Workmen v. Reptakos Brett. & Co. Ltd. (1992) 1 SCC 290

WORKMEN V. REPTAKOS BRETT. & CO. LTD.

Whether the management could alter the dearness allowance scheme to prejudice of workmen, based on the claim that the existing system over-compensated them relative to industry standards?

Management may revise wages to workers’ disadvantage only if it proves financial inability to sustain current wages, which are above the level of minimum wage.
Minimum wages, covering basic needs and welfare, are a protected right; employers unable to meet them should cease operations.
Dearness allowance must be determined on the basis of current money value of the components of minimum wage, rather than an outdated wage structure, in order to account for inflation.
Wage or dearness allowance restructuring requires proof that current wages exceed minimum living standards and are financially unsustainable.

In 1959, the Respondent company, The Reptakos Brett & Co. Ltd., implemented a “double-linked” dearness allowance (DA) system.
This system connected DA to both the cost of living index and employees’ basic pay.
It became a standard component of the company’s wage structure, confirmed through multiple settlements with employees, and was in effect for nearly 30 years.
In 1983, a dispute arose between the company and its workmen concerning the DA structure, leading the matter to the Industrial Tribunal.
The management sought to revise the DA scheme, requesting a new structure.
The Tribunal ultimately abolished the existing slab-based DA structure, mandating instead a link to the cost of living index alone at 33 paise per point over 100 points of the 1936 Madras cost of living index.
Both parties filed separate writ petitions before the High Court of Madras challenging the award of Tribunal.
The two parties agreed by way of joint memorandum before the High Court to focus only on the DA restructuring issue in their respective writ petitions.
The High Court upheld the Tribunal’s decision, and the intra-court appeal filed by the workmen was also dismissed.
Dissatisfied, the workmen appealed to the Supreme Court by special leave against the decision of the High Court.

The Supreme Court held that the Tribunal was not justified in abolishing the slab system of DA.
The Supreme Court stated that it had been a long-standing component of the wage structure confirmed through numerous settlements between the company and its workmen.
The apex Court found that the Tribunal and the High Court erred in failing to consider whether the existing DA structure met the minimum wage requirements necessary for a decent standard of life.
Moreover, neither the company nor the Tribunal presented evidence that the company’s financial position was so strained that it could not sustain the existing DA scheme.
The Supreme Court emphasized that wages should not be revised to the disadvantage of workers unless it can be shown that the company is financially incapable of maintaining the existing structure and that the current pay levels are above the minimum wage.