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When the CPI rose above 1450, the variable dearness allowance (VDA) for every 10 points rise was as follows : 

          (i)  for the first Rs. 100 of the salary        5 per cent of basic pay
 (ii)  for the second Rs. 100 and   2.25 per cent of basic pay
        (iii)  for salaries above Rs. 200/-             2 per cent of basic pay

 

7.      The company's demand was as follows :

(a) The existing scheme of dearness allowance should apply to workmen whose basic salary plus dearness allowance did not exceed Rs. 1,500/- per month ;

9. It would thus be clear from the award of the Tribunal that there is no ceiling placed on dearness allowance in the sense either that the workmen drawing basic salaries above Rs. 500/- p.m. are disentitled to receive any dearness allowance or that they are disentitled to dearness allowance above a fixed amount. The Award has placed a ceiling on the variable rate at which the dearness allowance was payable under the existing system to those drawing salary above Rs. 500/- per month and has made the same variable rate of dearness allowance applicable to them at which it is payable to those who draw basic wage of Rs. 500/-. In other words, the dearness allowance payable to workmen who draw a basic wage of Rs. 500/- and above will be at the same rate which is applicable to those who draw salary of Rs. 500/- per month. There is thus a ceiling on the variable rate of dearness allowance payable and not on its quantum. Nor is any workman disentitled to receive the dearness allowance.

17. (i) As regards method 'A', its attraction to the employers lies undoubtedly in the fact that it is the least burdensome among the four methods. Its logic at first blush, appeals. Since it has all along been held that the purpose of dearness allowance is to off-set the rise in the cost of living, it is naive to suggest that the variable dearness allowance to be paid to the employees should maintain only the value of dearness allowance paid in the base year. This argument, however, ignores that the dearness allowance is paid in the base year to maintain the value of the basic wage of that year, the object of the dearness allowance being to protect the wage against the rise in the cost of living. The dearness allowance or the rate at which it is paid cannot be fixed and is not fixed independently of the basic wage. It is fixed on the basis of and in relation to it. Hence the dearness allowance cannot be divorced from the basic wage without making it unrealistic and negativing the very object for which it is paid. If, therefore, the dearness allowance is to serve its real purpose, the rate at which it is paid must constantly reflect the basic wage which it seeks to protect. The object is not achieved by this method, since it is designed only to protect the value of the dearness allowance paid in the base year. That is why, as the illustration given shows, as the cost of living index increases, it protects the basic wage in an inverse proportion. The method forgets that it is the basic wage and the dearness allowance taken together which protects the value of the basic wage in a given year.

It will be clear from the aforesaid paragraph that the Court has merely referred to the nature of the statement filed in that case by the workmen. There is nothing in this paragraph to suggest that the Court had approved of the system adopted by the Union to work out the rate of neutralisation. It may be mentioned here that in their statement, the workmen had tried to compare the percentage of increase in the dearness allowance paid to the workmen as against the percentage of increase in the consumer price index over a particular index number of a base year, and to show how the percentage of increase in wages was lower than the percentage of increase in the C.P.I. In Chatanagpur Chamber of Commerce case (supra) the Patna high Court was called upon to decide as to whether a Notification issued by the Government increasing the rate of the variable dearness allowance from 2 Ps. to 4 Ps. per point rise in the cost of living index per day under the Minimum Wages Act was valid. The Court was undoubtedly concerned there directly with the working out of the rate of neutralisation and as far as we know this is the only case of its kind so far. While doing so the Court adopted the following method. The Court compared the percentage increase in the consumer price index with the percentage increase of the variable dearness allowance to the total wages, and since it was found that on the basis of the said enhanced rate of 4 Ps. per point, the percentage increase in the variable dearness allowance (VDA) compared to total wages of the preceding period, exceeded the percentage increase in the consumer price index, it struck down the said Notification holding that there was over neutralisation of the cost of living index which in effect increased the real wages. Since that was not the object of the dearness allowance, the Notification was illegal, invalid and without jurisdiction. This method, though advocated by the Company is assailable and (on behalf of the Unions it is assailed) on the ground that what has to be compared with the percentage increase in the cot of living index, is the percentage increase in the total wage packet, and not the percentage increase of VDA over the total wage packet. Since the Court had compared the percentage increase in the C.P.I. with the percentage increase of VDA to the earlier wage packet, and not the percentage increase in the two total wage packets, it has fallen in the same error from which Method A discussed above suffers. For the consideration only of increase in dearness allowance de hors the total wage packet suffers from the basic error, namely it completely ignores the fact that basically dearness allowance is meant to protect the real value of the basic wage and it is the dearness allowance plus basic wage which together ensures such protection. To take into consideration only the increase in dearness allowance or its percentage is to ignore one part of the emoluments of the base year. Neither the basic wage nor the dearness allowance alone is capable or maintaining the real value of the basic wage paid to the workmen in the base year or the preceding year, as the case may be . With respect, therefore, we are unable to endorse the method adopted by the High Court in this case.