Region Cum Industry

Submitted To: Prof. Sophy K.J Submitted By: Subject: 6.5 Labor Law

National Law University, Delhi

Table of Contents

Table of Casesi Chapter I: Introduction . 1 Chapter II: Brief History of the Doctrine.. 3 Chapter III: Development of Doctrine. 5 Chapter IV: Current Status of the Doctrine.. 8 Chapter V: Conclusion.. 10

Table of Cases

Burhanpur Tapti Mills. v. Burhanpur Tapti Mills Mazdoor Sangh Delhi Cloth & General Mills v. Its Workmen Dunlop Rubber v. Their Workmen French Motor Car Company v. Their Workmen Greaves Cotton v. Their workmen Kamani Metals and Alloys v. Their Workmen Management Kirlampudi Sugar Mills v. The Industrial Tribunal The Bharatkhand Textile v. The Textile Labour Association The Garment Cleaning Works v. Its Workmen Workmen of Orient Paper Mills v. Orient Paper Mills

AIR 1965 SC 839 1967 AIR 469 1965 AIR 1316 1963 AIR 1327 1964 AIR 689 1958 2 S.C.R. 463 1973 3 SCC 626 1962 AIR 673 1960 IIL LJ 21 SC 1969 AIR 976

Chapter I 1.1 Introduction: The passing to the minimum wages act, 1948 is landmark legislation in the context of the Labor Rights and their development. As in a country like India cheap labor is easily available due to reasons such as poverty, overpopulation, lack of skills, etc. Though the act prescribes a certain fixed baseline income which an employer is bound to give a workmen working in an industry. The effect of the provisions contained in the act makes it clear that it is not only the rule of market force i.e law of demand and supply that will govern the terms about wages as between employers and employees in respect of establishments called as industrial units1. yet this cannot be said to sufficient wage for the overall wellbeing, a sufficient wage is defined as a wage which would ensure to every worker the necessities for existence, food, clothing, housing and education, and other basic necessities for a just human life. So the next question that comes in mind is that how to fix the wages so as to entail the above criterion. It has been witnessed that wage rates in non scheduled industries are fixed in a variety of ways. They are settled for the industry as a whole in a local area or for different units, if within a local area not many units operate in the same industry. Generally, wage settlement proceeds on the basis of fixing the wage for the lowest category of worker in the industry or unit, differentials for skills being built upon the basis of this minimum2. If wage determination is industry wise within an area the wage fixed whether it is through collective bargaining or with the help of industrial relation machinery is on the basis of the overall capacity of the industry to pay. It has consistently taken the view in such cases that the capacity to pay of an individual unit is irrelevant for fixing the minimum for the industry in a local area so long as the industry as a whole can pay. If a unit has no capacity either it goes out of existence or improves its working to acquire the necessary capacity. Where however, the wages for individual units in a local area are fixed through collective bargaining or otherwise in based on the capacity of the industry to pay3. Having said so doctrine of region cum industry is also considered as a significant mechanism in determining and fixing wages. Normally in many of the committee reports it has been referred
1 2 3

Fair Wage Committee Report Ibid. Ibid. 4

that there is a unanimity of opinion that fair wages should be determined on an industry cum region basis. As it has been seen that industry wise payment may not be sufficient to meet the elements of Fair wages as certain aspects related to a particular region may affect the prices of good, value of land, and in all the cost of living so even being justified on the formula of industry cum region, the Minimum wages act would not be able to do justice to the labor class as the philosophy underlying the enactment of the minimum wages act is to prevent exploitation of labor through the payment of unduly low wage. 1.2 Research Question: Whether the principle of Region cum Industry is still relevant? 1.3 Hypothesis: In matters of Minimum Wage Fixation, the formula applied is industry cum region with the capacity of the industry to pay plus inflation in the market. 1.4 Chapterisation: Chapter I: Introduction Chapter II: Brief History of the Doctrine Chapter III: Development of Doctrine Chapter IV: Current Status of the Doctrine Chapter V: Conclusion

1.5 Research Methodology: The research paper has been primarily of doctrinal nature as the scope of the topic lies mainly with the factual recognition of the Research Hypothesis, hence apt usage of data through case laws, etc in order to reflect the ambiguity regards the subject of the topic has also been taken care off. The basis of the research has been carried through cases that are being retrieved through various online databases and through various law journal and reporters available in the law library of the institute.

Chapter II Brief History of Region cum Industry The reason for region wise fixation of wages recommended by the committee on fair wages is not limited to the difference in the cost of living in the different regions, though that is an important consideration the standard of living of the workers in the different regions, reflecting, as they do, the needs considered essential and feasible by the workers of the particular regions, cannot altogether be ignored, and as the Gadgill committee observed , standard of living are much lower in certain parts of the country that elsewhere.4 Moreover, the economics of the industry and in particular its capacity to pay, may vary substantially from region to regions, a factor that must undoubtedly influence the level of fair wages that can be paid in each region. It will be recalled that the Supreme court has laid down in the express newspaper case that e the capacity of an industry to pay should be judged on an industry cum region, obviously because it is likely to vary appreciably from region to region and should not be assumed to be uniform throughout the country. First of all, the cotton textile divided the numerous units across the country into two categories based on topology one being the highly fertile areas of northern india and secondly the not so advance region of South India in 19605. Next sugar board divided the country into four part of north, south, east and west. Jute board made demarcation based on areas which were developed more in terms of infrastructure, transportation, communication etc. Similalry, tea, coffee, rubber, steel wage boards evolved on the basis of region. Though wage boards are required to evolve wage structure in accordance with the principles set forth in the report of the committee on fair wages, which would include both regional and skill differentials 6, the terms of reference of wage boards make no specific mention of the industry cum region principle or of the need to provide for regional wage differentials while they pointedly draw attention to the need to provide for skill differentials. This difference in emphasis must tell against the regional principle.

4 5 6

Gadgill Report National Labour Committee Report Ibid 6

Various surveys have shown that principle of region wise fixation of wages has suffered at the hands of all India wage board. In the case of French Motor Car Company v. Their Workmen7, in which it was held that, it is now well settled that the principle of industry cum region has to be applied by industrial court, when it proceeds to consider questions like wagestructure, dearness allowance and similar conditions of service. In applying that principle industrial court have to compare wage scales prevailing in similar concerns in the region with which it is dealing, and generallyspeaking, similar concerns would be those in the same line of business as the concern with respect to which the dispute is under consideration. Also in the case of Greaves Cotton v. Their workmen8, held that there are large number of industrial concerns of the same kind in the same region, it would be proper to put greater emphasis on the industry part of the industry cum region principle as this would place all concerns on an equal footing in the matter of production cost and in the matter of competition in the market. On the other hand, where the number of comparable concerns were small in a particular region and the aspect of competition is not the importance. The Supreme court in the Greaves Cotton case also observed that the Industrial tribunal while making a comparison must take into account the total wage packet for each category of factory workmen.

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1963 AIR 1327 1964 AIR 689 7

Chapter III Development of the Doctrine In Kamani Metals and Alloys v. Their Workmen9, the court said Fixation of a wage-structure is always a delicate task because a balance has to be struck between the demand of social justice which requires that te workmen should receive their proper share of the national income which they help to produce with a view to improving their standard of living, and the depletion which every increase in wages makes in the profits as this tends to divert capital from industry into other channels thought to be more profitable10. The task is not rendered any the easier because conditions vary from region to region, industry to industry and establishment to establishment. To cope with these differences certain principles on which wages are fixed have been stated from time to time by this Court. Broadly speaking the first principle is that there is minimum wage which, in any event, must be paid, irrespective of the extent of profits, the financial condition of the establishment or the availability of workmen on lower wages11. This minimum wage is independent of the kind of industry and applies to all alike big or small. It sets the lowest limit below which wages cannot be allowed to sink in all humanity. The second principle is that wages must be fair, that is to say, sufficiently high to provide a standard family with food, shelter, clothing, medical care and education of children appropriate to the workman but not at a rate exceeding his wage earning capacity in the class of establishment to which he belongs. A fair wage is thus related to the earning capacity and the workload12. It must, however, be realised that 'fair wage' is not 'living wage' by which is meant a wage which is sufficient to provide not only the essentials above-mentioned but a fair measure of frugal comfort with an ability to provide for old age and evil days. Fair wage lies between the minimum wage, which must be paid in any event, and the living wage, which is the goal. The Supreme court in Dunlop Rubber v. Their Workmen13, first gave instances of this doctrine by dissenting with the industry cum region formula, the court said, the formula in force throughout
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1958 2 S.C.R. 463 Ibid p.466 Ibid p 467 Ibid p.468 1965 AIR 1316 8

10 11 12 13

India if seems unfair and not in accordance with conditions prevailing in a region. Wage board or court is bound to make necessary changes to make scheme fair and reasonable and unusual and unfair features should be removed. The court was of the opinion that the scheme was no adequate and contained features which were not usual in other prosperous concerns14. It pointed out that the scale of gratuity for clerks was on a lower basis than for operatives and that this was against the general conditions of things prevailing in that region. It further pointed out that the clerical and the supervisory staff had a higher standard of living, and had to meet heavier expenses of education of their children who get employment at a late age as compared to operatives. It was, therefore, of opinion that a uniform scale of gratuity should be fixed for all in a particular area, as it appear prima facie that the gratuity scheme finally sanctioned by the tribunal that it removed those features from the scheme in force in the company which were unusual and unfair and not in consonance with the prevailing condition for such schemes in that region. Further in a case of The Garment Cleaning Works v. Its Workmen15, the court stated that the industry cum region was not only the basis for wages to be framed and one framed on the basis of the region could not be challenged as invalid. And also in the case of The Bharatkhand Textile v. The Textile Labour Association16, in this case the court had no doubt dealt with the claim made by the workmen on the industry-cum-region basis, and an attack against the validity of the said approach made by the employer in regard to the scheme was repelled by this Court. It would, however, be noticed that all that this Court decided in that case was that it was erroneous to contend that a wages would always be based on industry-cum-region basis, and in support of this conclusion several considerations were set forth in the judgment. It is clear that it is one thing to hold that the wages can in a proper case be framed on industry-cum-region basis, and another thing to say that industry-cum-region basis is not the only basis on which wages can be framed. In the case of Delhi Cloth & General Mills v. Its Workmen17, the contention for wage determination was for the individual basis as there were four mills in different parts of the country and workers were not getting equal wages based on the wages to labors in the same area.
14 15 16 17

Ibid p. 1319 1962 AIR 673 1960 IIL LJ 21 SC 1967 AIR 469 9

And it was for the First Time it was held that wage board is bound to look at the units in different parts of the country as different and the concept of region cum industry is to be applied not only to determine the wage of a unit but also of the industries in the region as a whole. It was discussed in the case of Burhanpur Tapti Mills. v. Burhanpur Tapti Mills Mazdoor Sangh18 there are two general methods of fixing the terms of a gratuity scheme. It may be fixed on the basis of industry-cum region or on the basis of units. Both systems are admissible but regard must be had to the surrounding circumstances to select the right basis. Emphasis must always be laid upon the financial position of the employer and his profit-making capacity whichever method is selected, hence not only the region in which the industry is established but also the capacity to pay must also be given its due regards in wage determination.

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AIR 1965 SC 839 10

Chapter IV Current Status of the Doctrine The doctrine seems to lose its value after strengthening of the principles of Gratuity Scheme and Dearness Allowance. In the case of Workmen of Orient Paper Mills v. Orient Paper Mills19, where court held that when there are no other similar industries in the same region it is very difficult to fix wages on the basis on region as in the following case view that there were other industries in the region in which minimum wages were higher than the minimum wages paid by the Company and if they will fix wages it was cause loses to the units and will ultimately lead to its closure. The court further added that tt is now well settled that the principle of region cum industry has to be applied by the Court, when it proceeds to consider questions like wage structure, dearness allowance and similar conditions of service20. In applying that principle, Courts have to compare wage scales prevailing in similar concerns in the region with which it is dealing, and generally speaking similar concerns would be those in the same line of business as the concern with respect to which the dispute is under consideration. Further, even in the same line of business, it would not be proper to compare a small struggling concern with a large flourishing concern. In the case of Management of The Kirlampudi Sugar Mills v. The Industrial Tribunal, A.P21 the court held that fixing a uniform wage for the entire region without further dividing the industry in the region into classes of units according to their capacity namely regioncum-industry for fixation of the wage structure for those classes of units may hamper the interest of the business and development of the industries. As the industry might not have the financial capacity to pay those wage as their might not be enough revenues. In the particular case the reason were that the main factors responsible for variation in the yield of sugar cane in different regions due to: (1) Improved variety of cane; (2) irrigation facilities; (3) ecological factors; and (4) improved methods of cultivation, which may not be same for all other industries like textile or rice or wheat industries etc.

19 20 21

1969 AIR 976 Ibid p.981 1973 3 SCC 626 11

Hence, it is better to use the industry cum region formula as it compares various aspects of the wage determination and framing of these wages are much more rationally done and regional disparities are taken care off by dearness allowance and bonuses and similar provision.

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Chapter V Conclusion The doctrine of region cum industry evolved as a filler in the loopholes that were present in the already established principle of industry cum reason. The problem that there might be certain cases where region has to be given preference over the industries as there are factor other than the industry alone that can mitigate the cost and production and hence in the payment of wages. Thought the conflict lie in the two doctrines is that only one of the two can be applied and it has been witnessed in many cases that element of both the doctrines are important as putting one thing aside would either be affecting industry or labor, while clubbing both concept both head to harmony. Hence, by virtue of establishing wage board in states and for industries the ignorance toward regional disparities have been reduced to a large extent while promoting welfare which is the major philosophical argument behind the enactment of Minimum Wages Act. And also using the elements of inflation adjusted wage and linking wages to CPI and WPI has solved the problem of wage disparities related to region. Hence for this particular reason the importance of this doctrine on the basis of region has lost its importance and in many way is not required to this day. Hence, the doctrine of region cum industry is no longer required.

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