Pakistan Case LawTHATTA CEMENT COMPANY LIMITED, THATTA Versus THATTA CEMENT EMPLOYEES' UNION, THATTA
This matter concerns a dispute between Thatta Cement Company Limited and its Collective Bargaining Agent regarding the adjustment of statutory Cost of Living allowances against wage increases granted under a Memorandum of Settlement. The core legal question was whether the 13.5% and 18% wage increases provided in the settlement were intended to provide relief for the rising cost of living, thereby allowing the employer to adjust these against the statutory increases mandated by the Cost of Living (Relief) Act. The court held that the increases granted in the settlement were not annual increments but were intended to provide relief for the rising cost of living, as evidenced by the surrounding circumstances and the magnitude of the benefits provided. Consequently, the court ruled that the statutory increases were adjustable against the benefits granted under the settlements. The petition was disposed of accordingly. The court affirmed the principle that to determine if settlement benefits are adjustable against statutory cost of living allowances, one must examine the charter of demands, the language of the settlement, and surrounding circumstances to ascertain if the wage rise was intended to provide relief for the mounting cost of living.
- Can wage increases granted in a settlement be adjusted against statutory cost of living allowances?
- What factors determine if a wage increase in a settlement is intended to provide relief for the cost of living?
- Does an Office Memorandum from the Federal Government override the provisions of the Cost of Living (Relief) Act 1973?
DECISION
The applicants are one of the units of the State Corporation and the respondents are the Collective Bargaining Agent. A Memorandum of Settlement was concluded between them on the 2nd of December 1984. Its duration was to be 2 years ending on the 30th June, 1986. At the end of 2 years there was another settlement arrived at between the parties for another period of 2 years ending on the 30th June, 1988.
2.In mid 1986 there was a demand by the union for the payment of the increases in their wages brought about under subsections (6) and (7) of section 3 of the Cost of Living (Relief) Act. This demand came to be resisted by the applicant as to be found by the letter of the Manager dated 21-9‑1986. It appears that the applicant had received an Office Memorandum from the Federal Government apart from other instructions, which said, "the pay fixation under the O.M. shall be made after ignoring the increases allowed under such agreements or awards and the employees will be allowed emoluments under the O.M. or under the settlement or award as may be more beneficial to the workers etc.
3.As the parties could not resolve their dispute among themselves ‑ their views being totally disparate‑‑ the management made an application for the interpretation of "the various clauses of the Memorandum of Settlement"‑‑ which has been placed before me for reasons which need not be mentioned, after a period of about six years and more.
4.Mr. Ali Amjad learned counsel for the respondents contended that the Office Memorandum referred to above could not override the text of subsections (6) and (7) of section 3 of the Cost of Living (Relief) Act. His contention is unassailable and it is not necessary to dilate on the same. We have therefore to go through the Charter of Demands, the Memorandum of Settlement and the surrounding circumstances to find out whether the said increases of 13.5% and 18% are liable to be adjusted in the increases accorded to the workers in the settlement.
5.Mr. Ali Amjad drew my attention to the fact that when the first settlement came, subsection (6) was not there and even subsection (7) saw the light of the day after the other settlement had been duly reached in between the parties. Nothing will turn on that, looking to the provisos in the two subsections in regard to the date of their applicability.
6.Mr. Ali Amjad also contended that though in the settlement arrived at in 1982 the recital had expressly mentioned that the increases were to meet the mounting cost, yet out of the two settlements before us at least the settlement of 1984 was totally reticent about it. The inference to be deduced according to him therefore was that the increases given by the Government were also made available to the workers apart from the benefits available under the Settlement. But the mention or non‑mention of the rise in the Cost of Living in view of the decision of the Supreme Court given in R.B. Industries Limited v. Employees' Union reported in PLD 1983 Supreme Court page 15 is hardly material.
7.In the aforesaid case the increases in the basic salaries of the workers were Rs.55 per month in the case of those who had completed 5 years of service, and Rs.45 per month, in the case of the remaining workers who were permanent in service. As to be found on page 19 of the aforesaid judgment the Tribunal had worked out, that the settlement had thus provided them an increase of 38.6% in the case of lower grade workers, and in the case of higher grade workers to the extent of 21.6%, coupled with the fact that these increases were not on account of usual annual increment or promotion by higher grade etc. This came to be called an abnormal increase and was found by the Tribunal to be nothing but relief for higher Cost of Living. This view had the approval of the Supreme Court. Their Lordships had observed as follows:‑‑
"The question has, therefore, to be resolved by applying the test laid down in the proviso to section 8, namely, whether the increase provided in the settlement was intended to provide relief due to a rise in the cost of living. In order to apply this test and determine this question, we see no reason to exclude from consideration the charter of demands, the language of the settlement itself and the surrounding circumstances whether the rise in the wages was given with a view to relieve the mounting cost of living. If after taking into consideration all these factors the conclusion is reached by the authority concerned that the increase was really given to provide such relief, then the case would squarely fall within the ambit of the proviso and the financial benefits granted under the settlement would be adjustable against the additional cost of living granted by the Amending Act:"
8.In the instant case according to the earlier settlement the basic salary was to be increased by 15% with the minimum increase of Rs.40 and grade adjustment. "Further the start and ceiling of the grade shall be raised by two steps without any change in the quantum of increment". The workers were grouped in 7 grades, tae lowest grade i.e. No. 7 beginning with a pay of Rs.140 per month, and the highest No. 1, with Rs.550 per month. Then there were increases also in some 17 allowances apart from a number of other facilities which are being excluded from the consideration, as these will fall outside the pale of increase to meet the cost of living but the House Rent increase was 50% of the basic salary plus Cost of Living Allowance. Apart from this there were the transport facilities. In the later Settlement again there was an increase of 15% in the pay with grade adjustment, the minimum amount being Rs.42. In his Additional Affidavit Ali Gohar Abbasi, Deputy General Manager, has clearly stated that the benefits under the settlement did not include the annual increment which followed automatically every year and which according to him were Rs.68 per month, in 1984‑85, Rs.71, in 1985‑86 and Rs.71 in 1987‑88. He has further mentioned that in the settlement of 1984‑86 the workers had received an average Rs.482 as the cash value of the benefits received by them by way of cash increase or other benefits. In 1986 it was Rs.546 in addition to Rs.482. He has also mentioned that the allowances as given by subsections (6) and (7), to the highest grade was Rs.249 per month only. The Chart has been submitted alongwith this to show that the payments of average increase under the settlement were almost twice the rate of 18%, in the case of workers in the highest grade and more than 5 times in the case of lowest grade that is grade‑I.
9.Mr. Ali Amjad, learned counsel for the respondent, referred to the definition of the wages as to be found in the Cost of Living Act, according to which any sum paid as Bonus, House Rent, Conveyance Allowance, Travelling Allowance or any other Allowance was not to be included in the wages. To my mind increase given by the employer towards the House Rent or Transport Allowance or the medical facilities which are obviously given to the worker due to rise in the Cost of Living will be difficult to exclude. It was so held in the case of Borroughs Well come Employees' Union v. M/s. Well come Pakistan Limited .
10.As these were not increases on account of the annual increments, which are separately detailed by Abbassi, but to provide relief as a result of the rise in the Cost of Living, the applicants are right in contending that the increases of 13.5% and 18% are to be adjusted in the increases under the two settlements. My answer to the same is accordingly.
H.B.T./2212/Lb.S Order accordingly.
Judges on this bench
- Agha Ali Hyder560 judgments