The Indian Hume Pipe Co. Ltd. Vs.
Their Workmen [1959] INSC 61 (5 May 1959)
BHAGWATI, NATWARLAL H.
DAS, SUDHI RANJAN (CJ) DAS, S.K.
GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
CITATION: 1959 AIR 1081 1959 SCR Supl. (2)
948
CITATOR INFO :
R 1960 SC 571 (10) E&D 1960 SC 826 (19) R
1960 SC1006 (5) RF 1966 SC1754 (11) R 1972 SC 330 (10)
ACT:
Industrial Dispute--Bonus -Available Surplus Previous
losses written off-Expenditure on parents written off--Debenture redemption
reserve--If Proper Prior chargesPreference shares, return on-Calculations on
All-India basis, whether proper.
HEADNOTE:
The appellant manufactured hume pipes and had
factories in different parts of India, Pakistan and Ceylon. For determining the
available surplus for the payment of bonus for the year 1954-55 the appellant
claimed deductions as prior charges on account of (i) losses suffered on the
Lahore factory written off, (ii) expenditure on patents written off, and (iii)
debenture redemption reserve. It also claimed 6% return on the preference
shares as return on paid up capital. The losses on the Lahore factory had been
incurred in the previous years which had been carried forward from year to year
and had been written off as irrecoverable in the bonus year. The amounts spent
on the purchase of the patents which had been worked off in the previous years
had also been written off in the bonus year.
The appellant had issued debentures in
1942-43 redeemable in 1962-63 and claimed Rs. 3,50,000 as the annual
contribution towards the redemption reserve. The appellant bad issued
preference shares on which the shareholders, under the terms of the issue, were
not entitled to more than 5%, but the appellant claimed a return of 6% on these
hatres also as return on paid up 949 capital as provided in the Full Bench
formula. The dispute regarding bonus had been raised by the workmen of the
Wadala factory alone, the workmen of other factories having settled the matter
had been paid the agreed bonus. The respondents claimed that the bonus
calculations should not be made on the basis of All-India figures but on the
basis of the actual amounts paid or payable by the appellant under the
settlements.
Held, that the losses on the Lahore factory
and the patents written off could not be allowed as prior charges as they were
merely debits in connection with the working of previous years. Nor could the
amount on account of the debenture redemption reserve be allowed as a prior
charge as no such charge was envisaged by the Full Bench formula of the Labour
Appellate Tribunal ; but this amount could be taken into consideration when
distributing the available surplus among the various interests entitled
thereto. In determining the available surplus the Full Bench formula must be
adhered to in its essential particulars as otherwise there would be no
stability or uniformity of practice.
A deduction of more than 5% return on the
preference shares could not be allowed as that was the maximum return which the
shareholders could get on these shares. Even though the Full Bench formula
mentioned 6% return on paid up capital it was not to be literally construed and
the Tribunal could, if the circumstances warranted, increase or decrease the
rate.
In calculating the actual amount of bonus to
be paid calculations had to be made on the basis of All-India figures otherwise
the respondents would have an advantage over those workmen with whom
settlements had been made and would get larger amounts of bonus merely by
reason of the fact that the appellant had managed to settle the claims of those
workmen at lesser figures.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 54 of 1958.
Appeal by special leave from the Award dated
January 14, 1957, of the Industrial Tribunal at Bombay in Reference (I. T.) No.
75 of 1956.
M. C. Setalvad, Attorney-Generalfor India and
I. N. Shroff for the appellants.
N. V. Phadke, T. S. Venkataraman K. R. Sharma
and K. R. Chaudhury, for respondent No. I and the Intervener.
1959. May 5. The Judgment of the Court was
delivered by 950 BHAGWATI, J.-This appeal with special leave challenges the
award made by the Industrial Tribunal, Bombay, in Reference (IT) No. 75 of 1956
between the appellant and the respondents whereby the Industrial Tribunal
awarded to the respondents 4 1/2 months' basic wages as bonus for the year
1954-55 (year ending June 30, 1955).
The appellant is a subsidiary of the Premier
Construction Co., Ltd., and manufactures Hume Pipes. It has factories in
different parts of India, Pakistan and Ceylon. The respondents are the workers
employed in the appellant's factory at Antop Hill, Wadala, Bombay.
In October 1955, respondent I who are workmen
represented by the Engineering Mazdoor Sabha made a demand for the payment of
six-months' wages as bonus for the year 1954-55. The matter was also referred
to the Conciliation Officer requesting him to initiate Conciliation
Proceedings. The Conciliation Proceedings went on before the Conciliation
Officer upto March 23, 1956, on which date both the parties arrived at and executed
an Agreement to refer the matter to an Industrial Tribunal for adjudication.
Accordingly, on April 30, 1956, both the parties drew up and signed a jointapplication
for referring the dispute for adjudication to a Tribunal and the Government of
Bombay thereupon in exercise of the powers conferred by sub-s. (2) of s. 10 of
the Industrial Disputes Act, 1947, by its order dated June 11, 1956, referred
the following dispute to the Tribunal :" DEMAND: Every Workman (daily
rated) should be paid bonus for the year 1954-55 (year ending 30th June, 1955)
equivalent to six-months' wages without it attaching any condition thereto
".
Respondent No. I filed their statement of
claim before -the Tribunal on June 29, 1956. They alleged that the profits of
the appellant during the year 195455 were higher than those during the year
1953-54 for which year the appellant had paid four months' basic wages as
bonus. They also alleged that the wages paid to them by the appellant fell
short of the, living wage and therefore the appellant should pay the in six
months' basic wages as bonus for the relative year.
951 The appellant filed its written statement
in answer on August 14, 1956. The appellant submitted that, after providing for
" the prior charges " according to the formula laid down by the
Labour Appellate Tribunal the profits made during the year under consideration
did riot leave any surplus and tile, respondents were not entitled to any
bonus. It denied that it bad made huge profits during the year in question and
submitted that the profits made were not even sufficient to provide for "
the prior charges ", etc.
The Tribunal after hearing the parties came
to the conclusion that even if payment of a bonus equal to 4 1/2 months' basic
wages were made a fair surplus would be left in the hands of the appellant to
the tune of Rs. 3.30 lacs and therefore awarded the same subject to the
following conditions:(a) Any employee who has been dismissed for misconduct
resulting in financial loss to the company shall not be entitled to bonus to
the extent of the loss caused.
(b) Persons who are eligible for bonus but
who are no longer in the service of the company on the date of the payment
shall be paid the same provided that they make a written application for the
same within three months of publication of this award. Such bonus shall be paid
within one month of receipt of application provided that no claim can be
enforced before six weeks from the date this award becomes enforceable.
Being aggrieved by the said award of the
Tribunal, the appellant applied for and obtained from this Court special leave
to appeal against the same under Art. 136 of the Constitution and hence this
appeal.
The formula evolved by the Full Bench of the
Labour Appellate Tribunal in Millowners' Association, Bombay v.
Rashtreeya Mill Mazdoor Sangh, Bombay(1) is
based on this idea that " as both labour and capital contribute to the
earnings of the industrial concerti, it is fair that labour should derive some
benefit, if there is a surplus after meeting " prior or necessary charges
". The following were prescribed as the first charges on (1) (1950) L.L.J.
1247 952 gross profits, viz., (1) Provision for depreciation ;(2) reserves for
rehabilitation ; (3) a return at 6%on the paid up capital; (4) a return on the
working capital at a lesser rate than the return on paid up capital and (5) an
estimated amount in respect of the payment of income-tax. The surplus that
remained after making the aforesaid deductions would be available for
distribution among the three sharers, viz., the shareholders, the industry and
the workmen [See Muir Mills Co., Ltd. v. Suti Mills Mazdoor Union, Kanpur (1)
and Sree Meenakshi Mills Ltd. v. Their Workmen (2)].
This Full Bench -Formula has been working all
throughout the country since its enunciation as aforesaid and has been found to
be, in the main, fairly satisfactory. It is conducive to the benefit of both
labour and capital and even though certain variations have been attempted to be
made therein from time to time the main features thereof have not been
substantially departed from. We feel that a formula which has been thus adopted
all throughout the country and has so far worked fairly satisfactorily should be
adhered,' to, though there is scope for certain flexibility in the working
thereof in accordance with the exigencies of the situation.
In the working of the said formula, however,
regard must be had both to the interests of capital and labour. In any given
industry there are three interests involved, viz., the shareholders, the
Company and the workmen and all these interests have got to get their proper
share in the surplus profits ascertained after due provision is made for these
" prior charges ". The shareholders may look to larger dividends
commensurate with the prosperity of the industrial concern, the company would,
apart from rehabilitation and replacement of buildings, plant and machinery,
look forward to expansion and satisfaction of other needs of the industry and
the workmen would certainly be entitled to ask for a share in the surplus
profits with a view to bridge the gap between the wages earned by them and the
living wages. All these interests (1) [1955]1 1,s.C.R. 991, 998.
(2) [1958] S.C.R 878, 884, 953 have,
therefore, got to be duly and properly provided for having regard to the
principles of social justice and once surplus profits available for
distribution amongst these respective interests are determined after making due
provision for the " prior charges " as aforesaid the Industrial
Tribunal adjudicating upon the dispute would have a free hand in the
distribution of the same having regard, of course, to the considerations
mentioned hereinabove. But so far as the determination of the surplus profits
is concerned the formula must be adhered to in its essential particulars as
otherwise there would be no stability nor uniformity of practice in regard to
the same.
It maybe noted, 'however, that in regard to
the depreciation which is a prior charge on the gross profits earned by a
concern there is always a difference in the method of approach which is adopted
by the income-tax authorities and by the industrial tribunals. It was pointed
out by us in Sree Meenakshi Mills Ltd. v. Their Workmen (1) that the whole of
the depreciation admissible under the Income-tax Act was not allowable in
determining the available surplus.
The initial depreciation and the additional
depreciation were abnormal additions to the income-tax depreciation and it
would not be fair to the workmen if these depreciations were rated as prior
charges before the available surplus was ascertained. Considerations on which
the grant of initial and additional depreciations might be justified under the
Income-tax Act were different from considerations of social justice and fair
apportionment on which the Full Bench Formula in regard to the payment of bonus
to workmen was based. This was the reason why we held in that case that only
normal depreciation including multiple shift depreciation, but not initial or
additional depreciation should rank as prior charge. We approved of the
decision of the Labour Appellate Tribunal in U. P. Electric Supply Co., Ltd. v.
Their Workmen (2) in arriving at the above conclusion and disallowed the claim of
the company there to deduct the initial or additional depreciation as prior
charge in bonus calculations.
(1) [1958] S.C.R. 878.
120 (2) (1955) L.A.C. 659.
954 When this decision was reached we had not
before us the decision of the Labour Appellate Tribunal in Surat Electricity
Company's Staff Union v. The Surat Electricity Co., Ltd. (1) where a Bench of
the Labour Appellate Tribunal had negatived the contention that if only the
" normal " depreciation allowed by the Income-tax law were allowed a
company would be able to recoup the original cost of the assets and observed
that:
" For the purpose of bonus formula the
initial and additional depreciation, which are disallowed by that formula, must
be ignored in fixing the written down value and in determining the period over
which the normal depreciation will be allowed. The result will be a notional
amount of normal depreciation ; but, as we have said repeatedly the bonus
formula is a notional formula." We have already expressed in the judgment
delivered by us in Associated Cement Co., Ltd. v. Its Workmen (1) that for the
purpose of the bonus formula the notional normal depreciation should be
deducted from the gross profits calculated on the basis adopted in Surat
Electric Supply Co.
Staff Union v. Surat Electricity Co., Ltd.
(1) and not merely the normal depreciation including multiple shift
depreciation allowed by the income-tax authorities as stated in U. P. Electric
Supply Co., Ltd. v. Their Workmen (3).
It is well settled that the actual income-tax
payable by the company on the basis of the full statutory depreciation allowed
by the income-tax authorities for the relevant accounting year should be taken
into account as a prior charge irrespective of any set off allowed by the
Income-tax authorities for prior charges or any other considerations such as
building up of income-tax reserves for payment of enhanced liabilities of
income-tax accruing in future. It is also well settled that the calculations of
the surplus available for distribution should be made having regard to the
working of the industrial concern in the relevant (1) (1956) L.A.C. 443. (2)
[1959] S.C.R. 925.
(3) (1955) L.A.C. 659.
955 accounting year without taking into
consideration the credits or debits which are referable to the working of the
previous years, e.g., the refund of excess profits tax paid in the past or loss
of previous years carried forward but written off in the accounting year as
also any provision that may have to be made to meet future liabilities, e.g.,
redemption of debenture stock, or provision for Provident Fund and Gratuity and
other benefits, etc., which, however, necessary they may be, cannot be included
in the category of prior charges.
If regard be had to the principles enunciated
above it is clear that the items of Rs. 1.14 lacs representing the Lahore
factory balance written off, Rs. 0.34 lacs being patents written off, and Rs.
0.09 lacs shown as loss on sale of Tardeo property cannot be allowed as proper
deductions from the gross profits for the purposes of bonus calculations. The
first two items represented debits in connection with the working of previous
years. Loss of the Lahore factory had been incurred during the three previous
accounting years and had been carried forward from year to year and the only
thing which was done during the year under consideration was that it was then
written off as irrecoverable. The patents also had been worked off in previous
years and the amounts spent in the purchase thereof were therefore to be
written off but had reference to the working of the company during the previous
years. The last item of Rs. 0.09 lacs was trivial and was therefore not pressed
with the result that all these three items were rightly added back in the
calculations of the gross profits of the appellant and the figure of gross
profits taken at Rs. 36.21 lacs was correctly arrived at by the Tribunal.
The depreciation allowed by the Tribunal was
Rs. 9.82 lacs which was the full statutory depreciation allowed by the
Income-tax authorities. That should not have been done and the only
depreciation allowed should have been the notional normal depreciation which
was agreed between the parties before us at Rs. 6.23 lacs.
Working the figure of income-tax deducted by
the 956 appellant on the basis adopted in Shree Meenakshi Mills Ltd.
v. Their Workmen (1) the income-tax on the
gross profits of Rs. 36.21 lacs less the statutory depreciation allowed by the
income-tax authorities, viz., Rs. 9.82 lacs would be equivalent to 7 annas in
the rupee on Rs. 26.39 lacs, i.e., Rs. 11.55 lacs thus leaving a balance of Rs.
16.82 lacs from which the other prior charges would have to be deducted in
order to ascertain the distributable surplus.
6% return on the ordinary share capital and
5% return on the preference share capital would come to Rs. 4.30 lacs. The
appellant, however, claimed that even on the preference shares 6% return should
be allowed and not 5% even though preference shareholders were not entitled to
anything beyond 5% under the terms of issue. The appellant obviously relied
upon the wording of the formula: " return at 6% on the paid up capital
" and contended that the preference shares also being paid up capital it
would be entitled to a return of 6% on the preference shares for the purposes
of the bonus formula even though in fact it would have to pay only 5% return on
the same. We cannot accept this contention. Even though the bonus formula is a
notional one we cannot ignore the fact that in no event would the appellant be
bound to pay to the preference shareholders anything beyond 5% by way of
return. The Full Bench Formula cannot be so literally construed. There is bound
to be some flexibility therein, the 6% which is prescribed there as the return
on paid up capital is not inexorable, and the Tribunals could if the
circumstances warrant vary the rate of interest either by increasing or
decreasing the same. On the facts of this case however there is no warrant for
allowing anything beyond 5% return on preference share capital and the amount
of Rs. 4.30 lacs should therefore be deducted as another prior charge from the
grsos profits of the appellant.
4% return on reserves used as working capital
was calculated merely at a figure of Rs. 0.29 lacs worked out on a total figure
of Rs. 7,42,139. The Tribunal (1) [1938] S.C.R. 876.
957 did not take into consideration another
sum of Rs. 41,81,196 which represented the depreciation fund which according to
the appellant had been used as working capital during the year. If that had
been allowed a further sum of Rs. 1.67 lacs should have been added to Rs. 0.29
lacs and the total amount of 4% return on reserves used as working capital
would have amounted to Rs. 1.96 lacs.
Two arguments were advanced against this
contention of the appellant. One was that there was nothing like a depreciation
fund, that it merely represented a credit item introduced in the balance-sheet
as against the value of the fixed capital at its original cost and would have
disappeared as such if the proper accounting basis had been adopted, viz., the
fixed block bad been showed at its depreciated value after deducting the amount
of depreciation from the original cost. Such book entries, it was contended,
did not convert that credit item into a depreciation fund available to the
company and there was therefore no basis for the contention that such a
depreciation fund ever existed and could be used as working capital in the
business. The other was that there was nothing on the record to show that such
a depreciation fund, if any, had been, in fact, used as working capital in the
business during that year.
The answer furnished by the appellant in
regard to both these contentions was that on a true reading of the balancesheet
Rs. 41,81,196 were reserves used as working capital, vide calculations in Exhibit
C-12. Provision for depreciation was Rs. 1,10,29,954 and the paid up capital
was Rs. 80,00,000 thus totaling to Rs. 1,90,29,954. The total capital block as
shown in page 5 of the balance-sheet for the year ending June 30, 1955, was Rs.
1,48,48,758 and the working capital therefore was Rs. 41,81,196. This was apart
from Rs. 7,42,139 which was the total of the three items at page 4 of the
balance-sheet: Rs. 98,405 capital reserves, Rs. 4,73,734 other reserves and Rs.
1,70,000 provision for doubtful debts as also the investments, cash and bank
balance. This being the true position it follows on the facts of the present
case that this 958 amount was available for use as working capital and the
balance-sheet showed that it was in fact so used. Moreover, DO objection was
urged in this behalf nor was any finding to the contrary recorded by the
Tribunal.
We are, therefore, of the opinion that the
reasoning adopted by the Tribunal was not correct and the appellant was
entitled to 4% return on the reserves used as working capital including the sum
of Rs. 41,81,196. The appellant was thus entitled to Rs. 1.96 lacs as the 4%
return on reserves used as working capital and not merely Rs. 0.29 lacs as
allowed by the Tribunal.
The provision for rehabilitation bad been claimed
by the appellant at Rs. 1.10 lacs on the basis of 10% of the net profits
relying upon para. 20 of the Report of the Committee on Profit Sharing in which
the Committee had proposed that 10% of the net profits should compulsorily be
set aside for reserves to meet emergencies as well as for rehabilitation,
modernization and reasonable expansion. No evidence was at all led by the
appellant before the Tribunal showing the cost of the machinery as purchased,
the age of the machinery, the estimate for replacement etc., in order to
substantiate this claim for rehabilitation and the appellant was content merely
to rely upon this recommendation of the Committee on Profit-sharing. This was
rightly considered by the Tribunal as insufficient to support the appellant's
claim, though it allowed for rehabilitation, in addition to the statutory
depreciation, the amount for which the appellant had actually made provision,
viz., the sum by which the depreciation written off for the year exceeded the
statutory depreciation (i. e., Rs. 10,00,000 minus Rs.
9,82,799Rs. 17,201). The amount was really
small and did not affect the bonus to be awarded. The Tribunal, in fact,
allowed the same, though it appears that in the absence of evidence of the
nature above referred to even that sum of Rs. 0.17 lacs ought not to have been
allowed. In this state of affairs it is really impossible for us to allow the
appellant's claim for rehabilitation in anything beyond the sum of Rs. 0.17
lacs actually 959 allowed by the Tribunal and the claim of the appellant for
any further provision for rehabilitation must be disallowed for the purpose of
the bonus calculations for the year under consideration. It will however be
open to the appellant to claim higher rehabilitation for subsequent years if it
can substantiate its claim by adducing proper evidence.
In addition to these various sums allowed to
the appellant by way of prior charges against the gross profits earned during
the accounting year the Tribunal also allowed to the appellant Rs. 2.50 lacs by
way of provision for debenture redemption fund. The claim of the appellant was
for a sum of Rs. 3.50 lacs for the same and it arose under the following
circumstances. The appellant had issued debentures of the value of Rs. 30 lacs
in the year 1942-43 and they were redeemable in the year 1962-63. No annual
provision had been made from profits for redemption of the same inasmuch as
until the year 1949 the appellant was not working at a profit. Such provision
was made only thereafter. For the year 1950-51, the appellant made a provision
for Rs. 75,000 for debenture redemption fund, for 1951.52, Rs. 1,50,000, for
1952-53 Rs. 1,50,000, for 1953-54 Rs. 75,000 and further provision had to be
made for redemption of debentures in a sum of Rs. 24,50,000. In so far as 7
more years were left before the due date for redemption the appellant claimed
Rs. 3,50,000 as the annual sum to be set apart, though as a matter of fact in
the balance-sheet only a provision of Rs. 2,50,000 had been made by it for
debenture redemption reserve. The Tribunal pointed out that when the appellant
had in its accounts appropriated Rs. 2,50,000 for the debenture redemption fund
the claim to have Rs. 3,50,000 for the purposes of bonus formula was clearly
untenable. It however was of the opinion that a reasonable provision for
redemption fund should be allowed as a prior charge and actually allowed the
sum of Rs. 2,50,000 which had been actually provided for the purpose in the
balance-sheet, negativing the contention of the respondents that no provision
should be allowed for debenture redemption fund in the bonus formula.
960 We are of the opinion that the Tribunal
was not justified in allowing the sum of Rs. 2,50,000/for debenture redemption
fund as a prior charge in the bonus calculations. The Full Bench Formula does
not envisage any such prior charge. It is no doubt true that capital is shy and
it would not be practicable for the industrial concern to raise large amounts
by way of fresh debentures when they become due. It is also true that the
debentures do not stand on a par with other debts of a concern because the
debenture holders would in a conceivable situation be able to enforce their
security by bringing the industry to a stand-still by taking over charge of the
whole concern. It would therefore appear that the redemption of these
debentures would be one of the primary obligations of the industrial concern
and due provision has of necessity to be made for redemption thereof on due
date. This however does not mean that in the calculations of the distributable
surplus the provision for such redemption should be given the status of a prior
charge, though of course that would be a relevant consideration while
distributing the available surplus between the various interests entitled thereto.
We are therefore of opinion that the Tribunal was wrong in allowing Rs.
2,50,000/as a prior charge in the bonus
calculations.
This disposes of all the contentions which
have been urged on behalf of both the parties and calculating the figure on that
basis we arrive atthe following Rs. in lacs.
Gross Profit as per Tribudal's calculations
36.21 Less: Notional Normal Depreciation 6.23 29.98 Less: Tax @ 7 as. in a
rupee 11.55 18.43 Less: 6% return on ordinary share capital and 5% on
preference share capital 4.30 14.13 961 Less: 4% Return on reserves used as
working capital:
7,42,139 29 + 41,81,196 1.67
--------------------49,23,335 1.96 ------------12.17 Less: Provision for
Rehabilitation 0.17 -----------Available Surplus 12.00 This would bring the
available surplus for distribution to a sum of Rs. 12 lacs and this would be
distributable amongst the shareholders, the company and the workmen concerned.
It is not feasible to lay down any rigid
formula as to what the proportion of such distribution amongst these various
interests should be. The shareholders as well as the company would both be
naturally interested inter alia in providing the debenture redemption reserves
as also meeting the needs of the industry for further expansion. The workmen would
no doubt be interested in trying to bridge the gap between their actual wage
and the living wage to the extent feasible. This surplus of Rs. 12 lacs would
have to be distributed amongst them having regard to the facts and
circumstances of the case, of course bearing in mind the various considerations
indicated above.
Before we arrive at the figure of the actual
bonus which it will be appropriate in the circumstances of this case to allow
to the workmen, we may advert to one argument which was pressed before us. on
their behalf and that was that the bonus calculations should not be made on the
basis of the All-India figures which were adopted by the Tribunal but on the
basis of the actual amounts which the appellant had paid and would have to pay
to the workmen concerned. It was pointed out that the respondents here were
only the workmen in the Wadala Factory of the appellant. The appellant had,
however, paid to the various workmen elsewhere as and by way of bonus sums
varying between 4% and 29% of the basic wages for the year in question. The sum
of Rs. 1,23,138/only had been 121 962 paid in full and final settlement to the
workmen in some of the factories and the bonus calculations on an All-India
basis would thus work to the advantage of the appellant in so far as they would
result in saving to the appellant of the difference between the amounts to
which those workmen would be entitled on the basis of the All-India figures
adopted by the Tribunal and the amounts actually paid to them as a result of
agreements, conciliation or adjudication. It was therefore contended that the
calculations should be made after taking into account the savings thus effected
by the appellant and only a sum of Rs. 1,23,138 /which was the actual sum paid
to those workmen should be taken into account and no more. We are afraid, we
cannot accept this contention. If this contention was accepted the respondents
before us would have an advantage over those workmen with whom settlements have
been made and would get larger amounts by way of bonus merely by reason of the
fact that the appellant had managed to settle the claims of those workmen at
lesser figures. If this contention of the respondents was pushed to its logical
extent it would also mean that in the event of the non-fulfillment of the
conditions imposed by the Tribunal in the award of bonus herein bringing in
savings in the hands of the appellant, the respondents would be entitled to
take advantage of those savings also and should be awarded larger amounts by
way of bonus, which would really be the result of the claimants entitled to the
same not receiving it under certain circumstances-an event which would be
purely an extraneous one and unconnected with the contribution of the
respondents towards the gross profits earned by the appellant. The Tribunal
was, therefore, right in calculating the bonus on an All-India basis.
By our order dated April 12, 1957, the
appellant was ordered to pay to the respondents within a fortnight from the
date thereof bonus for the year 1954-55 equivalent to two months' basic wages;
that amount has already been paid and works out at Rs. 3.39 lacs on an
All-India basis.
The only question which therefore survives is
what further bonus, if any, would the respondents be entitled 963 to from the
distributable surplus of Rs. 12 lacs. The sum of Rs. 3.50 lacs required for
building up the debenture redemption reserve is an all-engrossing need of the
appellant and that is a factor which must of necessity be taken into
consideration while arriving at the ultimate figure, particularly because such
redemption of the debentures would enure not only for the benefit of the
Company and its shareholders but also of the workmen employed therein. Having
regard to all the circumstances of the case, we feel that an award of four
months' basic wages as aggregate bonus for the year 1954-55 (which by the way
was the bonus awarded for the previous year 1953-54 also) would give a fair
share to the labour in the distributable surplus, leaving to the shareholders
and the company a balance of Rs. 5.22 lacs to be utilised by them not only
towards building up of the debenture redemption reserve but also for building
up other reserves, which would be utilised for various other purposes indicated
above. The appellant would no doubt get also the refund of the income-tax on
the bonus payments made by it. This rebate would also go towards the fulfillment
of the very same objectives, which would ultimately enure both for the benefit
of the capital as well as labour.
We have, therefore, come. to the conclusion
that the appellant should pay to the respondents, in addition to the two
months' basic wages already paid to them in pursuance of this Court's order
dated April 12, 1957, an additional sum equivalent to two months' basic wages
by way of bonus for the year 1954-55 subject to the same conditions as were
laid down in the award of the Tribunal above referred to, all the dates
mentioned therein being calculated from the date of this judgment.
We accordingly allow the appeal, modify the
award of the Industrial Tribunal to the extent mentioned above, but in the
circumstances of the case we make no order as to costs, each party bearing and
paying its own costs thereof.
Appeal allowed.
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