Petlad Turkey Red Dye Works Ltd. Vs.
Dyes & Chemical Workers' Union, Petlad & ANR  INSC 14 (3 February
CITATION: 1960 AIR 1006 1960 SCR (2) 906
CITATOR INFO :
R 1962 SC1221 (24) R 1969 SC 612 (8) RF 1971
SC2567 (8) R 1972 SC 330 (11)
Working capital-Reserve fund utilised as
such-Return, if any available-Balance sheet, if proof of reserve actually used
as working capital.
The Industrial Tribunal, in the process of
ascertaining the available surplus, disallowed a claim of the appellant
employer for interest on a certain sum of money standing in the depreciation
fund and alleged to have been used as working capital. If this claim was
allowed and the amount claimed deducted as a prior charge, the employees would
not be entitled to any bonus as there would be no surplus. The Industrial
Tribunal was of opinion that even if the depreciation reserve was utilised as
working capital no return thereon was allowable in deciding what amount was to
be deducted as prior charge. On appeal the appellant contended, inter alia,
that the balance sheet of the employer company placed before the Industrial
Tribunal itself showed that the entire sum of depreciation fund was used as
Held, that any portion of the reserve fund
actually utilised as working capital in the year under consideration should be
treated as entitled to a reasonable rate of return and the amount thus
ascertained deducted as a prior charge in ascertaining the available surplus.
The balance sheet did not by itself prove the
fact of utilisation of any reserve as working capital and the law required that
such an important fact as the utilisation of the reserve as working capital had
to be proved by the employer by evidence on affidavit or otherwise after giving
opportunity to the workmen to contest the correctness of such evidence by
Management of Trichinopoly Mills Ltd. v.
National Cotton Textile Mills Workers Union, C.A. NO. 309 Of 1957, and Khandesh
Spg. & Weaving Mills Co. Ltd. v. The Rashtriya Girni Kamgar Sangh, jalgaon,
C.A. No. 257 Of 1958, followed.
Indian Hume Pipe Co. Ltd. v. Their Workmen.
(1959) 11 L.L.J. 357, explained.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 258 of 1958.
Appeal by special leave from the Award dated
August 17, 1957, of the Industrial Tribunal, Bombay, in Reference (IT) No. 15
I.M. Nanavati, S. N. Andley, J.B. Dadachanji
and Rameshwar Nath, for the appellant.
907 B.K.B. Naidu and I. N. Shroff for
respondent No. 1.
I. N. Shroff for interveners Nos. 1 and 2.
3. The Judgment of the Court was delivered by
DAS GUPTA, J.-The only point raised in this appeal by the employer, Petlad
Turkey Red Dye Works Ltd., Petlad, against the award of an industrial Tribunal
of a sum of Rs. 9,839 equivalent to one month's basic wages is as regards the
correctness of the disallowance, in the process of ascertaining the available
surplus, of a claim of 4% interest on Rs. 2,27,000 standing in the depreciation
fund said to .have been used as working capital. If this claim was allowed and
the amount claimed deducted as a prior charge no surplus would remain so that
the employees would not be entitled to any bonus. The Industrial Tribunal was
of opinion that even if the depreciation reserve was utilized as working
capital no return thereon was allowable for the purposes of deciding on the
amount to be deducted as prior charges in applying the Full Bench Formula. In
this view it was clearly wrong. Numerous decisions of this Court make it
abundantly clear that any portion of the reserve actually utilized as working
capital in the year under consideration should be treated as entitled to a
reasonable rate of return and the amount thus ascertained deducted as a prior
charge in ascertaining the available surplus. There is no reason whatsoever for
making an exception in this respect as regards depreciation reserves.
The question remains, however, whether this
amount of Rs. 2,27,000 in the depreciation fund was actually used as working
capital. The Tribunal did not think it necessary to consider this question, as
in its view even if this entire amount has been utilised as working capital no
return was allowable. If on the materials on the record it was possible to
reach a conclusion that any reserve or any portion of it was used as working
capital during the period under consideration we would have thought fit to
calculate the amount allowable as return thereupon and deducted it from the
amount ascertained as surplus 908 by the Industrial Tribunal. On an examination
of the record, however, we cannot discover any such material. All that we have
is that the employer Company in its written statement claimed interest on
reserves as working capital at Rs. 32, 000 the rate of return being mentioned
It ",as not mentioned therein in so many
words that the depreciation fund was part of the reserves employed as working
capital. It is claimed however that such an averment was implicit in the claim
of Rs. 32,000 as the amount allowable as return on reserves employed as working
capital. Assuming that this is so it still remained the duty of the Company to
prove that any portion of the depreciation fund was actually utilised as
It was suggested before us that this averment
by implication that the depreciation fund was also used as working capital was
not challenged by the workers. This suggestion is obviously incorrect. We find
that in Exhibit U/I a statement submitted on behalf of the workers containing
calculations for the available surplus Rs. 3,000 was shown as the amount
deductible on working capital at 2%. That is, a sum of Rs. 1,50,000 out of the
reserves was stated to have been used as working capital. The employer's
statement in Exhibit C/3 dated July 12, 1957, shows a deduction of
"Interest at 4% on Reserves employed as working capital Rs. 32,000".
A similar claim is made in Ex. C/4, an alternative statement filed on behalf of
the employer on July, 12,1957. The workmen also filed a statement showing
calculations of bonus made by them on the same date i.e., July, 12, 1957. This
is marked as Ex. U/3. According to this, return at the rate of 4% on working
capital of Rs. 1,66,000 was allowable as deduction. Thus, according to workmen,
the reserves used as working capital was stated to be Rs. 1,66,000 while
according to the employer this amount was no less than 8 lakhs. It is quite
clear therefore that the workmen had at no stage admitted either expressly or
by implication the employer's claim that any portion of the depreciation fund
was utilized as working reserve.
On behalf of the appellant it was strenuously
contended, however, that the balance-sheet of the 909 Company which was placed
before the Industrial Tribunal will itself show that the entire sum of
depreciation fund of Rs. 2,27,000 was used as working capital. The
balance-sheet does show a sum of Rs. 2,27,000 as the depreciation fund.
Assuming for the purposes of the present case
that this was the actual sum standing in the depreciation reserve the further
question is whether the balance-sheet proves that this sum was utilized as
working capital. Assuming further for the -purposes of this case that the
analysis of the statement made in the balance-sheet might indicate that this
sum could not but have been utilised as working capital, it has to be
remembered that no such conclusion is possible unless it is known as a fact
that the statements made in the balance sheets under the different heads are
correct statements. On that there is absolutely no evidence. All that the
balance-sheet, as submitted, shows is that certain statements were made. The
mere fact that the statements were made can never be taken as proving that the
statements were correct.
That is a distinction which the courts of law
have always been careful to make. Thus, if a person is to prove that he was ill
on a particular date, the mere filing of a certificate of a medical man that he
was ill on that date is not accepted as evidence to show that he was ill. The correctness
of the statement made in the certificate has to be proved by an affidavit or
oral testimony in court by the Doctor concerned or by some other evidence.
There is no reason why an exception should be made in the case of balance
sheets prepared by Companies for themselves. It has to be borne in mind that in
many cases the Directors of the Companies may feel inclined to make incorrect
statements in these balance-sheets for ulterior purposes. While that is no
reason to suspect every statement made in these balance- sheets, the position
is clear that we cannot presume the statements made therein to be always
correct. The burden is on the party who asserts a statement to be correct to
prove the same by relevant and acceptable evidence. The mere statement of the,
balance-sheet is of no assistance 910 to show therefore that any portion of the
reserve was actually utilized as working capital.
The question whether a balance-sheet can be
taken as proof of a claim of what portion of reserve has actually been used as
working capital -was very recently considered by us in Khandesh Spg. &
Weaving Mill Co., Ltd. v. The Rashtriya Girni Kamgar Sangh. Jalgaon (Civil
Appeal No. 257 of 1958).
As was pointed out by Subba Rao, J. in that
case the balance sheet of a Company is prepared by the Company's own officers
and when so much depends on the ascertainment of what portion of the reserve
was utilized as working capital, the principles of equity and justice demand
that an Industrial Court should insist upon a clear proof of the same and also
give a real and adequate opportunity to the labour to canvass the correctness
of the particulars furnished by the employer. In that case we also considered
an observation in Indian Hume Pipe Company Ltd. v. Their Workmen (1) which was
relied upon for an argument that the balance-sheet was good evidence to prove
that amounts were actually used as working capital. As was pointed out in
Khandesh Spg. @ Weaving Mills Case (Supra) this observation was not intended to
lay down the law that a balance-sheet by itself was good evidence to prove any
fact as regards the actual utilisation of reserves as working capital. The
observation relied on was a sentence at page 362 :- "Moreover, no
objection was urged in this behalf, nor was any finding to the contrary
recorded by the Tribunal." If it had been intended to state as a matter of
law that the balance-sheet itself was good evidence to prove the fact of
utilisation of a portion of the reserve as working, capital it would have been
unnecessary to add such a sentence.
This question as regards the sufficiency of
the balance- sheet itself to prove the fact of utilization of any reserve as
working capital was also considered by us in Management of Trichinopoly Mills
Ltd. v. National Cotton Textile Mills Workers Union (Civil Appeal No. 309 of
1957) and it was held that the balance-sheet does not by itself prove any such
fact and that the law requires that such an important (1)  II L.L.J- 357.
911 fact as the utilisation of a portion of
the reserve as working capital has to be proved by the employer by evidence
given on affidavit or otherwise and after giving an opportunity to the workmen
to contest the correctness of such evidence by cross-examination.
We must therefore reject the contention urged
on behalf of the employer-appellant that the balance Sheet that has been filed
is sufficient to prove that Rs. 2,27,000 of the depreciation fund was actually
used as working capital.
There is, as we have already stated, no
material on the record from which any conclusion can be reached as regards the
utilisation of the whole or any portion of this sum lying in depreciation fund
as working capital.
The appellant's counsel finally asked that
the matter may be sent back to the Industrial Tribunal and an opportunity given
to him to adduce proper evidence on this point. We do not see any circumstance
that will justify us in making an order of remand in a case of this nature.
The appeal is accordingly dismissed with