintainability-Jurisdiction of Division 
Bench under Letters Patent. 
The appellant Company desired placement of a ceiling on dearness 
allowance based on the premise that in the absence of such a ceiling the G 
neutralization factor exceeded 100%. The Company had a slab system 
dearness formula linked to basic wage and CPI. The management ~ub
mitted that the slab system of dearness allowance was unrealistic as it had 
the effect of distorting the entire wage strncture. Five references arose out 
of certain demands made by the workmen-employees of appellant company H 
217 
218 
SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R. 
A 
as well as the management's Notice of Change under Section 9A of the 
Industrial Disputes Act for the imposition of a ceiling on dearness al· 
lowance. 
B 
c 
The Industrial Tribunal by its Award conceded the demand of the 
management for the placement of a ceiling on dearness allowance on basic 
pay exceeding Rs. 500 p.m. Since the Company had a slab system dearness 
allowance formula linked to basic wage and CPI, the Tribunal directed that 
those workmen drawing a salary exceeding Rs. 500 per month will get the 
same dearness allowance as admissible to those drawing a basic salary of 
Rs. 500 p.m. without there being any variation in the dearness allowance 
for salary slabs exceeding Rs. 500 p.m. The Tribunal while placing a ceiling 
on dearness allowance granted an upward revision in the wages and the 
placement of a ceiling on dearness allowance had a direct nexus to the 
tribunal revising the salary structure of employees. The Tribunal also 
opted in favour of time bound automatic promotion. In taking that view 
·' D the Tribunal.acted on the region-cum-industry basis. Taking-note of the 
fact that 100% neutralization is ordinarily allowed to the lowest paid staff 
and as the basic salary rises the percentage of neutralization slides down, 
the Tribunal felt that the neutralization factor was very high at the higher 
levels of salary and even at the highest and, therefore, it opted in favour 
E 
of imposing a ceiling to balance the wage structure. The Tribunal pointed 
out that the existing dearness allowance formula had been in vogue for 
many years preceding 1976 when the company gave a Notice of Change u/s 
9A of the Industrial Disputes Act, and the neutralization varied from 
97.4% at the lower level to 86% at the highest point and concluded that 
F 
placement of a ceiling was imperative to eusure that the wage structure 
did not get destroyed and the disparity ratio between the wages paid by 
the appellant company and by other comparable units in the region at the 
level of employees drawing a basic salary of Rs. 500 and above remain 
within reasonable bounds. 
G 
The workmen and the company challenged the Award by filing Writ 
Petitions. The workmen challenged the Tribunal's Award conceding the 
management's demand for placement of a ceiling on dearness allowance. 
The High Court upheld the order of the Industrial Tribunal placing a 
ceiling on dearness allowance but mod
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