Aluminium Corporation Vs. Their
Workmen & Ors [1963] INSC 164 (14 August 1963)
14/08/1963
ACT:
Industrial Dispute-Award of bonus-Full Bench
FormulaAllowance under rehabilitation charges-Burden of proofEvidentiary value
of statements in balance sheets.
HEADNOTE:
The appellant is a manufacturer of aluminium,
having two factories one near Asansol and another in Asansol. A dispute having
arisen between the appellant and the respondent on the question of bonus for
the year 1957-58 it was referred to the Industrial Tribunal by the Government
of West Bengal. A similar dispute arose between the appellant and its workmen
in the second factory and this also was referred to the same tribunal. In the
second dispute the parties submitted joint petitions before the tribunal
agreeing to abide by the award on the bonus question in the first dispute and
requesting that similar award be made ,in the second dispute also. In the first
dispute the Tribunal awarded a bonus equivalent to three months basic wages
inclusive of the amount that had already been paid by the company voluntarily.
An award was made in the second dispute also in similar terms. In determining
the amount of available surplus the Tribunal applied the rules embodied in the
Full Bench Formula which was approved by this Court in Associated Cement Co.
Ltd. v. Its workmen, [1959] S.C.R.
925, and allowed Rs. 43 lacs as returnon
reserve used as working capital and allowed nothing under the head
rehabilitation charge. The appellant appealed against both the awards by way of
special leave granted by this Court.
On behalf of the appellant it was contended
that there was no justification in rejecting the claim under the head
rehabilitation charge. It was urged that the balance sheet of the company would
by itself show what part of reserve was used as working capital and a correct
way of reaching at the figure of reserve 430 used as working capital would be
by deducting liabilities of the company in the balance sheet from as shown
therein.
Held : (i) The burden to prove any prior head
of rehabilitation lies on the employer and that unless the employer has by
proper evidence established its claim to some amount as rehabilitation charge
the claim must be rejected. In the present case the materials on the basis of
which the multipliers and devisers have been arrived at have not been
established by proper evidence and therefore the tribunal was justified in
rejecting the claim under the head rehabilitation charge.
(ii)Regarding the claim of prior charges
under the head "return on reserve used as working capital" the
appellant gave widely different estimates and this fact gives some
justification in refusing to accept any of these as correct.
The mere statements in the balance sheet as
regards current assets and liabilities cannot be taken as correct. They have to
be established by proper evidence by those responsible for preparing the
balance sheet or by other competent witnesses. This has not been done in the
present case.
Petled Turkey Dye Works v. Dye and Commercial
Workers Union [1960] 2 S.C.R. 906, Khandesh Spg and Wvg. Mills Co. Ltd. v.
Rastriya Girni Kamgar Sangh, Jalgaon, [1960] 2 S.C.R.
841, Bengal Kagazkal Mazdoor Union v. The
Titagarh Paper Mills Co. [1964] 3 S.C.R. 38, referred to.
(iii)The practice on the part of employers to
show the entire amount of reserve available for use as working capital as the
actual amount used was wrong.
(iv)For deciding what part of the available
surplus should be paid to the workmen as bonus the wage bill of the workmen
only has to be considered and the Tribunal is not concerned with what is paid
by the company to its officers.
The Tribunal has not committed any error in
fixing the bonus figures and the appeals arc therefore dismissed.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 238 and 818 of 1962.
Appeals by special leave from the awards
dated October 21, 1960, and May 17, 1961 of the Fifth Industrial Tribunal, West
Bengal in Cases Nos. VIII-77 of 1959 and VIII-93 of 1959 respectively.
A. V. Viswanatha Sastri and B. P. Maheshwari
for the appellant (in both the appeals).
Janardhan Sharma, for the respondents (in the
both appeals).
August 14, 1963. The Judgment of the Court
was delivered by the 431 DAS GUPTA J.-These appeals by special leave are
against an award of the Fifth Industrial Tribunal, West Bengal, on the question
of bonus for the year 1957-58 to workmen of the appellant-Company. The
appellant which is engaged in the manufacture of aluminium from basic material
has its factory at J. K. Nagar near Asansol in West Bengal. A dispute having
arisen between the appellant and some of its workmen on the question of bonus
for the year 1957-58 it was referred to the Fifth Industrial Tribunal, West
Bengal, by an order of the Government of West Bengal. In another reference made
by that Government to the same Tribunal on May 2, 1959 a dispute between the
Company and its workmen employed at its factory at J. K. Nagar, Asansol, on the
question of bonus for the year 1957-58 was one of the matters referred. In the
first reference the Tribunal has awarded in favour of the workmen bonus
equivalent to three months' basic wages inclusive of the amount (equivalent to
half a month's basic wages) that has already been paid by the Company
voluntarily. In the second reference the parties filed joint petitions before
the' Tribunal agreeing to abide by any decision or award whatsoever passed by
the Tribunal regarding the bonus issue in the first reference and requesting
that similar award be made regarding the issue of bonus in both references. The
Tribunal accordingly passed an order in the second reference that the workmen
would get the same bonus as awarded in the first reference.
The result of this is that the workmen
covered by the second reference would also be entitled to three months' basic
wages as bonus for the year 1957-58.
Applying the rules embodied in what is known
as the Full Bench Formula evolved by the Labour Appellate Tribunal in 1950 and
approved by this Court in Associated Cement Companies Ltd., v. Its Workmen(1)
for calculation of profit bonus the Tribunal held that the available surplus
was Rs.
4.63 lacs. It pointed out that if bonus
equivalent to three months' basic wage was given to workmen, still the Company
will have Rs. 3.91 lacs as the available surplus inclusive of the refund of
income tax on account of bonus, which meant an expenditure of (1) [1959] S.C.R.
925.
432 only Rs.. 0.72 lacs on this head by the
Company. In reaching this figure of Rs. 4.63 lacs as the available surplus the
Tribunal allowed Rs. 0.43 lacs as return on reserves used as working capital
and allowed nothing under the head rehabilitation charge. In support of the
appeals Mr. Vishwanatha Sastri has vehemently challenged the Tribunal's view on
both these matters.
On the question of rehabilitation charge Mr.
Sastri contended that there was no justification whatsoever for rejecting the
claim on this head altogether. It has to be remembered in this connection that
by a series of decisions of this Court it is now well settled that the burden
to prove any prior charge under the head rehabilitation lies on the employer
and that unless the employer has by proper evidence established its claim to
some amount as rehabilitation charge the claim must be rejected. The appellant
adopted a curious procedure. It examined its Manager and through him put in
statements showing its calculations of available surplus. A number of
statements were put, in each showing the available surplus as nil.
While however in statements 1 and 11 the
rehabilitation charge is shown as Rs. 6,27234.00 it is shown as Rs. 5,84,534.00
in statements III and IV, and in statements V and VI the figure is Rs.
10,25,021.00 How such different figures could be arrived at has not been sought
to be explained by its only witness, the Manager. The witness stated that the
assets of the Company were revalued in 1956 by a Committee of which he was one
of the members. He had added that each of the assets was ascertained with
reference to the Company's registers and they were .divided in blocks according
to their date of acquisition. A portion of the report made by the Revaluation
Committee was put in. There is nothing however in this or in the witness's
evidence that throws any light on the important question of multiplier and
divisor. On the question of multiplier the witness says that the multiplier was
worked out according to the procedure as detailed in the Revaluation Report itself.
He has not tried himself to explain this
basis. It is by no means clear that he has special knowledge and skill in the
matter of replacement of the different machinery. The report was signed also by
two other members, neither 433 of whom has been examined. The materials on the
basis of which these multipliers were arrived at have also not been established
by any evidence.
When we turn to the question of divisor the
position is even more unsatisfactory. The witness has not vouchsafed a word as
to how the divisor was arrived at. It is hardly necessary to point out that the
mere submission of a statement prepared in the Company's office showing a
certain divisor cannot meet the requirements of law unless and until the basis
of this calculation is explained by testimony on oath which can be tested by
cross-examination. The Tribunal -was therefore wholly justified in rejecting the
claim for rehabilitation.
On the claim of prior charge under the head
"return on reserves used as working capital", the Tribunal, as
already stated, has allowed Rs. 0.43 lacs. What the Company claims under this
head is difficult to understand. For, as in the case of rehabilitation charge
so also under this head, different figures have been shown in different
statements.
Statements Nos. 1, III and V show the
reserves employed in business as Rs. 111,74,162.00, while in statements 11, TV
and VI the amount is shown as Rs. 199,56,718.00. The difference is due to the
fact that while in statements 1, III and V, the depreciation reserves is shown
as Rs. 86 lacs, the corresponding figure in statements 11, IV and VI is more
than double of this, being Rs. 173,82,556.00.
The very fact that such widely different
estimates have been given is some justification for refusing to accept any of
these as correct. Indeed, the way the Company has approached the calculations
of reserves used as working capital makes one think that those responsible for
these calculations did not treat the matter seriously at all and felt that by
putting arbitrary figures under this head they could play havoc with the Full
Bench Formula. This deserves strong condemnation.
Mr.Sastri made no attempt to justify these
calculations of reserves used as working capital. He tried to persuade us
however that the balance-sheet of the Company would by itself show what part of
reserves was used as working capital. Learned counsel submitted that are easy and
safe way of ascertaining the correct figure under this head is 434 by deducting
the current liabilities of the Company in the balance-sheet from the current
assets as shown therein.
There is undoubtedly support in standard
books on accountancy for the proposition that the excess of the readily
realisable, liquid, or current assets of a concern over its current liabilities
is the proper measure of the working capital. (See Cropper's Higher
Book-Keeping and Accounts 7th Edition, p. 301 and Pickles on Accountancy, 2nd
Edition p. 1325).
There are however two difficulties in the way
of accepting Mr. Sastri's contention. The first is that the mere statements in
the balance-sheet as regards current assets and current liabilities cannot be
taken as sacrosanct. As has been emphasised in more than one case by this
Court, the correctness of the figures as shown in the balance-sheet itself are
to be established by proper evidence in Court by those responsible for
preparing the balance-sheet or by other competent witnesses. (Petlad Turkey Dye
Works v. Dyes and Chemical Workers' Union(1) and Khandesh Spg. and Weaving
Mills Case(2)). This was recently emphasised again in Bengal Kagabkal Mazdoor
Union v. The Titagarh Paper Mills Co. Ltd.(3).
The second difficulty is that the task here
is not to ascertain the total working capital of the concern, but to find out
what portion of the reserves has been used as working capital. It may often
happen that the whole of the working capital is provided from what remained of the
subscribed capital after the acquisition of the fixed assets. There may be
other cases where a portion of the working capital is provided from the
subscribed capital and the remainder is met from the reserves. There appears to
be a tendency on the part of some employers to show the entire amount of
reserves available for use as working capital as the actual amount used for
that purpose. This is obviously wrong.
It would be improper and indeed impossible in
most cases to come to a correct conclusion on these matters by scrutiny of the
balance-sheet itself. Whenever a Company claims deductions from the gross
profits under the head (1) [1960] 2 S.C.R. 906.
(2) [1960] 2 S.C.R. 841.
(3) [1964] S.C.R. 38.
435 "return on reserves used as working
capital," as prior charge, for ascertaining the available surplus under
the Full Bench Formula it is necessary and proper that the accountant, or other
competent officers of the Company should come into the witness-box and assist
the Tribunals in coming to a satisfactory conclusion on the question.
No such attempt was made in this case and we
find it impossible to say from the evidence on the record as to what portion,
if any, of the reserves was actually used as working capital. The tribunal
would have been justified in rejecting in to the Company's claim under this
head. The allowance of Rs. 0.43 lacs as prior charge on return on reserves used
as working capital was therefore an error in favour of -the appellant. There is
no reason therefore for reducing the figure as found by the Tribunal as the
available surplus.
Lastly it was suggested by Mr. Sastri that in
deciding what should be allowed as bonus out of this available surplus the
Tribunal should have proceeded on the basis that one month's basic wages amount
to Rs. 90,000 and not Rs. 50,00 as mentioned by the Tribunal. This figure of
Rs. 90,000/has been given by the Company's Manager as the total wage of the
workmen and the employees, including officers. We are told that the officers
were also paid bonus and that also has to come out of the available surplus. So
Mr. Sastri argued, though rather faintly, that the bonus should have been fixed
on the basis of Rs. 90,000 wage bill. We do not think that to be the correct
approach. The Industrial Tribunal is not concerned with what is paid by the
Company to its officers.
It is concerned only with the workmen's claim
of bonus. For deciding therefore what part of the available surplus should be
paid to the workmen as bonus the wage bill of the workmen only has to be considered.
It is -not disputed that the wage bill (basic wage) of the workmen, excluding
the officers, was Rs. 50,000. The Tribunal has therefore committed no error in
fixing the bonus figures on this basis.
We wish to make it clear that what we have
said in this judgment will not stand in the way of the employer substantiating
a claim for rehabilitation charge by proper evidence, in any future dispute on
that question.
As all the points raised in the appeals fail,
they are dismissed with costs.
Appeals, dismissed.
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