PETITIONER: ALUMINIUM CORPORATION Vs. RESPONDENT: THEIR WORKMEN AND ORS. DATE OF JUDGMENT: 14/08/1963 BENCH: ACT: Industrial Dispute-Award of bonus-Full Bench Formula- Allowance under rehabilitation charges-Burden of proof- Evidentiary 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. Itsworkmen, [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. JUDGMENT:
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
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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 incometax on account of bonus, which meant
an expenditure of
(1) [1959] S.C.R. 925.
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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 it,self.
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
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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
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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 account-
ancy 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 state-
ments 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 work-
ing 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 toto 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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