Financial Position Of The Employer To Be Considered When Deciding Wage Structure Of The Employees- SC

Written by:

Adv Shubham Jindal

Updated: 08-03-2024

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While passing a recent judgement in the case of The VVF Ltd. Employees Union v. M/s. VVF India Limited & Anr., the Supreme Court of India stressed that an employer’s financial capacity shall be considered as one of the deciding factors when calculating the wage structure of the employees.

While deciding an appeal against the judgement of the Bombay High Court, the Bench of Justices Aniruddha Bose and Sanjay Kumar, observed that the best course in the present case would have been to remit the matter to the Industrial Tribunal by the High Court.

Background of the Case-

The main issue of the case is regarding the demands raised by the Appellant, i.e. the Employee’s Union in the year 2008, regarding the revision of the pay scale as well as certain allowances.
The Tribunal granted certain relief to the employees, which was challenged in the Bombay High Court by both parties, i.e. the Union and the employer
The High Court allowed 4 demands by the Union, while the decision of the Tribunal was allowed for 7 demands.
The appellant, i.e. the Union filed a review petition against the judgement by the High Court, which was dismissed. Finally, 3 appeals were filed in the Supreme Court of India.

Submissions by Parties

The Employer contended that the High Court when judging the legality of the award could not have enquired about the facts and the evidence, also that the units which were compared with the employer were not placed in a similar situation, i.e. their financial position and their industrial output.
Also, the employer stressed that the negative financial stratus of the employer was ignored by the High Court on the ground that losses were ‘miniscule’, granting some allowances in the absence of any evidence.
The Union on the other hand presented that provided under Article 226, instead of remanding a matter, the High Court has jurisdiction to decide upon the facts.

Observations by Supreme Court

The Supreme Court Bench, referred to the judgement given in the case of Gujarat Steel Tubes Ltd. and Others v. Gujarat Steel Tubes Mazdoor Sabha and Others, to conclude that in appropriate cases, the High Courts could examine the facts as well when deciding upon the award of a Tribunal.
It was also observed by the Apex Court that when deciding upon the revision of the wages, the industrial educator must follow the standard criteria, applying the industry-cum-region test, according to which the pay and allowances for a case must be compared with an equally placed unit in the same region.
The Supreme Court also noticed that as decided in the case of A.K. Bindal v. Union of India & Ors. and Mukand Ltd. v. Mukand Staff & Officers Association, when deciding upon the comparability of units, one must consider the financial capacity of the employer.
Also, as the employer presented that he was facing losses and the High Court asked for fresh charts, it would have been appropriate to remand the matter to the Tribunal.
As for about the jurisdiction of the High Court to decide upon the facts of the matter again, the Apex Court said that appreciation of the evidence by the High Court was not proper and even the plea filed by the employee-Union's for provisions related to the overtime wages when counting the allowance, had to be re-examined.

Decision by the Apex Court

The Supreme Court of India, setting aside the award by the Tribunal as well as the judgement of the High Court, decided that the matter must be decided by the Tribunal in fresh proceedings within a period of 6 months.

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