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 consequence 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 payable 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 dearness 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.
The Judgment of the Court was delivered by
B
·C
E
.. H
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. Dhrangadhra Chemical Works Kamdar Sangh (hereinafter to be described as
the union) is the first respondent. The second respondent is Dhrangadhra 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 Tribunal 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 settled by the
Simla Bureau, popularly known as "All ~ndia Consumers Price Index"
for the relevant quarter. Thus for the months of January, February
and March, 1974, the rate of D.A. w_as on the basis of the average
cost of living index for the months of July, August and September 1973
as published by the said Bureau and this was to follow for every quarter. It is the accepted position that for the months of April, May and
June 1974 the D.A. worked out at Rs. 78/- per month, but for the
quarter commencing on 1st July, 1974, and ending on 30th September,
1974, it worked out at Rs. 88.50 per month. In other words, it was an
agreed position between the union and the employer that the rate of
D.A. payable to all the workers from 1st July, 1974, was at the rate of
Rs. 88.50 per month.
With effect from 6th July, 1974, The Additional Emoluments (Compulsory Deposit) Ordinance 1974 came into force. This Ordinance
was replaced by The .Additional Emoluments (Compulsory Deposit)
Act 1974 (Act No. 37 of 1974) (briefly the Act) and the Act is deemed
to have come into force on the 6th day of July 1974.
We have already made a detailed reference to the aim and object _i,..'
of the Act and also dealt with the material provisions thereof in deal- ing with a similar question in Civil Appeal No. 690 of 1976 in which we
have delivered our judgment to-day(1). It is, therefore, not necessary
to repeat those observations here.
The short question that arises in this particular appeal turns on the
Explanation-I to section 2(b) of. the Act. We will, therefore, read that
provision :
"2 (b) 'additional dearness allowance' means 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 in force immediately before the date from which such sanction of additional
dearness allowance is to take effect.
(1) [1977] 2 S. C. R.472.
\ '
...
.. -,
### •
f
UNION _v._ DHARANGADHRA CHEMICAL _(Goswami,_ J.) 4 81
Explanation-I. Where payment of dearness allowance is
linked to a cost of living index or any other factor, any automatic payment, after the appointed day, of d~ai:nes~ allowan~e
in consequence of any rise in such cost of hvmg mdex or m
consequence of any change in such other factor shall, notwithstanding the provi~ions of this clause, be deemed to be the
additional dearness allowance."
It is clear under section 2 (b) that additional D.A. has to be sanctioned after the appointed day. "Sanctioned" is the heart of the definition clause. Since additional D.A. is defined to mean such D.A. as may
·be sanctioned from time to time after the appointed day, Explanation-I
to the definition is inserted to deal with a situation to avoid any controversy about the sanction while· there is an automatic rise in D.A.
linked to a cost of living index. Where D.A. is linked to a cost of living
index any automatic payment, after the appointed day, of D.A. in consequence of any rise in such cost of living index shall be deemed to be
·the additional D.A. In the absence of Explanation-I there would have
·been scope for controversy whether additional D.A. which is paid automatically with the rise in the cost of living index, as agreed upon, can
be said to be D.A. sanctioned from time to time. Such a controversy
ls set at rest by insertion of Explanation-I which is a deeming clause.
The question that arises for consideration in this appeal is whether
the rise in the cost of living index has also got to be after the appointed
·da.y. The union contends that the D.A. of Rs. 88.50 which is payable
from 1st of July, 1974, for the quarter-1st July, 1974 ·to 30th Sep
tember, 1974-is [n .pursuance of the rise of cost of living index between
January to March 1974 which is prior to the appointed day, namely, E
6th July, 1974. It is, _therefore, submitted that no additional D.A. is
deductible under the Act. The High Court has accepted the contention
of the union and allowed the application under Article 226 of the Constitution granting a Mandamus restn1.ining the employer from deducting
additional D.A. from the emoluments of the employees. The High
Court also ·granted certificate to appeal to this Court.
F
. It is common knowledge that when D.A. is linked to a 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 yardstick of which D.A. is adjusted. This 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 a cost of living index any
automatic payment after the appointed day of D.A. in consequence of G
any rise in the cost of living index shall, notwithstanding the provisions
.of this clause, be deemed to be the additional D.A.
The non obstante clause in the Explanation takes note of the definition clause where sanction after the appointed day has been mentioned.
Explanation-I, therefore, plays its role, notwithstanding whatever is
·stated in section 2(b), the definition clause. We do not find anvthing H
in Explanation-I to warrant the conclusion that rise of the cost of living
index should be after the appointed day. What is to be after the appointed day is "any automatic payment of D.A. in consequence of any
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4~82 SUPREME COURT REPORTS **[1977]** 2 S.C.R.
rise ...... " and not that any rise in the cost of living index should be·
after the appointed day.
We are, therefore, unable to agree with the High Court that the rise
of cost of living index also should be after the appointed day. It is
sufficient for the purpose of Explanation-I if payment of D.A., in consequence of rise of cost of living index, takes place after the appointed
day on account of rise in the cost of living index even prior to the appointed day. The nexus for the purpose of Explanation-I is with the
payment after the appointed day and not with the rise in the cost of
living index. The specified percentage of additional D.A. which is
50% of the rise, being the difference, between Rs. 78/- and Rs. 88.50'
is, therefore, deductible under section 6(2)(b) of the Act and the High
Court was not correct in holding to the contrary.
The appeal is allowed and the judgment of the High Court is set
aside. There will be, however, no order as to cos~s.
**P.B.R.** _Appeal allowed._
