UNION OF INDIA & ANOTHER versus DHRANGADHRA CHEMICAL WORKS & ANR.

Citation: [1977] 2 S.C.R. 479 · Decided: 16-12-1976 · Supreme Court of India · Bench: P.K. GOSWAMI, S. MURTAZA FAZAL ALI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

479 
UNION OF INDIA & ANOTHER 
v. 
DHRANGADHRA CHEMICAL WORKS & • .\NR. 
December 16, 1976 
(P. K. GOSWAMI AND S.MURTAZA FAZAL ALI, JJ.] 
Additional Emolumellfs (Compulsory Deposit) Act, 1974--S. 2(b) Expla-
nation f-Scope of. 
Section 2 (b) of the Additional Emoluments (Compulsory Deposit) 
Act, 
1974 defines additional dearness allowance to mean such dearness allowance 
as may be sanctioned from time to time after the appointed day over 
and 
above the amount of dearness allowance payable in accordance with the rate 
c: 
in force immediately before the date from which such sanction of additional 
dearness allowance is to take effect. Explanation I to the clause states that 
where payment of dearness allowance is linked to the cost of living 
index 
any automatic payment after the appointed day of dearness allowance in conse-
quence of any rise in such cost of living index or in consequence of any change 
in such other factor shall, notwithstanding the provisions of this clause, be 
deemed to be the additional dearness allowance. 
Dearness allowance was paid to the employees of the respondent at the rate 
!)-
of quarterly average cost of living index for the relevant quarter. The rate ot 
dearness allowance for one quarter e.g. the first quarter of 1974 was paid on 
the basis of the average cost of living index for the months of July--5eptember, 
1973. For the quarter July-September, 1974 there was a rise in the cost of 
Jivmg index and consequently there was a rise in the dearness allowance pay-
able to the employees. In a writ petition under art. 226 of the Constitution 
the employees contended that the increased dearness allowance payable for the 
quarter July-September, 1974 was as a result of rise in the cost of 
living 
index between January-March, 1974 which was before the appointed day 
in 
E: 
July 6, 1974 and, therefore, no additional dearness allowance was deductible.· 
under the Act. The High Court granted the writ. 
Allowing the appeal, 
HELD : The High Court was wrong in its view that the rise of cost of 
living index should be after the appointed day. The nexus, for the purpose of 
the explanation, is with the payment after the appointed day and not with the 
rise in the cost of living index. There is nothing in the Explanation to warrant 
the conclusion that rise in the cost of living index should be after the apoomted 
day. 
What is to be after the appointed day is any automatic payment of dear-
ness allowance in consequence of any rise in such cost of living index and 
not that any rise in the cost of living index should be 
after the appointed 
day. 
f482B: 481Hl 
y· 
When D.A. is linked to ·the cost of living index, actual determination of the 
D.A. takes place after the index is published and known. The index, therefore, 
is always of a past -period by the yard-stick of which D.A. is adjusted. This 
G; 
being the concept about linkage of D.A. to cost of living index. 
Explanation I 
makes it clear that when payment of D.A. is linked to cost of living index any 
automatic payment after the appointed day of D.A. in consequence of any 
rise in the cost of living im!ex shall, notwithstanding the provisions of this 
clause, be deemed to be the additional D.A. 
[481GJ 
CrVIL APPELLATE JURISDICTION: CIVIL APPEAL No. 691 of 1976. 
(From the Judgment & Order dated the 16th December 1975 of the 
H. 
Gujarat High Court in Special Civil Appln. No. 572 of 1975). 
G. L. Sanghi and Girish Chandra, for the Appellants. 
480 
SUPREME COURT REPORTS 
[1977] 2 S.C.R. 
·:\ 
V. M. Tarkunde, K. L.Hathi and Mrs. P. C. Kapur, for respondent 
No. 1. 
B 
·C 
E 
.. H 
The Judgment of the Court was delivered by 
GOSWAMI, J.-This appeal on certificate is from the judgment of 
thei High Court of Gujarat. The appellants 1 and 2 are respectively the 
Union of India and the Regional Provident Fund Commissioner. Dhran-
gadhra Chemical Works Kamdar Sangh (hereinafter to be described as 
the union) is the first respondent. The second respondent is Dhran-
gadhra Chemical Works (hereinafter to be described as the employer). 
With respect to the dearness allowance (D.A.) of the workers under 
the employer there was a reference No. 70/70 before the Industrial Tri-
bunal at Ahmedabad. The parties arrived at a settlement of the said 
industrial dispute and an award was passed in terms of the settlement. 
According to the award the employer was to pay D.A. to its employees 
at the rate of the quarterly average cost of living index as settl

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