These are 2 applications under section 50, I.R.O., one by the Rashid Textiles Mills Azad Mazdoor Union, to which I will refer for bravity as the union and the other by the Rashid Textile Mills Ltd., to which I will refer as the company are for the interpretation of a settlement arrived at between the 2 parties on 25th April, 1981 as differences have arisen between the parties in regard to certain provisions contained in the said settlement. The provisions in the settlement in respect whereof differences have arisen between the parties provide for increase in the basic wages of skilled, semi-skilled and unskilled workmen as well as the workmen paid on piece rate basis. These provisions in the settlement read as follows :- URDU
2. According to the interpretation sought to be placed on the above provisions by the management, the company is entitled to set-of the cost living allowances payable under subsections (4) and (5) of section 3 of the Employees' Cost of Living (Relief) Act, 1973, hereinafter referred to as the said Act, against the increase in wages allowed to the workmen under the aforesaid provisions of the settlement, whereas the stand of the union is that set-of under the said Act is permitted only where the increase in wages or allowances is made for the purposes of providing relief to workmen against rise in the cost of living and since the increases in wages under the settlement were not provided for with the said object, the com--pany cannot be entitled to set of the allowances payable to workmen under subsections (4) and (5) of section 3 of the said Act against the said increases in wages.
3. It will be pertinent here to state that before the 2 present appli--cations were made to this Tribunal, the company had filed an application under section 34, I.R.O. Claiming set-of. This application was rejected by the learned I11rd Labour Court vide its order, dated 20th October, 1981 on the ground that the increase in wages made under the settlement in question was for the purposes of providing relief to the workmen against rise in the cost of living wand hence set-of as claimed by the com--pany could not be allowed. On appeal by the company to this Tribunal, the order of the Labour Court was set aside in view of the decision of the Karachi High Court in the case of Fauji Sugar Mills that interpreta--tion of the provisions of a settlement is the exclusive function of this Tribunal under section 50, I.R.O. It was in view of this judgment by this Tribunal that both the parties have filed separate applications under section 50, I.R.O. To this Tribunal.
4. An essential requirement for set-of under subsection (5) of section 3 of the said Act is that the amount payable under the settlement or agreement must be given as a relief due to rise in the cost of living. Although subsection (4) of section 3 of the said Act is differently worded from subsection (5) of section 3, but on a close examination of the said subsection in the light of the scheme of the said Act, was held by this Tribunal in the case of New Jubilee Insurance Employees'
Union v. Messrs New Jubilee Insurance Co. Ltd. And 3 others (1981 PLC 705) that "the amount" against which the cost of living allowance payable under sub-section (4) of section 3 of the said Act can be set-of should be paid or payable by the employer to provide earlier due to the rise in the cost or living. As such, whether adjustment or set-of is sought under subsection (4) of subsection (5) of section 3 of the said Act, in either case, it must be established that the increase in wages or allowances was made by the employer to provide to the workmen against rise in the cost of living. This, however, not mean that the settlement or agreement itself should specifically that the increase in wages or allowances is being made for the purposes of providing earlier to the workmen against rise the cost of living, A Division Bench of the Karachi High Court in the case of New Jubilee Insurance Company v. District Judge Karachi (1981 PLC 566), while interpreting the words 11specitically given with reference to increase in allowances, appear--ing in the explanation to section 8 of the said Act, repelled the conten--tion that the said words require an express mention in the settlement or agreement itself that the increase in allowances was given to provide relief due to rise in the cost of living, and holding that in the absence of any such express statement in the settlement or agreement, the Court is empowered to look into the facts and circumstances and also to consider the evidence validly brought on record observed as follows: " We are of the considered view that the explanation to section 8 does not provide a form to express the nature and purpose of payment in a settlement or a document. It merely clarifies that if the employer wants to adjust any allowance, then it should be clearly established that it was specifically paid to provide relief due to rise in the cost of living. In such a situation if there is any am--biguity the benefits will be given to the workers and the employer will not be entitled to the benefits of adjustment. If the purpose of granting such increase is not clear from the agreement itself then the Court is empowered to look into the facts and circumstances and also to consider the evidence subject to the rules of evidence to determine the intention of the parties, whether the payment was intended to be made to provide relief due to rise in the cost of living."
5. It was candidly conceded by Mr. Abdul Hafeez, the learned counsel for the company that there was no express statement in the settlement that the increase in wages was being made to provide relief to the workmen against the rise in the cost of living, but the learned counsel strongly urged that there are indications in the settlement itself for concluding that the increase in wages was made to provide such a relief to the workmen. The learned counsel relied upon 2 circumstances in support of his contention. The first was that there was no usual annual increment system prevailing in the company's establishment. In this behalf, he invited my attention to the cross-examination before the learned Labour Court of Mr. Abdul Majeed, manager of the company, who has stated that the wages of workmen are increased every year by virtue of settlement and that no other annual increment in wages is given except the one agreed under the settlement. From this reply, it can only be inferred that though annual increments are given to the workmen by the company, the system followed is not of granting fixed or pre-determined increase after a workman has put in on year's service or other prescribed period of service, but the extent or quantum of increase as well as perhaps the date from which the increment would be due would be negotiated through a settlement between the parties. The fact never the less remains that there is some system of annual increments in the company and since this appears to be a normal practice in the company, the increments granted or provided under the settlement could well be considered to be the usual increments. Such increments, therefore, would be protected from the provisions of set-of under subsection (5) of section 3 of the said Act. Even if I am wrong in the view that 1 have taken, the question would still arise in order that the company be entitled to set-of, whether the increase in basic wages granted to the workmen was for the purposes of providing relief to them against the rise in the cost of living. Merely because the increases in wages were negotiated through settlements cannot possibly give rise to the inference that the increase is made to provide relief to workmen against rise in the cost of living. The increase in wages may be due to several factors such as the earning or profits by the company, extra production by the workmen, increase in the prices of the products of the company, higher wages paid by other companies doing similar business etc. The increase in the basic wages of the workmen is modest. Perhaps, if it had been unusually high and there had been no explanation why such high increase was made where as in past the increases in wages had been modest, this could have been a circumstance to be taken into considera--tion along with other circumstances for determining whether the increase in wages, was on account of rise in the cost of living and to provide relief to workmen against such rise. The instant increase in wages, however, as already indicated is rather modest.
6. It may further be pointed out that the settlement provides for increase only in the basic wages of the workmen. In the case of Employees' Welfare Union v. R.B. Industries Ltd. (PLD 1976 Kar. 297), the question which arose for determination by a Division Bench of the Karachi High Court was whether the increase in the basic wages of the workmen under a settlement between the management and the C.B.A. Was by way of cost of living allowance or a normal increase in wages. The settlement in that case provided for an increase of Rs.45 to Rs.55 in the basic monthly salary drawn by each workman. It was found that there was no regular scale of wages in the R. B. Industries, whereby the workers could get automatic increase at regular intervals. However, every 2 years the manage--ment and the employees entered into a settlement to determine the conditions of service of workers including wages. It was in pursuance of this prac--tice that settlement was arrived at between the parties on 15th May, 1974, by which increase in wages of the workmen, as stated above was provided. Repelling the contention that the increase in wages to the workmen was given on account of rise in the cost of living, the Division Bench observed as follows :- " The relevant clause in the settlement, as reproduced above, clearly states that the increase of Rs.
55 and Rs. 45 respectively is by way of increase in the basic salary. It nowhere specifically declares that it is an increase occasioned due to rise in the cost bf living. The provision of the law on the subject is quite clear and is not ambi--guous. Any effort to prove through extraneous circumstances that the increase was due to rise in the cost of living is not called for. In view of the clear language used by the Legislature there is no room for any controversy in the matter."
7. The second circumstance on which Mr. Abdul Hafeez relied upon in support of his contention was that under the settlement itself it was ex--pressly provided that if during the period of 2 years for which the settle--ment was to remain in force, the Government granted an increase either in the basic wages or in the cost of living allowance, the increase in wages granted to the workmen under the settlement would be considered as part of the increase in the basic wages or cost of living allowance by the Government. It was first sought to be argued by Mr. Abdul Hafeez that the above provision in the settlement in fact provided that if the Govern--ment enacted legislation providing for increase in wages or the cost of living allowance, then the increase in wages provided under the settlement would cease to be given. The wording of the settlement, however, does not support the contention of the learned counsel for the company. The settlement does not state that on the enactment of a law providing for increase in the wages or the cost of living allowance payable to the work--men, the employer will be exempted from the liability to pay the workmen the increase in the basic wages provided under the agreement, but on the other hand, the settlement provides that on the enactment of such a law, the increase in wages under the settlement would be deemed to be a part of the amount payable to the workman under the law. The payment of the cost of living allowances under subsections (4) and (5) of section 3 of the said Act is a statutory responsibility of the employer and set-oft' against the amount of increase in the wages or allowances granted by the employer to the workmen under any agreement or settlement is permissi--ble only on the specific conditions laid down in the aforesaid subsections, the most important condition being that the increases in wages/allowances must be given to provide relief to workmen against rise in the cost of living.
8. Mr, Abdul Hafeez finally argued that specific reference to the cost of living allowance in the settlement indicates that the increase in wages was given to provide relief to the workmen against rise in the cost of living. It may be mentioned that in addition to the cost of living allowance the settlement makes mention of increase in the wages of the workmen, which ordinarily is not linked with rise in the cost of living. In any case mere reference in the settlement to the cost of living allowance or the withdrawal of the increases in wages in case the cost of living allowance was increased by Government would not lead to the inference that the increase in the basic wages granted to the workmen by the company was to provide relief to them against rise in the cost of living.