Workmen of Assam Co. Vs. Assam Co.
Ltd. [1958] INSC 28 (28 March 1958)
ACT:
Industrial Dispute-Bonus-Formula applicable
to tea industry- Deductions allowable for return on capital and on
reserves-" Unit Scheme " of Payment of bonus, if suitable.
HEADNOTE:
The appellants claimed bonus for the years
1950, 1951 and 1952 at the rate of six months' wages per year. The Industrial
Tribunal to which the dispute was referred allowed, in calculating the surplus
available for payment of bonus, inter alia return on paid up capital and on the
reserves at 7% and 5% respectively and accepted the " unit scheme "
of payment of bonus which the company had been following since 1926. Under this
scheme units were credited to each workman taking into consideration the
importance of the job he held, the wages he got and the number of years he had
been employed in that particular job, and each workman was paid bonus in
proportion to the units to his credit. On appeal the Labour Appellate Tribunal
modified the award and raised the return on the reserves from 5% to 6% :
Held, that the formula laid down in Sree
Meenakski Mills v. Their workmen, ([1958] S.C.R. 878 at 884) for ascertaining
the surplus on the basis of which bonus becomes determinable and distributable
could be applied to the tea industry with suitable adjustments.
The allowing Of 7% return on capital as
against 6% held allowable under that formula was justified by the additional
risk factors in the tea industry. The allowing Of 5% return on reserves by the
Industrial Tribunal as against 4% allowed by the formula was not unreasonable,
it being sufficient to safeguard the interests of the company. But the
increasing of this to 6% by the Appellate Tribunal was insupportable in the
absence of any claim in the respondent's written statement for rehabilitation
or ,of any figures for determining this amount.
The " unit scheme " was suitable
for the payment of bonus and would result not only in the fair distribution of
bonus but would also lead to improvement in the quality and quantity of work.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 34 of 1957.
Appeal from the judgment and order dated
August 31, 1955, of the Labour Appellate Tribunal of India, Calcutta in Appeal
Nos. Cal-187 & Cal-188 of 1954, arising out of the Award dated May 15,
1954, of the 328 Industrial Tribunal, Assam in Reference No. 20 of 1953
published in the Assam Gazette dated June 16, 1954.
C.B. Aggarwala and K. P. Gupta for the
appelants. P.K. Goswami, S. N. Mukherjee and B. N. Ghosh, for the respondent.
1958. March 31. The Judgment of the Court was
delivered by KAPUR J.-In this appeal brought by special leave against the order
of the labour Appellate Tribunal, Calcutta dated August 31, 1955, the
controversy between the parties is confined to the question of bonus. The
appellants are the workmen including members of the Indian staff and artisans
employed by the respondent, the Assam Co. Ltd., a company incorporated in the
United Kingdom and engaged in tea, industry in the State of Assam. The
appellants claimed bonus for the years 1950, 1951 and 1952 at the rate of 6
months' wages per year. The respondent offered to the Indian staff excluding
the artisans Rs. 51,061 as bonus for 1950, Rs. 48,140 for 1951 and Rs. 15,493
for 1952 which works out at 2.3% of the net profit for the year 1950, 3.1 % for
the year 1951 and 3.9 % for the year 1952. This dispute was referred to the
Industrial Tribunal by a notification of the Assam Government dated August 27,
1953.
The Industrial Tribunal allowed depreciation
as given in the company's balance sheets for the three years and allowed as
return on the paid up capital and on the reserve 7% and 5% respectively and
held the artisans also to be entitled to bonus. For the purpose of mode of
payment the Industrial Tribunal accepted the " unit scheme" under
which the company had been paying bonus since the year 1926. It was of the
opinion that the scheme was fair and rational and gave incentive to industrial
efficiency and to production.
Both the appellants and the respondent
appealed against this order, the former as to the correctness of 329 the
accounts, the amount of the return on capital and reserves and the " unit
scheme " and again claimed six months' wages per year as bonus. The latter
appealed against the percentages allowed on the capital and the reserves and
claimed 10% and 8% respectively as a fair return. It objected to the inclusion
of the artisans amongst the workmen eligible for bonus and also to the
application of what is known as the Bombay formula to Tea industry.
The Labour Appellate Tribunal varied the
Tribunal's award and allowed depreciation at the rate allowable under the
Indian Income Tax Act, confirmed 7% on the paid up capital but raised the
return on the reserves from 5% to 6% in order to meet the claim of the company
for rehabilitation which though not claimed before the Industrial Tribunal, was
put forward before it as a basis for increase in return on reserves. In this
Court the appellants again repeated their objection to the amount of depreciation,
the return on capital and on reserves and to the " unit scheme " but
were prepared to confine their claim to two months' was as bonus.
Counsel for the respondent objected to the
applicability of the formula to an industry like the 'tea industry, his
contention being that circumstances and considerations applicable to the
textile industry cannot apply to Tea industry which, being connected with
agriculture, is affected by various factors which must be taken into
consideration in the matter of depreciation, return oil capital and return on
reserves.
The principles on which the ascertainment of
the surplus on the basis of which bonus becomes determinable and distributable
have been laid down by this Court in Sree Meenakshi Mills v. Their Workmen The
formula there laid down is: " Distributable surplus has to be ascertained
after providing from the gross profits for (1) depreciation, (2)
rehabilitation, (3) return at 6 per cent. on the paid up capital (4) return on
the working capital at a lesser but reasonable rate, and (5) for an estimated
amount in respect of the payment of income-tax." (1) [1958] S.C.R. 878.
42 330 Under this formula the depreciation
allowable in cases arising under the Industrial Disputes Act is the normal
depreciation including shift depreciation. We did not understand counsel for
the respondent to contend that there was anything in the formula which was
wrong in principle but that it had to be adjusted to suit the circumstances of
the Tea industry. No circumstances, were however, given by him which would make
it unfair to apply the formula nor were any figures or particulars furnished
for varying it in regard to depreciation.
The Industrial Tribunal allowed 7% return on
capital as against 6% held allowable under the formula. Its reasons for this
increase were :
That the tea industry here may have often to
face various adverse circumstances-more adverse than those that may come upon
other industries and may have more risks than other industries. It may however
be noted that the company in the instant case-is more than a Century old one
faring well all through and has thus been so far a prosperous one and on a
sound footing and as such it is expected to have built up a substantial
reserve." The Labour Appellate Tribunal maintained this higher rate of
return on capital on the ground " of its being exposed to greater risks
than any other industry namely weather, pests in the plants and gradual
deterioration of the soil over which no man has any control These additional
risk factors are no doubt present in an industry connected with agriculture
like the tea industry and in our opinion they justify the giving of a higher
rate of return on capital.
Instead of 4% allowed by the formula the
industrial Tribunal fixed the return on reserves at 5% on the ground of its
being sufficient to guard the interests of the company but the Labour Appellate
Tribunal increased it to 6% to meet replacements and rehabilitation charges
since the " usual method of calculating these charges is not possible in
the present case " and, " we are to see that the industry does not.
suffer for want of replacement and rehabilitation funds and must 331 provide
such funds in some other way, namely, by allowing a return on the working
capital at higher rates ". In the absence of any claim in the respondent's
Written Statement for rehabilitation or any figures for determining this
amount, this extra one per cent. is insupportable. It is not a case where a
claim could not be made or figures could not have been given at the proper
stage. The additional one per cent. cannot therefore be allowed. In our opinion
the reasons given by the Industrial Tribunal sufficiently support the giving of
5% on the reserves as being fair considering the risks of the tea industry
which is exposed to various adverse circumstances and elements. The Industrial
Tribunal has not acted unreasonably nor in disregard of any accepted principles
in calculating the return on reserves at 5% and we see no cogent 'reason for
varying this rate.
The respondent has, since 1926, been paying
bonus to its employees according to a scheme called the " unit scheme
" which according to the Industrial Tribunal has the merit of being more
rational and gives incentive to industrious habits and efficiency loading to
more production. The Labour Appellate Tribunal did not go into the merits of
the scheme but ordered payment according to it. Under this scheme units are
credited to each workman, taking into consideration the importance of the job
he holds, the wages he gets and the number of years he has been employed in
that particular job. The value of units so awarded thus vary commensurate with
considerations of efficiency and experience. The establishment is divided into
twelve categories and the medical staff into three each based on the relative
importance of the nature of work done by a workman. Thus in the descending
order of their importance the jobs are classified as: 1. Head Mohori; 2. Head
Clerk;
3. Divisional Mohori ; 4. Land Mohori;
Hazaria Mohori; 5.
Kamjari Mohori; 6. Godown Mohori; 7. 2nd Tea
House Mohori;
2nd Kerani; 2nd Hazaria Mohori; 8. 2nd Godown
Mohori;
9.Gunti Mohori; 10. 3rd Tea House Mohori;
11.Mondal; 12.
Apprentices.
Units would thus be awarded to workmen in the
332 particular category they are in and the more qualified the worker the
better his work and the higher his wage, the higher the number of units he
would be entitled to. The amount available for distribution as bonus is divided
by the aggregate number of units of all the workmen participating in the scheme
and each worker would be entitled to a multiple of the amount payable on one
unit and the units to his credit. It appears to us that the estimate of the
Industrial Tribunal as to the suitability of the scheme was fully justified and
payment of bonus in accordance with this scheme will not only result in fair
distribution of bonus but would also lead to improvement in the quality and
quantity of work. This scheme is not to be confused with production bonus
though it has the merit of combining the fair distribution of the surplus
available and the maintenance of efficiency in the establishment.
Taking the figures on the basis of the award
made by the Industrial Tribunal we find that Rs. 7,64,608 would be the surplus
for the year 1950, Rs. 77,823 for 1951 and a deficit of Rs. 10 lacs for the
year 1952. The total sum available for three years will be nil. On the basis of
the claim which counsel for the appellant has made before us, i. e., two
months' wages, we find that the amount of bonus required for the members of the
staff for the year 1950 will be one sixth of Rs. 4,63,095 and for the year
1951, one sixth of Rs. 4,83,893 and for 1952 one sixth of Rs. 5,31,202 which
works out to Rs. 77,182 for 1950, Rs. 80,647 for 1951 and Rs. 88,533 for 1952.
The amounts required for the artisans further increase these figures. No doubt
on the calculations which have now been made the appellant may justify the
claim of two months' bonus for the year 1950 but the same cannot be said in
regard to It-)he claim for the years 1951 and 1952 because of the available
surplus which is only Rs. 77,823 for 1951 and there is a deficit of about 10
lacs of rupees for the year 1952. Taking all these figures into consideration,
we are of the opinion that the amounts awarded by the Industrial Tribunal are
fair and proper. As the Labour Appellate Tribunal 333 allowed depreciation and
rehabilitation on an erroneous basis, we would set aside the order of the
Labour Appellate Tribunal and would restore that of the Industrial Tribunal
with this modification that the Respondent shall make available the additional
amount required for payment of the proportional bonus to the artisans.
The appeal is, therefore, allowed to this
extent, the order of the Labour Appellate Tribunal set aside and the award of
the Industrial Tribunal restored with this modification that the respondent
shall also provide an additional amount for these three years for payment to
the artisans of proportionate bonus on the basis of the " Unit System ".
As neither of the parties have succeeded in their main contentions, the fair
order in regard to costs should be that the parties do bear their respective
costs throughout.
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