' These are 4 separate applications under section 50, I.R.O., and the common issue involved in all of them is whether the cost of living allowance of Rs, 40 per month payable, to workmen under subsection (5) of section 3 of the Employees' Cost of Living (Relief) Act, 1973, hereinafter referred to as the said Act, is liable to be set off against the increase in wages and allowances of the workmen provided under the settlements/agreements entered into between the managements of the companies/establishments concerned and the collective bargaining agents therein. The said subsection, which was added to the said Act by Ordinance XXV of 1981, promulgated on 28th June, 1981, reads as follows :- '(5) In addition to the cost of living allowance admissible under sub, sections (1), (2) and (3) or, as the case may be subsection (4), if any, every employee whose wages do not exceed one thousand five hundred rupees shall, in respect of his employment on or after the first day of July, 1981, whether on time-work or piecework basis, be paid by his employer a cost of living allowance equal to forty rupees per month : ' Provided that the said cost of living allowance shall be set off-
(a) against the amount payable as a relief due to rise in the cost of living under an agreement or settlement reached, or an award given, under the Industrial Relations Ordinance, 1969 (XXIII of 1969) which has been announced and becomes effective within a period of one year of the commencement of the Employees' Cost of Living (Relief) (Amendment) Ordinance, 1981 ; and
(b) against the amount payable under an agreement or settlement reached and in force on the first day of July, 1981, under which employees get increase at regular intervals on the basis of a rise in the cost of living : ' Provided further that the provisions of section 7 shall not apply to the cost of living allowance payable under this subsection.
Explanation.-Por the purposes of this suhsection any increase in wages accruing by virtue of the usual annual increment or promotion to a high grade, or an allowance not specifically given to provide relief due to rise in the cost of living, shall net be deemed to be an increase intendend to provide relief due to a rise in the cost of living."
2. The cost of living allowance payable under the above subsection was in addition to the different cost of living allowances payable to workmen drawing wages not exceeding the prescribed amounts under subsections (1), (2), (3) and (4) of section 3 of the said Act. The provisions of subsection (5) of section 3 of the said Act came up for consideration before this Tribunal in the cases of Gul Ahmad Textile Mills. Ltd. v. Gul Ahmad Textile Mills Ltd. Mazdoor Union, decided on 13th August, 1981, and Grind Wheel Employees' Union v. Mls. Grind-Wheel (Pak.) Ltd. Decided on 14th October, 1981. In the Gul Ahmed Textile Mills' case, it was observed that the object of Ordinance XXV of 1981 appears to be on the one hand to compel the employers to pay to their workmen an additional cost of living allowance on account of the rise in the cost of living and on the other hand to entitle those employers who had already granted relief to their workmen against rise in the cost of living, to adjust the new cost of living allowance against the increase in the wages/allowance, which had been paid by them on account of rise in the cost of living. In that case, the cost of living allowance payable under subsection (5) of section 3 of the said Act was held to be subject to set off against the increase in wages provided under the settlement arrived at between the management and the C.B.A., as the settlement expressly provided that the increase was being given to provide financial relief to the workers due to rise in the cost of living. In the subsequent case of Grindwheel Employees' Union, the question which arose for- consideration by this Tribunal was whether the cost of living allowance payable under subsection (5) of section 3 of the said Act could be set off against the increases in the house rent allowance and the conveyance allowance provided under the settlement arrived at between Messrs Grindwheel (Pak.): Ltd., and the C.B.A., therein. This question was answered in the affirmative in view of the fact that it was expressly stated in the settlement that the increase both in the house rent allowance and the conveyance allowance was being made on account of the rise in the cost of living.
3. The first application with which we are presently concerned is application No, KAR-586/81, which has been filed by Azad Friends and Company Ltd., and in which the respondent is the Azad Friends & Co. Employees' Union Labour Welfare Society. The facts on which the said application is founded are that on 11th July, 1981 a settlement under the I.R.O., 1969, was signed between the applicant company and the respondent union, which is the C.B.A., in the applicant company. The said settlement provided that-
(a) The wages of all the permanent workers would be increased by Rs, 50.00 per month from 1st April, 1981.
(b) The existing house rent allowance shall be increased by Rs, 14.50 per month from let April, 1981.
(c) The existing conveyance allowance shall be increased by 0.75 patsas per clay from 1st April, 1981.
4. Clause (3) of the said agreement stated that the management had agreed to continue to pay the cost of living allowance at the rate of Rs, 40 announced by the Government in the month of July, 1980, and the admissibility or otherwise of any additional cost of living allowance will depend upon the provisions of the enactment on the subject. It may be pointed out here that the cost of living allowance announced by the Government in July, 1980, was given legal cover in the shape of subsection (4) of section 3 of the said Act, which subsection was added by Ordinance XXXII of 1980.
The contention of the applicant company, which is mainly founded on the aforesaid settlement, is that the cost of living allowance payable to workmen under subsection (5) of section 3 of the said Act is liable to be set off 'against the above increases in wages and allowances.
5. The second case is Application No, KAR-596/8I, wherein the applicant is Dawood Cotton Mills Al- Fateh Labour Union, while the respondent is Messrs Dawood Cotton Mills Ltd. The said application seeks interpretation of a settlement which was signed and executed by the said parties on 1st January, 1981. The provision in the said settlement which is the subject of controversy between the parties is , clause (1) thereof, which provides that the management have agreed to increase the wages of the workers, on the Pay Roll of the company on or before 27th April, 1981 and drawing wages/salaries upto and not exceeding Rs, 2,500 per month, by an amount of Rs, 40 per month' with effect from 1st January, 1981. It is the case of the applicant union that the respondent company have illegally set off the cost of living allowance payable to the workmen under clause (5) of section 3 of the Act against the said increase in wages. On the other hand, the stand of the company is that as the C.B.A., in its charter of demands had asked for wage increase of 25% in respect of all types of workers and as the wage increase provided in the settlement is based on the said demand, the increase in the wages of the workmen should be deemed to have been made on account of rise in the cost of living and hence the action of the company in setting off the additional cost of living allowance against the said increase in wages is justified. It is further alleged by the company that the large increase in the quantum of wages itself should be taken to be a circumstance indicating that the increase was made on account of the rise in the cost of living.
6. The third case is Application No, KAR-636/8I, which application has been made by the Singer Industries Labour Union and wherein Messrs Singer Industries (Pak.) Ltd. Are the respondents? The parties had arrived at a settlement on 9th April, 1981. The settlement provides for increase in the basic wages of the workmen who were in the permanent employment of the company on 1st January, 1981 and were on the company's Pay Roll on the day of the signing of the settlement. The increase in wages ranges from Rs, 35 p.m., in the case of workmen in Grade I and II to Rs, 55 per month in the cases of workmen in Grade VIII and Rs, 50 per month in the case of clerks in Grades VI and VII and Rs, 60 per month in the case of clerks in Grade V. The settlement also provided for increase in the conveyance allowance, house rent allowance, washing allowance and foundry allowance. The increase in the conveyance allowance was Rs, 8 per month in the case of workmen residing at a distance of less than 3 miles, Rs, 10 per month in the case of workmen residing at a distance of more than 3 Mks and less than 6 miles and Rs, 15 per month u the case of workmen residing at a distance or 6 miles and more. In the case of house rent, there was a uniform increase of Rs, 25 per month. Similarly in the case of washing allowance, there was a uniform increase of Rs, 2 per month. The foundry allowance was increased from Rs, 30 to Rs, 50 per month. It is the case of the applicant union that the above increases in the basic wages and allowances were not given on account of rise in the cost of living but for improving labour productivity, and hence, the said increases are not subject to set off against the cost of living allowance. On the other hand, the stand of the respondent company is that as the settlement itself provides that the said increases were given on account of the rise of cost of living, the company is fully entitled to set off the cost of living allowance payable under subsection (5) of section 3 of the said Act against the said increase in wages and allowances.
7. The last applications, i,e,, No, KAR-643/81, is by the General tyre and Rubber Employees Welfare Union, and the respondent therein ate Messrs General Tyre and Rubber Co. (Pak.) Ltd. In that case a settlement was arrived at between the parties on 19th March, 1981. The said settlement provides for an amount of Rs, 70 per month as a special increment in the basic salary/wages of the permanent hourly rated workers and staff falling in category I, II and III, with effect from 1st January, 1981. It also provides for uniform increase of conveyance allowance by Rs, 40 per month, an increase in the attendance allowance by Rs, 35 per month, increase in washing allowance by Rs, 5 per month, as also increases in certain other allowances, such as heat allowance, milk allowance, medical allowance etc., with which we are not presently concerned, as it was frankly conceded by the learned representative of the company that these allowances are not liable to set off against the cost of living allowance as they are paid for performance of special work or on account of the arduous nature of duties to be performed. It is, however, the case of the company that the cost of living allowance payable under subsection (5) of section 3' of the said Act is liable to be set off against the increase in the basic wages and also the conveyance Ole mice and the working allowance payable under the settlement as these increases have been provided to give relief against the rise in the cost of living as expressly stated in the settlement. On the other hand, the plea of the applicant union is that these increases have been provided on account of the undertaking given by it to the management to maintain industrial peace and discipline and to abide by the settlement for the operative period thereof and to cooperate fully with the management to increase the production.
8. In the application made by Azad Friends & Co. Ltd., it was submitted by Mr. Abdul Hafeez, the learned representative for the applicant company that as the cost of living is constantly rising in this country, as appears from the Consumers Price Index Bulletin of June, 1981, every amount of increase, whether in wages or in allowances, granted to workman, would provide him some relief against the ever spiraling cost of living. It is not necessary to examine or even to dispute this contention of the learned representative for the issue with which we are presently concerned is not whether an increase in wages or allowances to workman would provide him relief against the rise in the Cost of living or the inflationary tendencies in the World including in this country, but whether the increases in wages and allowances were paid as a relief due to rise in the cost of living. It may be pointed out that in order to entitle any amount or any increase in wages or allowances paid to workmen to be set off against the cost of living allowance payable to him under subsection (5) of section 3 of the said Act, the following requirements/conditions have to be fulfilled :-
(a) The amount must be payable as a relief due to rise in the cost of living ; #TBS (b) #TBE such amount should be payable under an agreement or settlement reached, or an award given, under the I.R.O., which was announced and became effective on or after the lst day of January, 1981, or which is announced, and becomes effective prior to 28th June, 1982 ; or
(c) the amount should be payable under agreement or settlement reached and enforced on 1st day of July, 1981, under which employees get increases at regular intervals on the basis of rise in the cost of living ;
(d) if the amount is payable' on account of an increase in wages, such increase is not by virtue of the usual annual increment or promotion to a higher grade ; and
(e) in the case of an allowance, it must be specifically given to provide relief due to rise in the cost of living.
9. In the case of New Jubilee Insurance Company Ltd. v. District Judge, Karachi and others (C.P. No, D-982/78), a Division Bench of the Karachi High Court examined the connotation of the word 'specifically given' as contained in the explanation to section 8 of the said Act, which explanation is similarly worded as the explanation to subsection (5) of section 3 of the said Act. Rejecting the contention that the said expression connotes or implies "specifically stated" or "expressly mentioned", the Division Bench agreed with the view taken by another Division Bench in the earlier case of Alpha Insurance Company Ltd. v. Employees' Union and another (1) wherein the words "especitically given" have been construed as 'paid specifically" and not "specifically mentioned".
The Division Bench in the case of New Jubilee Insurance Company Ltd. Summed up its view in this behalf in the following words :- "It is thus established that if any amount within the specified period has been paid by the employer to provide relief due to rise in cost of living then the employer is entitled to adjustment under section 8. Where such payment has been made but it has not been expressly mentioned that it is to provide relief due to rise in cost of living then the employer will be entitled to adjustment provided he is able to prove that payment was made for such purpose."
10. Now in the case of Messrs Azad Friends & Co. v. Azad Friends & Co. Employees' Union, there is no mention in the settlement arrived at between the parties suggesting or indicating that the increase in the Wages to workmen was being given to provide them relief due to rise in the cost of living. On the other hand, clause (2) of the settlement provides that the union has agreed to accept the benefits provided under {{FOOT NOTE}}
(1) PLD 1979 Kar. 79 {{FOOT NOTE}} ' the settlement in full and final settlement of all their demands contained in the demand notice, dated 31st March, 1981/strike notice dated 29th June, 1981. There is another important piece of evidence to indicate that the increase in the wages and allowance was not given as a relief due to rise in the cost of living. The settlement between the parties, was the result of conciliation proceedings held by Mr. Shamsul Hasan Jafri, Assistant Director, Labour (Conciliati in), who was examined by this Tribunal in order to clarify the point whether the increases in wages/ allowances provided under the settlement were given as a relief due to rise in the cost of living. He stated that 2 conciliation meetings were held by him, one on 7th July, 1981 and the other on 11th July, 1981.
According to him the parties had already, at the factory level, reached an agreement in respect of the domestic demands made by the C.B.A., and the only point of difference between them was that whereas the management wanted to incorporate a clause in the settlement that the increase in wages and allowances was on account of the rise in the cost of living, the contention of the C.B.A., was that the increases were allowed as a result of negotiations. It is clear, that the contention of the C.B.A.. Prevailed, for the settlement makes no mention of the fact that the increases in wages and allowances were being made due to in the cost of living, but instead the following clause was incorporate in the settlement :- "The management has agreed to continue to pay C. L. A at the rate of Rs, 40 announced by the Government in the month of July, 1980 and admissibility or otherwise of any additional C. L. A will depend upon the provisions of the enactment on this subject".
11. As the increases in wages/allowances payable to the workmen under the aforesaid settlement were not on account of rise in the cost of living the most important requirement for set off is wanting in the instant case. I am, therefore, of the humble view that the applicant ' company is not entitled to withhold the cost of living allowance payable to their workmen under clause (5) of section 3 of the said Act or to set off the same against the increases in the wages allowances of the workmen.
12. In the case of Dawood Cotton Mills Al-Fateh Labour Union v. Dawood Cotton Mills Ltd., as in the case of the Azad Friends and Co. Ltd., there is no tangible evidence indicating that the increase in wages of Rs, 40 per month was given on account of the rise in the cost of living, but on the contrary, there are circumstances to suggest that the increase was payable on account of other causes and factors. The first and foremost of such circumstances is that there is no direct or indirect reference in the settlement that the increase in wages was being given on account of rise in the cost of living.
The second circumstance which negatives the contention of Dawood Cotton Mills that the increase was payable on account of the rise in the cost of living is that whereas in the earlier settlements of 1972, 1977 and 1979, which have been produced by the Dawood Cotton Mills, there is either express statement or a strong indication to the that effect the increases in wages provided under the said settlements have been given on account of rise in the cost of living and that the cost of living allowance announced by the Government would be subject to set off against such increases, no such reference or provision has been made in the settlement of 1981, with which we are presently concerned. The absence of such a provision in the present settlement is significant and shows a departure from the policy adopted in the earlier settlements where the increases in wages were expressly stated to be given on account of rise in the cost of living. The absence of such a provision from the present settlement strongly suggests that the increases were not given on account of rise in the cost of living or at least that this provision was not agreed to by the C. B. A., and hence, was not incorporated in the present settlement. It may further be mentioned that instead of the provision as contained in the earlier settlements, that the increase in wages was being given on account of the rise in the cost of living, the present settlement contains the following provisions under the heading "Miscellaneous"- "That the Union have agreed to withdraw, unconditionally, rest of the demands contained in their Charter of Demands forwarded with their letter No, DC-A/LG-333/81, dated 19th March, 1981.
' That the Union have undertaken on behalf of the workers that the Union, its office bearers and the workers shall perform their duties, assignments and jobs to the best of their abilities.
' That the Union have undertaken on behalf of the workers that they shall do their best to increase the production of the company and also maintain quality and efficient use of raw materials, machines and manpower.
' That the Union have agreed not to interfere in any way or prevent the management or their personnel from implementing policies of the company, which may be introduced from time to time, for improving financial control, production and efficiency of the company.
' That this settlement shall come into force with effect from 28th April, 1981, and shall be binding upon both the parties upto 27th April, 1983.
' That Union/workers have agreed not to raise or reagitate for any financial or non-financial demand having financial or otherwise implication, upon the management during the operation of this settlement i,e, upto 27th April, 1983.
' That the Union/workers have also agreed that they shall not interfere, directly or indirectly, in the legal right and the authority, privileges and jurisdiction of the management."
' The above provisions suggest that the increase in wages was on account of negotiations based on factors other than the providing of relief on account of rise in the cost of living.
13. Mr. Mahmood Abdul Ghani, the learned counsel for Dawood. Cotton Mills, however, sought to rely upon two circumstances in support of his contention that the increase in wages was given on account of rise in the cost of living and to provide relief against the same. He submitted that in the Dawood Cotton Mills there was only a single wage system and no allowances were payable and this practice was more favourable to the workmen. It is not necessary to consider this aspect of the case in the present proceedings. The learned representative also invited my attention to the fact that the demand of the workers was for 25% increase in their wages. Apart from the fact that the making of the demand for increase in the wages of all workmen by 25% does not by itself suggest that the demand was based upon the rise in the cost of living, the admitted position is that the demand was not accepted and instead the wages of every workman was increased by an amount of Rs,
40. It was argued by Mr. Mahmood A. Ghani that the substantial rise in the wages of the workmen was indicative of the fact that it was given on account of rise in the cost of living. He sought support for his contention from the decision of my learned predecessor in the case of Elite Textile Mills Ltd. v. Workers' Union (1). In that case, my learned predecessor has observed that the intention of the parties is to be gathered primarily from what is stated in the settlements itself and since the setilement provides for increase of wages by as much as 50% this increase appears to have been made on account of rise in the cost of living and the cost of living allowance provided under Ordinance XXII of 1973, could be set off against the increase. Such a view could possibly have been taken if there had been no material to negative the same. I have already referred, to the past practice that specific mention was made in the past settlements that the increase in wages was being given on account of rise in the cost of living. The absence of such a provision in the present settlement would seem to indicate a different intention and would thus make the drawing of any such inference unreasonable. I am, therefore, of the view that the respondent company is not entitled to withhold the cost of living allowance payable to workmen under subsection (5) of section 3 of the said Act against the increase in wages allowance to workmen under the settlement of 1981.
14. The case of Singer Industries Labour Union stands on a different plane. The settlement arrived at between the applicant Union and the company on 19th April, 1981 itself expressly stated that the financial benefits have been agreed by the company in consideration of the rise in the cost of living. This provision is contained in clause 11 (a) of the settlement under the, heading "General" and reads as follows :- "11 (a) The Union hereby agree that the above financial benefits have been agreed by the company in consideration of the rise in the cost of living and the Union understanding of co-operation in implementing the measures of improving the Labour productivity."
15. Mr. Chaudhry Rasheed, the learned counsel for the applicant Union, however, sought to rely on 2 circumstances in support of his contention that the increase in wages and allowances to the workmen was not given' on account of rise in the cost of living. His first leg of argument in this behalf was that the increase in the basic wages, though admittedly substantial, was only given to permanent workmen and the temporary workmen were excluded from this increase, which would not have been the case if the increase in wages was given on account of the rise in the cost of living. In support of this limb of his argument, he relied upon the decision of a learned Single Judge, of the Karachi High Court in the case of Security Papers Employee's Union v. lVth Sind Labour Court and another (2). In that judgment, no doubt, one of the circumstances taken into consideration in holding that increase in wages was not given on account of the rise in the cost of living was that the increase was given only to permanent workman, but the main circumstances which influenced the {{FOOT NOTE}}
(1) 1974 PLC 240 (2) PLD 1976 Kar. 288 {{FOOT NOTE}} ' learned Judge in holding that the increase in wages was not given on account of rise in the cost of living was that there was total absence of any such reference in the settlement by which the increase in the wages was given whereas in the instant case, as already shown the settlement expressly states that the financial benefits have been given in consideration of the rise in the cost of living. The other circumstance urged by Mr. Ch. Rasheed in support of his contention was that even if it be conceded that the rise in the cost of living was a factor or a consideration in granting the increase in wages and allowances, it was only one of the factors, the other factors being the Union's understanding or co-operation in implementing the measures for improving the labour productivity and the giving up by the Labour Union of its other demands. The argument of Mr. Ch. Rasheed as I understood it, seems to be that in order that an increase in wages or allowances should qualify for adjustment against the additional cost of living allowance, such increase in wages/allowances must be solely and exclusively given on account of the rise in the cost of living.
However, the law neither uses such expression nor can such intention be legitimately drawn from the words used. Obviously, in cases where an employer substantially increases the wages/allowances of the workmen, even if such an increase is justified or based on the rise in the cost of living, he would expect better co-operation and better productivity from the workmen, because increase in financial commitment must be matched at least partly with better production and increase financial returns. Moreover, since it would be difficult in most cases to apportion the percentage of the increase which is given on account of the rise in the cost of living and to other circumstances, including willingness to cooperate with the management in attaining greater productivity, the law would become difficult of operation and may possibly become inoperative if set off is allowed only in those cases where increase in wages was not solely on account of rise in the cost of living. Of course, if the increase in wages is partly on account of the rise in the cost of living and partly related to the actual production of an individual worker, the position would be different, for in any such cases the increase in wages would be substantially what is termed as production incentive. In the instant case, I am satisfied that the increase in wages/allowances was on account of the rise in the cost of living.
16. The case of General Tyre and Rubber Employees' Welfare Labour Union v. Messrs General Tyre and Rubber Company (Application No, KAR-643/81), is substantially similar to that of the Singer Industries. In the instant case as in the case of Singer Industrie's there is specific mention in the settlement of the fact that the increase in the wages/ allowance is on account of the rise in the cost of living. This provision is made in paragraph 6 of the recital clause and the said paragraph reads as follows :- "And whereas the parties have reached the following settlement, taking into cousideration among other things, the rise in the Cost of Living, on all the demands and claims of the Union and the workers as contained in the said Charter of Demands or brought forward for negotiations or discussions in the course of meeting for Collective bargaining of the said Charter of Demands".
17. Further indication that the increase in wages/allowances was given on account of rise in the cost of living and was adjustable against the cost of living allowance provided under the law is given in the clause in the agreement under the heading "Compounding of benefits" which reads as follows :- "It is mutually agreed that the benefits covered by this agreement will not be compounded with similar benefits stipulated by any law which may be introduced during the course of this Agreement. In the event of such a law being implemented, the company's additional liability/obligation, if any, will be to provide for the difference between the benefits already in effect and the benefits given by law."
18. As in the case of the employees of Singer Industries the increase in wages in the instant case was also confined solely to permanent employees. However, it appears from the affidavit of the Divisional Manager (Administration) of the company that the wages of unskilled workmen were separately increased and hence no mention of that increase was made in the settlement with the Union. It appears from paragraph 3 of his affidavit, dated 10th December, 1981 that whereas the wages of unskilled workmen in the year 1980 were Rs, 15 per day the same were increased by Rs, 5 and became Rs, 20 per day in 1981. As such there has been an increase in the wages not only of the permanent workmen but also the temporary workmen though the increase in the emoluments of the permanent workmen was naturally much higher. I am, therefore, of the view that in this case also the General Tyre and Rubber Co. (Pak.) Ltd. is entitled to set off the cost of living allowance payable under subsection (5) of section 3 of the said Act against the increase in the wages and such allowances in the settlement which are not given on account of the arduous nature of the duties or to compensate workmen for any extra labour or any expenses incurred by them.
19. Mr. Mahmood A. Ghani, the learned counsel appearing for Dawood Cotton Mills Ltd., Singer.
Industries of Pakistan Ltd., and General Tyre and Rubber Co. (Pak) Ltd., also invited my attention to a number of authorities and Reports on the question 'of principles governing the wage structure of workmen and the foundations of the wage policy and cited authorities, both from the Ind jurisdiction and of the Pakistan Courts, on the principles governing the grant of house rent allowance, conveyance allowance, washing allowance, medical allowance, etc., and their effect to reduce expenditure which would otherwise have been borne by the family budget, but I have considered it unnecessary to deal with, these submissions as they are not relevant or helpful for the purposes of these cases which merely involve interpretation of the settlement arrived at between the parties.