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Bengal Chemical & Pharmaceutical Works Ltd. Vs Its Workmen

Author: Deepa, Student at Lloyd Law College, Meerut.

Citation: 1968 Latest Case law 218SC 

Date of Declaration: 16-09-1968

Bench: Vaidyalingam C.A, Shelat J.M, Bhargava Vishishtha 

Original Copy: here 


Issues In Question:

  • The purpose of the dearness allowance being to neutralise a portion of the increase in the cost of living, it should ordinarily be on a sliding scale and provide for an increase in the rise of living and decrease on a fall in the cost of living. 
  • Employees getting the same wages should get the same dearness allowance, irrespective of whether they are working as clerks or members of subordinate staff or factory workmen. 
  • What is the wage structure or dearness allowance and what would it impose upon an employer, and his ability to bear such a burden? 

Background of the Cases:

  • In 1957, Bengal Chemical entered into an agreement with its workmen about dearness allowance.  The dearness allowance was fixed by the 5th Industrial Tribunal on the basis of the cost of living index in May 1957 which stood at 400.6. This appeal was dismissed and did not proceed further. 
  • In 1962, there was a fresh settlement between the company and the workmen whereby dearness allowance was raised by Rs. 3. 
  • Again there was a dispute that came in 1962, The Industrial Tribunal gave its award in January 1965. The award was provided by an increase or decrease of Rs. 1/-for rise or fall of five points in the cost of living index with retrospective operation from November 1963. 
  • These changes made some effect on the gratuity scheme and raised the age of superannuation from 55 years to 58. 


  • The tribunal had directed that it should stand revised from November 1963. It provides a sliding scale for an increase or decrease of Rs 1/- for rise or fall in the cost of living index, with the retrospective operation from November 1963. It further decided that the dearness allowance payable for each month from November 1963 shall be recalculated on the basis and additional amount due to workmen should be paid in two monthly installments after the date of publication of the award. Therefore the dearness allowance for any particular month shall be calculated on the basis of average cost of living index for three immediately preceding months. 
  • The tribunal increased the maximum gratuity payable to 15 months and 116 salary, more modification that in order to get gratuity  employees should have put in service of ten completed years or more. It asserted that the Tribunal increased the existing age of superannuation from 55 years to 58 years. 
  • The counsel also points out the extent or degree of neutralisation to be granted is not rigid and that though hundred per cent neutralisation is not normally given, nevertheless in the case of the lowest paid employees such neutralisation is permissible. Counsel also urged that the Tribula has committed a mistake in not accepting the claim of the Union that the question of dearness allowance will have to be considered entirely on the materials placed before it. Without in any manner being influenced by the award of Shri Palit. It is also, allowance and provision made for the rate of dearness allowance being liable to be increased or decreased by Rs 1/- for a rise or fall in the cost of living index by every 10 points

Critical Analysis: 

  • This is a substantial increase in the cost of living index and hence a revision of the dearness allowance was necessary. The Tribunal took the view that the financial ability of the company to bear the additional burden did not come in for consideration because the settlement date on 6th January 1962, The company had agreed to a modification of the dearness allowance if there was a substantial change in the working class cost of living index. According to the counsel, the agreement entered into between the parties should not be taken as indicative of the fact that complete neutralisation has been effected in the matter of fixing dearness allowance, 100% neutralist has been given. 
  • The contention bearing upon dearness allowance, is that the direction that the award will have retrospective effect from November 1963 is erroneous. In this connection Mr. Gokhale referred us to el. 10 of the settlement of January 6, 1962 stating that the settlement was to remain operative for three years. 
  • The Cost of living index had increased considerably, the company did not choose to adjust the dearness allowance suitably. It was, after having regard to all the circumstances that the Tribunal felt that the workmen should get dearness allowance commensurate with the cost of living index. 
  • The principle emerges two decision is that in applying the industry-cum-region formula for fixing wage scales, if there are large number of concerns in the same region on same industry, in this case the production cost may not be unequal and there may be equal competition,wages be fixed on the basis of the comparable industries, industries of same kind. 
  • Employees getting the same wages should get the same dearness allowance irrespective of whether they are working as clerks or members of subordinate staff or factory workmen. The additional financial burden which a revision of the wage structure or dearness allowance would impose upon an employer.

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