Voltas Limited Vs. Its Workmen 
INSC 280 (9 December 1960)
GUPTA, K.C. DAS
CITATION: 1961 AIR 941 1961 SCR (3) 167
CITATOR INFO :
D 1962 SC1258 (2,3) D 1968 SC 963 (41) R 1973
Industrial Dispute-Bonus-Contribution to
Political fund, if can be deducted from gross profit-Extraneous income-Nature
of Salesmen and apprentices, if entitled to bonus.
The question in this appeal was whether the
Tribunal was wrong in not allowing the amount paid to a political fund which
was permissible as an item of expense and for disallowing the claim for
deduction of certain amounts as extraneous income and whether the salesmen and
apprentices were entitled to bonus.
168 Held, that though the law or the rules of
the company per- mitted the employer to pay amounts as donations to political
funds, it was not a proper expense to be deducted when working out the
available surplus in the light of the Full Bench formula.
Held, further, that neither the profits from
transactions which were carried out in the normal course of business, nor the
commission earned on transactions entered directly with foreign manufacturers,
where the workmen had serviced the goods and did other work which brought such
business to the employer, could be allowed as extraneous income.
Held, also that the salesmen who were given
commission on sales had already taken a share in the profits of the company on
a fair basis and there was no justification for granting them further bonus out
of the available surplus of profits.
That the apprentices hardly contributed to
the profits of the company. Thus they were not entitled to any bonus.
The Associated Cement Companies Ltd. v. Their
Workmen,  S.C.R. 925 and The Tata Oil Mills Co. Ltd. v. Its Workmen and
Ors.,  1 S.C.R. 1, applied.
CIVIL APPELLATE, JURISDICTION: Civil Appeals
Nos. 153 and 154 of 1960.
Appeals by special leave from the Award dated
February 5,1959, of the Industrial Tribunal, Bombay, in Reference (I.T.) No.
212 of 1958.
S.D. Vimadalal, S. N. Andley and J. B.
Dadachanji, for the appellant in C. A. No. 153/60 and Respondent in C.A. No. 154/60.
M.C. Setalvad, Attorney-General for India and Janardan Sharma, for the respondents in C.A. No. 153/ 60 and Appellants in C.A.
1960. December 9. The Judgment of the Court
was delivered by WANCHOO, J.-The only question raised in these two appeals by
special leave is about the quantum of bonus to be paid to the workmen
(hereinafter called the respondents) by Voltas Limited (hereinafter called the
appellant) for the financial year 1956-57. The dispute between the parties was
referred to the adjudication of the industrial tribunal Bombay. The appellant,
it appears, had already paid 4 1/2 months' basic wages as bonus for the
relevant year but the respondents claimed it at the rate of six months' basic
wages subject to the minimum of Rs. 250 per employee.
169 The tribunal went into the figures and
after making the relevant calculations came to the conclusion that the
available surplus worked out according to the Full-Bench formula justified the
grant of bonus equal to five months' basic salary; it therefore ordered payment
of this amount excluding the amount already paid. The appellant in its appeal
claims that the tribunal should have allowed nothing more than what the
appellant had already paid; the respondents in their appeal on the other hand
claim that they should have been allowed six months' bonus.
The principles on which bonus has to be
calculated have already been decided by this Court in the Associated Cement
Companies Ltd. v. Their Workmen (1) and the only question that arises for our
consideration is whether the tribunal in making its calculations has acted in
accordance with those principles. This leads us to the consideration of various
points raised on behalf of the parties to show that the tribunal had not acted
in all particulars in accordance with the decision in the Associated Cement
Companies' case (1).
We shall first take the points raised on
behalf of the appellant. The first point raised is that the tribunal was wrong
in not allowing a sum of rupees one lac paid as contribution to political fund
as an item of expense. It is urged that this is a permissible item of expense and
therefore the tribunal should not have added it back in arriving at the gross
profits. We are of opinion that the tribunal was right in not allowing this
amount as expenditure. In effect this payment is no different from any amount
given in charity by an employer, and though such payment may be justified in
the sense that it may not be against the Articles of Association of a company
it is nonetheless an expense which need not be incurred for the business of the
company. Besides, though in this particular case the donation considering the
circumstances of the case was not much, it is possible that permissible
donations may be out of all proportion and may thus result in reducing the
available (1)  2 S.C.R. 925.
22 170 surplus from which low paid workmen
are entitled to bonus.
We are therefore of opinion that though the
law or the rules of the company may permit the appellant to pay such amounts as
donations to political funds, this is not a proper expense to be deducted when
working out the available surplus in the light of the Full Bench formula. The
tribunal's decision therefore on this point must be upheld.
The second contention of the appellant
relates to deduction of what it calls extraneous income. This matter has been
considered by this Court in The Tata Oil Mills Co. Ltd. v. Ite Workmen and
Others (1) and what we have to see is whether in accordance with the decision
in that case, the appellant's claim for deducting certain amounts as extraneous
income is correct. Learned counsel for the appellant has pressed four items in
this connection. The first item relates to a sum of Rs. 3.47 lacs. It is said
that this was not the income of the year and therefore should not have been
taken into account in arriving at the gross profits. The exact position with
respect to this item is not clear and in any case learned counsel for the
appellant appearing before the tribunal conceded that the amount could not be
deducted from the profits. In view of that concession we are not prepared to
allow the deduction of this amount as extraneous income. The second item is a
sum of Rs. 1.76 lacs in respect of the rebate earned on insurance by the
appellant with other companies by virtue of its holding principal agency.
Obviously this is part of the insurance business of the appellant and the work
in this connection is entirely handled by the insurance department of the
appellant; as such the tribunal was right in not allowing this amount as
extraneous income. The third item is a sum of Rs. 3-33 lacs being gain on foreign
exchange transactions. These transactions are carried on in the normal course
of business of the appellant. As the tribunal has rightly pointed out, if there
had been loss on these transactions it would have certainly gone to reduce the
gross profit,%; if there is a profit it has to be taken into account as
(1) 1 S.C.R. 1.
171 it has arisen out of the normal business
of the appellant.
The tribunal was therefore right in not
allowing this amount as extraneous income. The last item is a sum of Rs. 9.78
lacs being commission on transactions by government agencies and other
organisations with manufacturers abroad direct.
It seems that the appellant is the sole agent
in India of certain foreign manufacturers and even when transactions are made
direct with the manufacturers the appellant gets com- mission on such
transactions. The tribunal has held that though the transactions were made
direct with the foreign manufacturers, the respondents were entitled to ask
that the commission should be taken into account inasmuch as the respondents
serviced the goods and did other work which brought such business to the
appellant. It seems that there is no direct evidence whether these particular
goods on which this commission was earned were also serviced free by the
appellant like other goods sold by it in India. We asked learned counsel for
the parties as to what the exact position was in the matter of free service to
The learned counsel however could not agree
as to what was the exact position. It seems to us that if these goods are also
serviced free or for charges but in the same way as other goods sold by the
appellant in India, the respondents are entitled to ask that the income from
commission on these goods should be taken into account. As however there is no
definite evidence on the point we cannot lay down that such commission must
always be taken into account. At the same time, so far as this particular year
is concerned we have to take this amount into account as the appellant whose
duty it was to satisfy the tribunal that this was extraneous income has failed
to place proper evidence as to servicing of these goods. A claim of this
character must always be proved to the satisfaction of the tribunal. In the
circumstances we see no reason to interfere with the order of the tribunal so
far as this part of its order is concerned.
Two other points have been urged on behalf of
the 172 appellant with respect to the interest allowed on capital and on
working capital. The tribunal has allowed the usual six per cent on capital and
four per cent on working capital. The appellant claimed interest at a higher
rate in both cases. We agree with the tribunal that there is no special reason
why any higher rate of return should be allowed to the appellant.
This brings us to the objections raised on
behalf of the respondents. The main objection is to a sum of Rs. 4.4 lacs
allowed by the tribunal as income-tax, which is said to be with respect to the
previous year. It appears that there is a difference between the accounting
year of the appellant and the financial year. In the particular year in dispute
there was an increase in the rate of tax which resulted in extra payment which
had to be paid in this year. In these special circumstances, therefore, the
tribunal allowed this amount and we see no reason to disagree.
Next it is urged that the tribunal had
allowed a sum of Rs. 4.76 lacs for making provision for gratuity as a prior
charge. This is obviously incorrect, as this Court has pointed out in the
Associated Cement Companies' case (1) that no fresh items of prior charge can
be added to the Full-Bench formula, though at the time of distribution of
available surplus such matters, as provision for gratuity and debenture
redemption fund, might be taken into account.
This disposes of the objections relating to
Two other points have been urged on behalf of
the respondents. They are with respect to (1) salesmen and (2) apprentices. The
tribunal has excluded these two categories from the award of bonus made by it.
The respondents contend that they should also have been included. We are of
opinion that the decision of the tribunal in this behalf is correct.
So far as salesmen are concerned, the
tribunal has examined the relevant decisions of other tribunals and has come to
the conclusion that salesmen who are given commission on sales are not treated
on par with other workmen in the matter of bonus. It has also been found that
the clerical work done by salesmen is small and incidental to their duty as such;
salesmen have (1)  S.C.R. 925.
173 therefore been held not to be workmen
within the meaning of the Industrial Disputes Act. The tribunal has pointed out
that the commission on an average works out at about Rs. 1,000 per mensem in
the case of salesmen and therefore their total emoluments are quite adequate.
Besides, the salesmen being paid commission on sales have already taken a share
in the profits of the appellant on a fair basis and therefore there is no
justification for granting them further bonus out of the available surplus of
profits. As for the apprentices, the tribunal has held that there is a definite
term of contract between them and the appellant by which they are excluded from
getting bonus. Besides, as the appellant has pointed out, the apprentices are
merely learning their jobs and the appellant has to incur expenditure on their
training and they hardly contribute to the profits of the appellant. The view
of the tribunal therefore with respect to apprentices also is correct.
We now turn to calculation of the available
surplus according to the decision in the Associated Cement Companies' case (1).
The gross profit found by the tribunal will stand in view of what we have said
with respect to various items challenged by either party. The chart of
calculation will be as follows:- in Lacs Gross profits Rs. 109.97 Less
depreciation 3.28 Balance 106.69 Less income-tax @ 51.15 per cent. 54.20
Balance 52.49 Less dividend tax, wealth tax etc. 7.50 Balance 44.99 Less return
on capital at 6 per cent. 13.20.
Balance 31.79 Less return on working capital
at 4 per cent. 1.66 Available surplus 30.13.
(1)  S.C.R. 925.
174 Out of this, the tribunal has allowed
five months' basic wages as bonus to the respondents which works out at Rs. 16.80
lacs. In the circumstances it cannot be said that the award of the tribunal is
not justified. We do not think that we would be justified in giving anything
more than what the tribunal has awarded, because the appellant has to provide
for a fund for gratuity, for it is a new concern which took over the old
employees of another concern when it was started and has thus a greater
liability towards gratuity than otherwise would be the case. We are therefore
of opinion that the tribunal's award of five months' basic wages as bonus for
the year in dispute should stand. We therefore dismiss both the appeals. In the
circumstances we pass no order as to costs.