{"id":7991,"date":"1972-02-15T00:00:00","date_gmt":"1972-02-14T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/binny-ltd-vs-their-workmen-on-15-february-1972"},"modified":"2016-10-22T20:32:19","modified_gmt":"2016-10-22T15:02:19","slug":"binny-ltd-vs-their-workmen-on-15-february-1972","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/binny-ltd-vs-their-workmen-on-15-february-1972","title":{"rendered":"Binny Ltd vs Their Workmen on 15 February, 1972"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Binny Ltd vs Their Workmen on 15 February, 1972<\/div>\n
Equivalent citations: 1973 AIR 353, \t\t 1972 SCR (3) 462<\/div>\n
Author: C Vaidyialingam<\/div>\n
Bench: Vaidyialingam, C.A.<\/div>\n
           PETITIONER:\nBINNY LTD.\n\n\tVs.\n\nRESPONDENT:\nTHEIR WORKMEN\n\nDATE OF JUDGMENT15\/02\/1972\n\nBENCH:\nVAIDYIALINGAM, C.A.\nBENCH:\nVAIDYIALINGAM, C.A.\nDUA, I.D.\nMITTER, G.K.\n\nCITATION:\n 1973 AIR  353\t\t  1972 SCR  (3) 462\n\n\nACT:\nThe Payment of Bonus Act, 1965. ss. 17 and 19--Direction  to\npay  half yearly bonus--If justified--Payment of  additional\nbonus--Method of calculation.\n\n\n\nHEADNOTE:\nThe appellant company was making two payments of bonus every\nyear  one for the half year ending 30th June and  the  other\nfor the half year ending 31st December.\t The payment was  on\nthe basis of profits earned by it and the payment was not  a\ncondition  of service and had nothing to do with any  custom\nor festival.  When the Payment of Bonus Act, 1965 came\tinto\nforce,\tthe  appellant issued a circular that as  bonus\t was\npayable under law only within a period of 8 months from\t the\nend of the, accounting year (the appellant's accounting year\nwas  the  calendar  year),  no bonus  was  payable  for\t the\naccounting  year  1965 until the accounts for the  year\t are\nclosed, and the announced payment of one month's basic wages\nas advance against wages for the half year ending 30th\tJune\n1965.\nThe  questions, (1) whether the appellant was  justified  in\nannouncing the payment\tas advance against wages instead  of\nas advance bonus, and (2)     whether  the respondents\twere\njustified in claiming bonus for the years 1962 and 1963,  in\naddition to what had already been paid by the appellant were\nreferred to the Industrial Tribunal.\nOn the first question the Tribunal held. that the  appellant\nwas not justified in announcing the payment towards  advance\nwages and directed the appellant to pay profit bonus in\t two\ninstallments one as advance against the final declaration of\nbonus,\tand the balance, if any, as the\t second\t instalment.\nOn  the second question the Tribunal held that the  question\nof bonus payable was to be calculated in accordance with the\nLabour\tAppellate  Tribunal Full Bench Formula\tapproved  in\nAssociated  Cement  Companies  Ltd.  v.\t Workmen,<\/a>  r   19591\nS.C.R.25;  that\t in calculating the return on  Reserves\t the\nclaim of the appellant to include in the  working  capital\nthe amounts sunk in (a) fixed assets and (b) capital work in\nprogress  should  be disallowed; and that the claim  of\t the\nappellant  for\ta  provision for  rehabilitation  should  be\nrejected.\nIn appeal to this Court.\nHELD  :\t (1)  (a)  Under the Act,  bonus  for  a  particular\naccounting year will have to be computed in accordance\twith\nthe provisions of the Act on the basis of the gross  profits\ndetermined  at\tthe close of the accounting year.   The\t Act\nmakes  provision as to how the gross profits, available\t and\nallocable surplus are to be calculated, and s. 19 prescribes\n8 months from the close of the accounting year as the period\nwithin which the bonus was to be normally paid.\t The  scheme\nof  the\t Act shows that a claim for bonus can be  made\tonly\nafter  the  close of-the accounting  year,  because.,  gross\nprofits\t and  the  available and allocable  surplus  can  be\nworked\tout only at the end of the accounting year  and\t not\nearlier,  whereas  the\tdirection  given  by  the   Tribunal\nrequires the employer to make two computations at the end of\neach half year. [469 E-H; 470 A-B]\n463\n(b)  The   direction  given  by\t the  Tribunal\t making\t  it\nobligatory on the management to make half yearly payments of\nbonus  apart  from being opposed to the scheme of  the\tAct,\nruns counter to s. 19.\tUnder the section, whether it is the\nminimum bonus of 4% under s. 10 or the maximum bonus of 20%\nunder s. 11, they have to be paid only within a period of  8\nmonths from the closing of the accounting year. [470 C-E]\n(c)  Section  17(b) is an enabling section in favour of\t the\nemployer in that it visualizes a situation when he may\thave\npaid during the accounting year a part of the bonus  payable\nunder  the Act, before the date on which such bonus  becomes\npayable.   If the payment was by way of profit bonus, he  is\nentitled  to  deduct it from the final amount  that  may  be\npayable\t under the Act.\t But that provision does not give  a\nright  to  an employee to claim payment of bonus by  way  of\npart  payment  during the currency of the  accounting  year.\nTherefore, the mere fact that the appellant has been  making\npayments on previous occasions half yearly, does not  confer\na  right  on the employee to have such payments\t by  way  of\nbonus in the same manner after the Act has come into  force.\nHence, the Tribunal had no jurisdiction to give a  direction\nto the appellant to, pay bonus at the end of each half year.\n[471 A-C]\n(2)  (a)  In  considering the claim for\t return\t on  working\ncapital two questions have to be kept in view : (i)  whether\nReserves were available, and (ii) whether they were used  as\nworking capital, and if so, what was, the amount used.\t1477\nGI\nIn the present case, the Tribunal has correctly kept the two\nprinciples  in\tview in arriving at the amount\tof  Reserves\nused  as  working capital and on which a return\t is  to,  be\nallowed.   The balance sheets of the appellant do  not\thave\nany figures from which the Tribunal would be able to, draw a\nconclusion.   The Tribunal, therefore, while  accepting\t the\nstatements.  of account filed by the appellant for  the\t two\nyears,\tfor  showing  how it had calculated  the  amount  of\nReserves  utilized  as working capital, held, that  the\t two\nitems\tshould\t be  deducted;\tbecause,   working   capital\nrepresents  the funds required for day-to-day Work  of\tthe\ncompany\t and cannot include,, fixed assets, and the  capital\nworks in progress. [477 G-H; 478 A-C]\nWorkmen of M\/s.\t Hindustan Motors Ltd. v.  M\/s.\t  Hindustan\nMotors\tLtd. & Anr.<\/a> [1968] 2 S.C.R. 311 and M\/s.   Aluminium\nCorpn.\tof India v. Workmen,<\/a> [1969] 3 S.C.R.  832,  referred\nto.\nTherefore, the contention that the Tribunal had committed  a\nmistake\t in  calculating  the amount  of  Reserves  used  as\nworking capital cannot be accepted. [478 D-E]\n(b)  A company should build up rehabilitation reserve taking\ninto  consideration  the  increase in  price  in  plant\t and\nmachinery  which has to be replaced at a future\t date.\t But\nsince  it  is a substantial item which goes  to\t reduce\t the\navailable surplus and as a result, affects the right of\t the\nemployees  to  bonus, the employer will have  to  place\t all\nrelevant  material,  before the Tribunal for  its  scrutiny.\nThe burden of proof is on the employer to prove the price of\nthe plant and machinery, its age, the period during which it\nrequires  replacements, the cost of replacement, the  amount\nstanding  in  the Debenture and Reserve Funds  and  to\twhat\nextent\tthe  funds at its disposal would meet  the  cost  of\nreplacement.   If  the employer fails to  lead\tsatisfactory\nevidence  on these points his claim for rehabilitation\twill\nbe  rejected.\tAlso,  if  a  company  has  no\tscheme\t for\nrehabilitation then its claim on that bead must be rejected.\n[479 A-E; 481 B-C]\n464\nAzam  Jahi  Mills Ltd. v. Workmen,<\/a> [1967] 2  L.L.J.  18\t and\nNational  Engineering Industries Ltd. v. Workmen,<\/a>  [1968]  1\nS.C.R. 779, referred to.\nin  the present case, the averment in the written  statement\nof the respondents, that the appellant's machinery was among\nthe  most  modern and no provision  for\t rehabilitation\t was\nnecessary,  was\t not  controverted by  the  appellant.\t The\nbalance\t sheets for the two years showed that  some  amounts\nwere  spent  on machinery.  But when  the  respondents\twere\ncontesting the claim of the appellant on the ground that  it\nhad  no scheme of rehabilitation and that it had  not  spent\nany  amount  by way of replacement, it was the duty  of\t the\nappellant to have made a proper claim and to adduce evidence\nregarding  that aspect.\t Mere production of  balance  sheets\nand  profit  and  loss accounts and adding  a  note  in\t the\nstatements, of account filed that the figure is 'subject  to\nclaim for rehabilitation' will not entitle the appellant  to\nsustain\t  its  claim  for  rehabilitation.   Moreover,\t the\nappellant   had\t large\tReserves  to   meet   rehabilitation\nexpenses.   It had also 'Boated a debenture for\t buying\t new\nmachinery. [481 G-H; 482AC, D]\nFurther,  in  determining  the\tclaim  of  an  employer\t far\nrehabilitation,\t  two,\t factors   are\t essential   to\t  be\nascertained,  namely,  (i) the multiplier, which has  to  be\ndone by reference to the purchase price of the machinery and\nthe price which has to be paid for replacement; and (ii) the\ndivisor, which has to be done by deciding the probable\tlife\nof the machinery. [479 E-F]\nHonorary   Secretary,  South  India  Millowners'  Assn.\t  v.\nSecretary Coimbatore District Textile Workers' Union,<\/a> [1962]\nSupp. 2 S.C.R. 926 and M\/s.  Gannon Dunkerley & Co. v. Their\nWorkmen, A.I.R.<\/a> 1971 S.C. 2567, referred to.\nIn  the\t present  case no material  was\t placed\t before\t the\nTribunal  by  the appellant from which\tthe  multiplier\t and\ndivisor can be properly worked out. [481 E-F]\nTherefore,  the Tribunal was justified in holding  that\t the\nappellant  had not made out its claim for  making  provision\nfor rehabilitation. [482 C-D]\n(c)  The  equitable  method  of\t allocating  the   available\nsurplus between the company and its workmen is to distribute\n60% as bonus to the workmen leaving the remaining 40% to the\ncompany.   In  the present case, the method  of\t calculation\nadopted for 1962, by the Tribunal, shows that the amount  of\nbonus  awarded\tby  the Tribunal together  with\t the  amount\nalready paid by the appellant exceeded 60% and the award  of\nthe excess was not justified. [484 A-C]\nM\/s.   Gannon Dunkerley & Co. v. Their Workmen, A.I.R.<\/a>\t1971\nS.C. 2567. referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos.  1291\t and
\n1292 of 1967.\n<\/p>\n
Appeals\t by special leave from the award dated June 30\t1967
\nof  the Additional Industrial Tribunal, Bangalore in  A.I.D.
\nNos.6 ‘,and 8 of 1966.\n<\/p>\n
O.   P. Malhotra and D. N. Gupta, for the appellant.
\nI.   N. Keshava and K. Rajendra Chowdhary, for respondents
\nNos.2 and 3.\n<\/p>\n
Vineet Kumar, for respondents Nos. 4 to 10.\n<\/p>\n
465<\/span><\/p>\n
The Judgment of the Court was delivered by
\nVaidyalingam  These  two  appeals,  by\tspecial\t leave,\t are
\ndirected  against the common Award,, dated June 30, 1970  of
\nthe  Additional\t Industrial  Tribunal,\tBangalore,  in\t two
\nReferences, A.I.Ds. 6 and 8 of 1966.\n<\/p>\n
On  December 8, 1965, the Government of Mysore\treferred  to
\nthe  Industrial\t Tribunal  for\tadjudication  the  following
\nquestion
\n\t      “Is  the Management of the Bangalore  Woollen,
\n\t      Cotton   and  Silk  Mills\t  Company   Limited,
\n\t      Bangalore, justified in announcing payment  of
\n\t      one  month’s  basic wages as  advance  against
\n\t      wages  for  the  half-year  ending  June\t1965
\n\t      instead  of declaring this payment as  an\t ad-
\n\t      vance  against payment of bonus as was  being,
\n\t      done all these years ?\n<\/p>\n
\t      If  not,\twhat other relief  the\tworkers\t are
\n\t      entitled\tto. This was numbered  as  Reference
\n\t      No. A.I.D.  6 of 1966.  Civil Appeal No.\t1291
\n\t      of  1967 is directed against that part of\t the
\n\t      order   of   the\t Tribunal   regarding\tthis
\n\t      Reference.\n<\/p>\n
\t      On  March\t 5, 1966, the Government  of  MysorE
\n\t      referred to the same Tribunal for adjudication
\n\t      the following question
\n\t      “Whether\t the  demand  of  the\tworkers\t  of
\n\t      Bangalore Woollen, Cotton and Silk Mills\tCo.,
\n\t      Ltd., Bangalore, for additional bonus for\t the
\n\t      year 1962 and 1963 at\tthe rate of 2 months
\n\t      additional bonus and4 months  additional
\n\t      bonus   on   total   wages   respectively\t  is
\n\t      justified.\n<\/p>\n
\t      If  not, to what other relief or\treliefs\t are
\n\t      the workmen entitled ?”\n<\/p>\n
This  Reference\t was numbered as A.I.D. 8  of  1966.   Civil
\nAppeal No. 1292 of 1967 is directed against that part of the
\norder  of the Tribunal regarding this Reference.   Both\t the
\nappeals are by the Company.\n<\/p>\n
We  will  first\t take  up Civil Appeal\tNo.  1291  of  1967.
\nappellant  was making two payments of bonus every year,\t one
\nfor the half-year ending 30th June and half-year ending 30th
\nDecember.   The accounting year is the Calendar\t year.\t The
\nhalf  yearly  payments\twere unilaterally  declared  by\t the
\nappellant and not on the basis of any agreement between\t the
\nparties.  The quantum of bonus that was paid for each  half-
\nyear was also not constant.  Half-yearly payments were\tmade
\nat the end of the half-year when
\n466<\/span>
\nthe  working result of the said year was known and if  there
\nwas  sufficient profit to pay bonus.  The payment  of  bonus
\nfor  the  half\tyears also  depended  upon  the\t approximate
\nestimate  that\tthe  Directors\tused  to  make\tabout  their
\nprospective  future earnings for next half-year.   According
\nto the appellant the bonus amounts were paid out of profits.
\nAs  the\t Payment  of  Bonus Act,  1965\t(hereinafter  to  be
\nreferred as the Act) had come into force on August 28, 1965,
\nthe  appellant issued a circular to the effect that for\t the
\nhalf-year  ending  June 30, 1965, payments will be  made  as
\nadvance\t of wages equivalent to 1\/6th of the basic  earnings
\nof the employees.  In this circular there is a reference  to
\nthe Payment of Bonus Ordinance 1965, promulgated on May\t 29,
\n1965  and  that under the terms of the Ordinance,  bonus  is
\npayable\t only  within a period of 8 months from the  end  of
\nthe-accounting\tyear.  The circular further states  that  no
\nbonus  is  payable for the accounting year  1965  until\t the
\naccounts for the year are closed.  It was further  mentioned
\nthat  the amounts are paid as advance wages in view  of\t the
\nrepresentations made by the employees.\tThe circular further
\nmentioned that the amounts paid as advance wages will be set
\noff against the bonus that may be found payable for the\t ac-
\ncounting  year\t1965 and that if no bonus  is  payable,\t the
\namount\tpaid will be adjusted against the wages due for\t any
\nmonth after March, 1966.\n<\/p>\n
The issue of the above circular led to the Unions  concerned
\nraising\t a dispute with the Management that the\t payment  of
\nbonus at the end of each half-year has become a condition of
\nservice\t of  the  workmen as the same  was  being  paid\t for
\nseveral\t decades  without  any\trelation  to  profits.\t The
\nappellant  was charged by the Unions of having\tchanged\t the
\nconditions  of\tservice\t by offering  to  make\tpayments  as
\nadvance\t against wages instead of payment by way  of  bonus.
\nAs conciliation proceedings failed, the workmen resorted  to
\na strike in December 1965, which led to the Reference  being
\nmade by the State Government on December 8, 1965, No. A.I.D.
\n6 of 1966.\n<\/p>\n
The short stand taken by, the appellant before the  Tribunal
\nwas that the payments were being made as bonus at the end of
\neach  half-year\t on the basis of the profits earned  by\t the
\nCompany.  Such payment was a voluntary act of the  appellant
\nand  related to profit and it had not become a condition  of
\nservice of the employees.  The further case of the appellant
\nis that as the Act had come into force, bonus is governed by
\nthe provisions of the Act and that bonus is to be paid\tonly
\nwithin eight months after the close of the year of  account,
\ni.e., December 31, 1965.\n<\/p>\n
 The Unions pleaded that the payment of bonus at the end  of
\neach  half-year, which was being done for a long  number  of
\nyears,
\n467<\/span>
\nhas become a condition of service and the amounts paid\twere
\nnot  related  to  the profits earned by\t the  Company.\t The
\nUnions further contended that the Act has not in any  manner
\naffected  the  right of the employees getting bonus  in\t the
\nmanner\tpaid by the appellant namely , at the end  of  every
\nhalf-year.\n<\/p>\n
The Tribunal has recorded the following findings : The\tpay-
\nment of bonus was not a settled condition of service, but is
\ndependent  upon\t the profits earned  during  the  half-year.
\nPayments made by the appellant at the close of the half-year
\ncannot be considered as customary or festival bonus and that
\nthe  appellant\thas  made no change  in\t the  conditions  of
\nservice\t of  the workmen by altering the quantum  of  bonus.
\nThough\tbonus was paid at the close, of each half-year,\t the
\nquantum\t of  such bonus varied depending  upon\tthe  profits
\nearned by the Company.\tThe Company has no doubt been paying
\nfor a long time profit bonus in two instalments, namely,  in
\nthe  month of August for the half year ending 30th June\t and
\nin  the month of March or April of the succeeding  year\t for
\nthe  half-year ending 31st December.  The coming into  force
\nof  the Act has, not created any right in the  appellant  to
\nwithhold  the payment for each half-year as it used  to\t do.
\nThe appellant will be entitled to deduct the amount of bonus
\npaid  for  the\tfirst half year from  the  amount  of  bonus
\npayable\t to its, employees under the Act in respect  of\t the
\naccounting  year  and  the employees  will  be\tentitled  to
\nreceive only the balance for the second half-year.  On these
\nfindings  the  Tribunal\t held that  the\t appellant  was\t not
\njustified  in announcing the payment of the  amount  towards
\nadvance wages under the circular dated August 28, 1965.\t  In
\nthe end the Tribunal gave a direction to the effect that the
\nappellant is liable to pay profit bonus in two instalment as
\nadvance\t against the final declaration of bonus to  be\tpaid
\nduring\tthe last week of August or first week  of  September
\nand  the  balance, if any, was to be paid in  the  month  of
\nMarch  or  first week of April of the succeeding  year.\t  It
\nfurther\t gave a direction that the first payment that is  to
\nbe paid is to be as advance against payment of bonus and not
\nas against wages.\n<\/p>\n
Mr.  Malhotra, learned counsel for the appellant, has  chal-
\nlenged\tthe  above directions given by\tthe  Tribunal.\t The
\ncounsel pointed out that after the coming into force of\t the
\nAct,  the rights and liabilities of the\t parties,  regarding
\nbonus,\tare governed by its provisions.\t Under the Act,\t the
\ncomputations of the available and allocable surplus have  to
\nbe made on the basis of the gross-profits ascertained at the
\nend of the relevant accounting year and the payment of bonus
\nhas  to\t be made within eight months of the  close   of\t the
\naccounting  year.  As the Act envisages payment of only\t one
\nbonus, at the end of the accounting year, after\t computation
\nof  the\t amount as per the Act, the direction given  by\t the
\nTribunal
\n468<\/span>
\nregarding  payment  of\thalf-yearly  bonus  is\tillegal\t and
\ncontrary to the provisions of the Act.\tThis direction,\t the
\ncounsel\t pointed-out, given by the Tribunal, will apply\t not
\nonly to the year 1965, but also to all succeeding years.
\nOn  the other hand, Mr. H. K. Puri, learned counsel for\t the
\nrespondents  Nos.  2  and 3,  whose  contentions  have\tbeen
\naccepted  by the, counsel for the other\t respondents,  urged
\nthat the Act does not prohibit an employer from paying bonus
\nat the end of each half-year.  The appellant has been paying
\nbonus in two installments, namely, at the end of each  half-
\nyear.\tIt is always open to the appellant, both by  virtue:
\nof the provisions of the Act and the direction given by\t the
\nTribunal to deduct when paying final bonus at the end of the
\naccounting year, any amounts that may have been paid for the
\nfirst  half-year.   Therefore, according to  Mr.  Puri,\t the
\ndirections  given  by the Tribunal are neither\tillegal\t nor
\ncontrary to the provisions of the Act.\n<\/p>\n
We  are not inclined to accept the contention of  Mr.  Puri.
\nWe have already referred to the findings of the Tribunal  to
\nthe effect that the amount that was paid by the appellant as
\nbonus  at the end of each half-year was on the basis of\t the
\nprofits earned by it The Tribunal has rejected the claim  of
\nthe Unions that the payment of bonus, in the manner  claimed
\nby them, was not a condition of service and that the payment
\nhad  nothing  to  do with any  custom  or  festival.   These
\nfindings  have not been and in fact could not be  challenged
\nby  the\t respondents.\tThere is also  no  controversy\tthat
\npayment of bonus for the accounting year 1965 is governed by
\nthe  provisions of the Act.  If so, the question is  whether
\nthe directions given by the Tribunal and referred to  above,
\ncan be supported by the provisions of the Act.
\nThe  Act has come into force with effect from  August  ‘-IS,
\n1965.\tAs provided under sub-section (4) of section  1,  it
\napplies to all accounting years commencing on any day in the
\nyear  1964  and in respect of  every  subsequent  accounting
\nyear.\tSection\t 2 defines amongst others  the\texpressions,
\n“accounting year”, “allocable surplus”, “available  surplus”
\nand “gross profits” Section 4 deals with the computation  of
\ngross-profits.\tSo far as the appellant is concerned;  under
\ns. 4, cl. (b) the gross-profits are to be calculated in\t the
\nmanner specified in the Second Schedule.  Section 5 provides
\nfor   computation  of  available  surplus.   It\t is  to\t  be
\nascertained  after  deducting  from  the  gross-profits\t the
\nvarious items, referred to in S. 6. Section 6 deals with the
\nitems  to  be  deducted as prior  charges  from\t the  gross-
\nprofits.   Section 10 makes it obligatory on an employer  to
\npay minimum bonus to the employees in an accounting year  of
\n4%  of his salary or wages or Rs. 40\/- whichever is  higher.
\nThis payment is irrespective of the
\n469<\/span>
\nfact  whether a Company has or has not earned profits in  an
\naccounting  year.   But\t this provision is  subject  to\t the
\nprovisions of ss. 8 and 13.  Section 11 provides for payment
\nof bonus subject to a maximum of 20% of the salary or wages,
\nif the conditions mentioned therein are satisfied.   Section
\n17  enables an employer, who has paid during any  accounting
\nyear  Puja Bonus, or other customary bonus or a part of\t the
\nbonus  payable under the Act before the due date, to  deduct
\nthe  amount so paid from the amount of bonus payable by\t him
\nto  an employee under the Act in respect of that  accounting
\nyear.  It further provides that under such circumstances the
\nemployee  will\tbe  entitled to receive\t only  the  balance.
\nSection\t 19 fixed the time limit for payment of\t bonus.\t  If
\nthere is a dispute regarding payment of bonus pending before
\nany authority, the bonus will have to be paid within a month
\nfrom the date, on which the Award becomes enforceable or the
\nsettlement  comes  into operation.  In any  other  case\t the
\nbonus  will have to be paid within a period of eight  months
\nfrom the close of the accounting year.\tUnder the proviso to
\ns.  19,\t power\tis given to the\t appropriate  Government  to
\nextend\tthe  period of eight months in accordance  with\t the
\nprovisions contained therein.  Section 34 provides that\t the
\nAct except as otherwise provided in the section, shall\thave
\neffect\t notwithstanding  anything  inconsistent   therewith
\ncontained in any other law for the time being in force or in
\nthe terms of any Award, agreement, settlement or contract of
\nservice made before May 29, 1965.\n<\/p>\n
We  have referred to some of the relevant provisions of\t the
\nAct.   From a perusal of the scheme of the Act, it is  clear
\nthat the bonus for a particular accounting year will have to
\nbe computed in accordance with the provisions of the Act  on
\nthe  basis of the gross-profits which are determined at\t the
\nclose of the accounting year.  The Act itself provides as to
\nhow the gross-profits are to be calculated and the available
\nand  allocable surplus arrived at The Act also provides\t the
\nouter  limit, the period within which bonus has to be  paid.
\nIt  further gives the employer a right to deduct any  amount
\nthat  any have been paid during the accounting year as\tpart
\nof the bonus payable under the Act.\n<\/p>\n
It  will be seen from the scheme of the Act that  the  claim
\nfor bonus can be made only after the close of the accounting
\nyear and in accordance with the provisions of the Act.\t The
\ngross-profits  can  be\tcalculated only at the\tend  of\t the
\naccounting year and the available and allocable surplus\t can
\nalso  be worked out only at the end of the accounting  year.
\nThere  is  no question of an employer computing\t the  gross-
\nprofits,,  available and allocable surplus in the middle  of
\nan  accounting year or at any time before the close  of\t the
\nrelevant  accounting  year.   The  direction  given  by\t the
\nTribunal really amounts to the employer having to make, two
\n831 Sup CI\/72
\n470<\/span>
\n  computations at the end of each half-year.  No  doubt\t the
\nTribunal has given a direction to the effect that any amount
\npaid for the first half-year  can be deducted when the final
\nbonus is paid at the, end     of the accounting year.Even
\nwithout\t any  such  consideration    being  shown   by\t the
\nTribunalallowing an employer to so deduct section 17gives
\nsuch a right to an employer. We are\tnot  impressed\twith
\nthecontention of Mr. Puri that as there is no\tprohibition
\nin theAct against an employer making the payment by  way
\nof bonus at the end of a half year, the direction given\t by’
\nthe Tribunal can be sustained.\n<\/p>\n
Mr.   Puri  referred  us  particularly\tto  the\t  provisions
\ncontained in s. 17 of the Act.\tHe pointed out that though a
\ntime  limit is fixed by s. 19, the Act itself as is  evident
\nfrom s. 17, clearly envisages payment of bonus at the end-of
\neach  half  year.   We\tare  not  inclined  to\taccept\tthis
\ncontention of Mr. Puri.\t The direction given by the Tribunal
\nmaking\tit obligatory on the Management to make half  yearly
\npayment of bonus apart from being opposed to the scheme-  of
\nthe  Act,  also\t runs counter to the provisions\t of  s.\t 19.
\nWhether\t it is the minimum bonus of, 4% under s. 10 or’\t the
\nmaximum bonus of 20 % under s. 11, they have to be paid, as,
\nis  made clear by s’ 19, only within the period\t mentioned
\ntherein.’ It may be that an employer voluntarily pays amount
\nduring the accounting year by way of part bonus which he  is
\nentitled  to take into account and adjust when making  final
\npayment\t at  the close of the accounting year.\tIt  is\tone,
\nthing  to say that an employer can make\t voluntary  payment,
\nbut  it\t is- a different thing for the Tribunal\t to  give  a
\ndirection to that effect.\n<\/p>\n
\t      Section  17  on which reliance, is  placed  by
\n\t      Mr. Puri is as follows:\n<\/p>\n
\t      “Where in any accounting year–\n<\/p>\n
\t      (a)   an\temployer has paid any paid bonus  or
\n\t      other customary bonus to an employee; or\n<\/p>\n
\t      (b)   an employer has paid a part of the bonus
\n\t      payable  under this Act to an employee  before
\n\t      the date on which such bonus becomes payable,
\n\t      then, the employer shall be entitled to deduct
\n\t      amount  of  bonus so paid from the  amount  of
\n\t      bonus  payable  by him to the  employee  under
\n\t      this  Act in respect of that  accounting\tyear
\n\t      and the employee shall be entitled to  receive
\n\t      only the; balance.\n<\/p>\n
Clause\t(a)has no application as the Tribunal has  categori-
\ncally  held that there is question of any payment by way  of
\npuja bonus, or other customary bonus.  Even then if any such
\nbonus
\n471<\/span>
\nhas  been paid the employer is entitled to deduct  the\tsame
\nfrom the amount of bonus payable under the Act.\t Clause\t (b)
\nis an enabling section in favour of the employer in that  it
\nvisualizes a situation or contingency where he may have paid
\nduring the accounting year a part of bonus payable under the
\nAct  “before date on which such bonus becomes payable”.\t  If
\nan employer has paid any amount during an accounting year by
\nway of part of the bonus, he, is entitled lo deduct the same
\nfrom  the final amounts that may be payable under  the\tAct.
\nThat provision does not give a right to an employee to claim
\npayment\t of  bonus even by way of part\tpayment\t during\t the
\ncurrency  of the accounting year.  If so, the  Tribunal\t has
\nalso  no jurisdiction to give a direction to an employer  to
\npay bonus at the end of each half-year.\n<\/p>\n
In this case,it\t is no doubt, seen that the appellant  has
\nbeen paying bonus atthe end of each half-year.\tBut the
\nTribunal has found that suchpayment   has  not\tbecome\t a
\ncondition  of service. Therefore by the mere fact  that\t the
\nappellant  has\tbeen making payments on\t previous  occasions
\nevery  half-yearly, does not confer a right on the  employee
\nto  have  such payments by way of bonus in the\tsame  manner
\neven after the Act came into force,..\n<\/p>\n
From  the  above discussion it follows that  the  directions
\ngiven,\tby the Tribunal in A.I.D. No. 6 of 1966 have  to  be
\nset aside.\n<\/p>\n
Now  coming to Civil Appeal No. 1292 of 1967,  as  mentioned
\nearlier,  it  is  against  that part of\t the  Award  of\t the
\nTribunal  in  A.I.D. No. 8 of 1966.  The question  that\t was
\nreferred  to  the Tribunal has also-been  extracted  in\t the
\nearlier\t part of the judgment.\tThat relates to a claim\t for
\nadditional  bonus for the years, 1962 and 1963, There is  no
\ncontroversy that the appellant has already paid for the year
\n1962, three months basic wages as bonus.  Similarly for\t the
\nyear 1963 also four months basic wages as bonus has  already
\nbeen  paid.   The claim was for, two months total  wages  as
\nadditional  bonus for the year 1962 and four months’ total
\nwages  as additional bonus for the year 1963.  The  findings
\nrecorded  by the Tribunal in A.I.D. No. 6 of 1966  regarding
\nthe nature of bonus paid to the employees have been  adopted
\nfor  this  reference also.  The\t respondents-Unions  do\t not
\nchallenge those findings.  Therefore, even in respect of the
\nyears  1962 and 1963, what is payable is only profit  bonus.
\nThere  is also no controversy that for these two  years\t the
\nquantum\t  of  bonus payable  has  to  be   calculated\tin
\naccordance.  with  what\t is known as  the  Labour  Appellate
\nTribunal Full Bench Formula, which has been approved by this
\nCourt in The Associated Cement Companies Ltd. Dwarka  Cement
\nWorks,\tDwarka\tv.  Its Workmen\t and  Another<\/a>(1).  Both\t the
\nparties have filed statements of calculations according to
\n(1)  [1959] S.C.R. 925.\n<\/p>\n
 472<\/span><\/p>\n
the  said Formula.  The statements Exs.\t M. 1 and M.2  filed
\nby  the\t Management represent the computation  of  available
\nsurplus\t for  the  years ended December 31,  1962  and\t1963
\nrespectively.  Ex. M.\t 1 is as follows-:\n<\/p>\n
“THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO.\t LTD.
\nStatement  showing the computation of available surplus\t for
\nthe year ended 31st December, 1962
\n (Under L.A. T. Formula)
\n     Profit as per profit and loss Account6801756 Add:\n<\/p>\n
     Provision for Bonus\t\t      1614000\n     Depreciation on Fixed Assets\t      1696481\n     Donations\t\t\t\t      107362\n     Additional Bonus for    1961\t 146000\n3563843\n\t\t\t     ----------\n\t\t\t\t     10365599\n     .Less:\n     Profit on sale of assets\t 1745426\n\t\t\t     8620173\n     Less\n<\/pre>\n
     Normal Depreciation and Shift Allowance1465812
\n\t\t\t\t       7154361
\n     Less:<\/p>\n
\n     Tax Liability\n     Profit as above\t\t\t     7154361\n     Less\n     -Development Rebate\t\t      586415\n\t\t\t\t\t    6567946\n     Income-tax Liability at\n     50 Y. on Rs.\t\t\t65534083276704\n     Income-Tax at\n     25 % on Rs.145383635\n\t\t\t\t    65679463280339\n<\/pre>\n
     Super Profits Tax on Rs.\t  6553408409158
\n\t\t\t\t  3689497
\n     Return on Capital employed
\n     Preference Share Capital
\n     78 %. on Rs.\t\t      60000046800
\n     ordinary Share Capital\t\t       729000
\n 6% on\t Rs.\t\t  12150000
\n     Reserves employed in the business
\n     4% on Rs.\t469379 471787 3325545336244030
\n     Available Surplus.Rs. 910331
\nSubject to claim for rehabilitation.\n<\/p>\n
473<\/span><\/p>\n
We  have  prepared  the above  statement  from\tthe  audited
\naccounts of the Company and is in accordance therewith.\t The
\nreturn on Capital and Reserves is as claimed by the Company.
\nSd\/Illegible
\nChartered Accountants.”\n<\/p>\n
Similarly Ex.  M2 regarding the year 1963 is as follows :
\n“THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO.\t LTD.
\nStatement  showing the computation of available surplus\t for
\nthe
\nyear ended 31st December 1963
\n     (Under L. A. T. Formula)
\n     Profit as per Profit and Loss Account 5239220
\nADD :\n<\/p>\n
     Provision for Labour Bonus\t\t      2245000\n     Depreciation on Fixed Assets\t      1733719\n     Donations\t\t\t\t      8804\n     Provision for Taxation\t 8110000      12097523\n\t\t\t       ----------\n\t\t\t\t\t      17336743\n     LESS:\n     Profit on Sale of Assets\t\t\t 83093\n<\/pre>\n
     Excess Provision of Electricity charges and interest
\n     written back\t   675184\t\t 758277
\n\t\t\t\t\t\t 16578466
\n     LESS:\n<\/p>\n
     Normal depreciation and Shift Allowance\t1647555
\n\t\t\t\t\t\t14930911
\n     LESS
\n     Tax Liability
\n     Profit as above\t\t\t\t 14930911
\n     Less
\n     Development Rebate\t\t\t\t 460548
\n\t\t\t\t\t14470363
\n     Income-tax Liability at
\n     50% on Rs.\t\t\t     14455825\t 7227912
\n     25 % on Rs.\t\t\t    145383635
\n     Dividend-tax\t\t       164025
\n     Companies (Profit) Surtax
\n     Liability on Rs.\t      1445582\t  51786212
\n\t\t\t\t\t   9181784
\n     Return on Capital Employed
\n     Preference Share Capital
\n     7 .8 % on Rs.\t\t\t 600000\t 46800
\n     Ordinary Share Capital
\n     6 Y. on Rs.\t    12150000\t\t729000
\n     Reserves employed in the business
\n     4 % on Rs. 46937947 .1877518265331811835102\n<\/p>\n
\t\t   ————————–\n<\/p>\n
     Available surplus\t\t\t       3095809
\n     Subject to claim for rehabilitation.\n<\/p>\n
474<\/span><\/p>\n
We  have  prepared  the above  statement  from\tthe  audited
\naccounts of the company and certify that it is in accordance
\ntherewith.   The  return  on capital  and  reserves  is,  as
\nclaimed by the company.\n<\/p>\n
   Sd. illegible Chartered Accountants.\n<\/p>\n
The  Tribunal has accepted as correct the  gross-profits  as
\ngiven  by the appellant in these, two exhibits for  the\t two
\nyears  in  question.  Even though the Unions  contested\t the
\nreturn on Preference Share Capital at 7.8%, the Tribunal has
\nrejected  their\t objections.  it has  held  that  under\t the
\nPreference  Share Regulations Act, the Company is  bound  to
\npay  7.8% on Preference Share Capital.\tIle Workmen did\t not
\nraise any controversy regarding the return on Ordinary Share
\nCapital\t at  6%.   The\tTribunal,  therefore,  accepted\t the
\nfigures given in both Exs.  M. 1 and M. 2 and to the  return
\nof Ordinary Share Capital.  But the controversy arose  about
\nthe claim made by the appellant regarding return on Reserves
\nemployed  during  the  two years.  It  will  be\t noted\tthat
\nneither in Ex.\tM. 1 nor in Ex.\t M. 2 the appellant has made
\nany claim for rehabilitation excepting adding a note to\t the
\nstatement   that   they\t  are  subject\tto   a\t claim\t for
\nrehabilitation.\n<\/p>\n
The two points in controversy between the parties  regarding
\nthese  two years were (1) The claim for Return\ton  Reserves
\nand (2) Provision for Rehabilitation.\n<\/p>\n
We  will first take up the question regarding the  claim  of
\nthe  appellant\tfor return on Reserves.\t In Ex.\t M.  1,\t the
\nappellant has claimed a sum of Rs. 178733.00 as 4% return on
\nRs.  44468315.00  being\t the amount  employed  in  business.
\nSimilarly in Ex.  M.2, for the year 1963, it had claimed Rs.
\n1877518.00, being 4% return on Reserves on Rs.\t46937947.00,
\nemployed in the business.  The Unions contested the claim of
\nthe  appellant on the ground that they are not\tentitled  to
\nany  return  on\t Reserves.   The  appellant  had  filed\t two
\nstatements  Exs.  Ml (a) and M.2(a) for the years  1962\t and
\n1963  respectively,  showing  how  the\tamounts\t claimed  as
\nReserves employed in business have been arrived at Ex. M.  1\n<\/p>\n
(a). for the year 1962 is as follows
\nTHE BANGALORE WOOLLEN, COTTON & SILK MILLS CO.\tLTD.
\nYear ended 31st December 1962.\n<\/p>\n
Reconciliation\tof Capital employed in the  business  during
\nthe year ended 31st December. 1962.\n<\/p>\n
475<\/span><\/p>\n
 “As at 31-12-1961:\n<\/p>\n
     Fixed Assets and Capital Works\t       43139570
\n     in Progress
\n     Investments\t\t\t\t595216
\n     Interest accrued on Investments\t\t17477
\n     Stores and Spare parts\t\t       6179042
\n     Raw Materials\t\t\t\t6886058
\n     Process Stocks\t\t\t\t5053558
\n     Finished Stocks\t\t\t\t1381082
\n     Sundry Debtors\t\t\t\t 2473722
\n     Advances\t\t\t\t\t2768233
\n     Balance with Railway and
\n     Excise Authorities\t\t\t\t292529
\n     Deposits\t\t 18993\t\t     68806470\n<\/p><\/blockquote>\n
\t\t\t   ——————-<\/p><\/blockquote>\n
\n     LESS\n     Sundry Creditors\t\t  7077709\n     Due to Directors\t\t 63744\n     Unclaimed Dividends\t18257\n     Provision for Taxation\t 1057850\n     Proposed Dividends\t\t 1481400\n     Provision for Gratuity\t1860431\n     Officer's Retiring Fund\t 26764\n     (Fund loss investments)   11588155\n\t       -------------\n\t\t\t    57218315\nLESS:\nShare\t\t\t\t\t\t     Capital\n12750000\nRs.\t44468315\"\n<\/pre>\n
Exhibit M.2(a) for the year 1963 is as follows
\n “THE BANGALORE WOOLLEN, COTTON & SUR MILLS CO.\t LTD.\n<\/p><\/blockquote>\n
Year ended 31st December, 1963.\n<\/p>\n
Reconciliation of Capital employed during the year ended 31-
\n12-1963.\n<\/p>\n
     As at 31-12-1962\t\t   45229453\n     Investments\t\t    548575\n<\/pre>\n
     Interest accrued on Investments 8703
\n     Stores and Spare Parts\t    6553343
\n     Raw Materials\t\t  4701434
\n     Process Stocks\t\t  7285534
\n     Finished Stocks\t\t 1688931
\n     Sundry Debtors\t\t  3429299
\n     Advances\t\t\t  3165324
\n     Balances with Railway and Excise Authorities  346450
\n     .Deposits\t\t\t  24234\n<\/p>\n
\t     ————-\n<\/p>\n
\t     729811280
\n     476<\/span>
\n     LESS:\n<\/p>\n
     Sundry Creditors\t\t       7686123\n     Due to Directors\t\t\t65278\n     Unclaimed Dividends\t\t 22837\n     Provision for Taxation\t\t 2305645\n     Proposed Dividends\t\t      1481400\n     Provision for Gratuity1\t       706251\n     Officers Retiring Fund\t\t25799\n     (Fund less investments)\t      13293333\n\t\t    --------------------\n\t\t\t\t 59687947\n     Less Share Capital\t\t       12750000\n     Rs.\t\t\t 46937947\"\n<\/pre>\n
It  will  be seen that the last figures shown  in  both\t the
\nstatements  have been claimed by the appellant as  Reserves
\nemployed in business for each of these two years.
\nThe Tribunal after a reference to the evidence of the  Char-
\ntered  Accountant,, M.W.1, has held that the  amounts  which
\nshould have been used as Working Capital are those mentioned
\nin  Exs.   M.1(a)  and M.2(a), less  the  fixed\t assets\t and
\ncapital\t works in progress.  The Tribunal has  further\theld
\nthat the working capital cannot include fixed assets nor the
\ncapital\t works\tin  progress, as they  represent  the  funds
\nrequired  for day to day work of the Company.  According  to
\nthe  Tribunal these fixed assets have been accumulated\tover
\nyears  and  they cannot form part  of-the  working  capital.
\nHowever,  the Tribunal accepted the claim of  the  appellant
\nthat  the  other items in Exs.\tM.1(a) and  M.2(a),  namely,
\ninvestments,  interest\taccrued on investments,\t stores\t and
\nspare parts, raw materials, process stocks, finished stocks,
\nsundry\tdebtors, advances etc. are the amounts available  to
\nbe used as working capital.  On this reasoning the  Tribunal
\nheld that in calculating the return on working capital,\t the
\namounts\t mentioned in Ex.M.1(a) and M.2(a) less\t the  amount
\nsunk  in fixed assets and working capital in progress,\thave
\nto  be\tdeducted.   On\tthis  basis  it\t deducted  from\t Rs.
\n44468315,  a  sum of Rs. 43139570, and fixed a\tsum  of\t Rs.
\n1328745,  as Reserves employed in business during  the\tyear
\nended December 31, 1962.  On this amount it allowed a sum of
\nRs. 53150\/- as return on Reserves at 4% for the year 1962.
\nSimilarly, for the year 1963, it deducted from Rs.  46937947
\na  sum of Rs. 45229423, and fixed a sum of Rs. 1708524\/-  as
\nReserves  employed  in business during that year.   On\tthis
\namount it allowed Rs. 68340\/- as return on Reserves at 4%.
\nMr.  Malhotra,\tlearned\t counsel for  the  appellant,  while
\naccepting that the principle adopted by the Tribunal in this
\nregard is
\n477<\/span>
\ncorrect, contended that it had made a mistake incalculation.
\nAccording to the learned counsel, the claim musthave  been
\nallowed\t in the manner calculated by the  appellant.In\tthis
\nconnection,  the  learned counsel pointed out that  even  in
\ncases  where  the  evidence  regarding\tthe  utilization  of
\nReserves  as Working Capital as claimed by the\tCompany,  is
\nnot  very  satisfactory, this Court,, on the  basis  of\t the
\nbalance\t sheets, which indicated that some amount must\thave
\nbeen  used as working capital has allowed such a claim.\t  In
\nthis  connection,  he  relied on Workmen  of  M\/s  Hindustan
\nMotors Ltd. v. M\/s Hindustan Motors Ltd., and Another<\/a>(1) and
\nMessrs.\t  Aluminium  Corporation of India v.  Their  Workmen<\/a>
\n(2).\n<\/p>\n
We  may straightaway say that these decisions do not  assist
\nthe appellant.\tIn the case before us it is not necessary to
\ndo  any\t guess work as the appellants wants us to  do.\t The
\nappellant has filed statements showing how it has calculated
\nthe  amount of Reserves utilized as working capital  and  we
\nhave  to  find out whether the calculations made by  it\t are
\ncorrect.   In fact, Mr. Malhotra has not been able to  point
\nout from the balance sheets, as to what amount, according to
\nthe appellant, can be considerd to have been used as working
\ncapital.   In  the  two decisions,, relied on  by  him,\t the
\ncompany\t concerned was able to refer to the figures  in\t the
\nbalance\t sheets\t from which this Court was able\t to  draw  a
\nconclusion regarding the approximate amount that would\thave
\nbeen utilized as working capital.  The position before us is
\nentirely different.\n<\/p>\n
On the other hand, Mr. Puri” learned counsel for the respon-
\ndents,\treferred us to the balance sheets for the  years  in
\nquestion  regarding the share capital of the  company  being
\nshown  as Rs. 12750000\/-.  The counsel further\tpointed\t out
\nthat the said share capital must have been sunk in acquiring
\nthe  fixed  assets and for capital works  in  progress\tand,
\ntherefore,  the\t Tribunal  was justified  in  deducting\t the
\namount\tof fixed assets and capital works in progress  shown
\nin  Exs.  M. 1 (a) and M.2 (a) from the total shown  by\t the
\nappellant  in those statements.\t The counsel  further  urged
\nthat in considering the claim for return on working  capital
\ntwo  questions\thave  to be kept in view:  (1)\tWhether\t the
\nReserves  were available, and if they were (2) whether\tthey
\nwere used as working capital and if so what is that  amount.
\nThe  Tribunal in our opinion, has correctly kept  these\t two
\nprinciples  in\tview in arriving at the amount\tof  Reserves
\nused  as  working  capital and on which a return  is  to  be
\nallowed.   We see no error committed by the Tribunal in\t the
\ncalculation  made for arriving at the, Reserves\t which\tmust
\nhave  been  used  as  working  capital,\t especially  as\t the
\nevidence   on\tthe   side  of\tthe   appellant\t  was\tvery
\nunsatisfactory.\t Even the appellant has deducted the  amount
\nof share capital before
\n(1) [1968] 2 S.C. R. 311.\n<\/p>\n
(2) [1969] 3 S.C.C. 832.\n<\/p>\n
478<\/span><\/p>\n
arriving at the final figures mentioned in Exs.\t M.1(a)\t and
\nM.2  (a).  But the appellant was claiming the whole  of\t the
\nfinal amount shown in these two statements as Reserves\tused
\nas  working capital, which it was not certainly entitled  to
\nin law.\n<\/p>\n
We have already pointed out that the Tribunal has held\tthat
\nthe  working  capital cannot include fixed  assets  nor\t the
\ncapital\t works\tin  progress as\t it  represents\t ‘the  funds
\nrequired  for  day  to day running  of\tthe  Company.\tThe,
\nTribunal has further held that the appellant is entitled  to
\ndeduct\tinvestments, interest accrued on  ,investments\tetc.
\nwhich  have  been shown in Exs.\t M 1 (a) and M.2(a)  on\t the
\nground\tthat  they  must be considered\tto  be\tthe  amounts
\navailable  to  be used as working capital.   These  findings
\nhave  not  been challenged by the learned  counsel  for\t the
\nappellant.  The appellant has also filed details of Reserves
\nemployed  in  the  business  during  the  years\t ended\t31st
\nDecember,  1962\t and  1963 as shown in Exs.  M.\t 1  (b)\t and
\nM.2(b) respectively.  Even ,there the appellant has deducted
\nthe share capital before giving final figures.
\nTherefore, the contention of Mr. Malhotra that the  Tribunal
\n‘has  committed\t a  mistake in\tcalculating  the  amount  of
\nReserves used as working capital for these two years, cannot
\nbe accepted.  If so, it follows that the amount fixed by the
\nTribunal  as  return  ‘at 4% on\t Reserves  used\t as  working
\ncapital for these two years, is correct.
\nThe  second  question that arises for consideration  is\t the
\nclaim made by the appellant for provision for rehabilitation
\nfor the two years and which claim has been rejected by\tthe
\nTribunal.   The claim made by the appellant  for  provision
\nfor rehabilitation for the year 1962 was Rs. 18030871.00 and
\nfor  the year 1963 Rs. 18062336.00. Thus the  appellant\t was
\nclaiming  for each year provision being made of more than  a
\ncrore of rupees for rehabilitation.  The appellant has filed
\na chart Ex.  M.8 giving the calculations for the year  1962,
\nits  claim  for rehabilitation for Rs. 18030871.00.  If\t the
\nclaim  for rehabilitation is accepted, then the result\twill
\nbe  that  there will be no profits at all from\tand  out  of
\nwhich any bonus can be paid for the years in question.
\nThe  claim  of the appellant has been opposed by Mr.  I.  N.
\nKeshava,  learned counsel for the first respondent  and\t his
\ncontentions  have been adopted by the counsel appearing\t for
\nthe other respondents-Unions.  The claim of the appellant is
\nopposed\t mainly\t on  two  grounds,  namely,  (1)  that\t the
\nappellant has no scheme for rehabilitation for the  relevant
\nyears  and  (2)\t in  any  event\t there\twere  huge  Reserves
\navailable  from which the, claim for rehabilitation  can  be
\neasily\tmet.   The  Tribunal  has  rejected  the  claim\t for
\nrehabilitation both on the grounds that the appellant
\n479<\/span>
\nhas no scheme for rehabilitation and that the rehabilitation
\nclaim  can be adequately met with from the huge Reserves  of
\nnearly four crores of rupees that the appellant had.
\nIt   must  be  noted  that  Rehabilitation  Reserve   is   a
\nsubstantial item which goes to reduce the available  surplus
\nand  as\t a  result affects the right  of  the  employees  to
\nreceive\t the bonus.  Hence the employer will have  to  place
\nall  relevant  materials  and  the  Tribunal  will  have  to
\nscrutinize them carefully and to be satisfied that the claim
\nis justified.  It is no doubt true that it is but proper  in
\nthe larger interest of the industry as well as the employees
\nthat proper rehabilitation Reserve should be built up taking
\ninto  consideration  the  increase in  price  in  plant\t and
\nmachinery  which has to be replaced at a future date and  by
\ndetermination  of  multiplier and its deviser.\tIt  is\talso
\nclear from the decisions of this Court that if a Company has
\nno  scheme for rehabilitation, then of course, its claim  on
\nthat  head must be rejected. [vide Azam Jahi Mills, Ltd.  v.
\nTheir  Workmen<\/a>(1)].  Further, since it is the  employer\t who
\nseeks  replacement  costs,  it is for  him  to\tsatisfy\t the
\nTribunal as to what will be the overall cost of\t replacement
\nand in doing so, it is he who has to discharge, this  burden
\nby  adducing  proper  evidence and  giving  other  party  an
\nopportunity  to\t test the correctness of  that\tevidence  by
\ncross-examination.  [vide  National  Engineering  Industries
\nLtd. v. Its Workmen<\/a>(2)].\n<\/p>\n
It is also now well-settled that in determining the claim of
\nthe  employer for rehabilitation, two factors are  essential
\nto be ascertained, namely, (1) the, multiplier, and that has
\nto  be\tdone  by  reference to the  purchase  price  of\t the
\nmachinery   and\t the  price  which  has\t to  be\t  paid\t for
\nrehabilitation or replacement; and (2) the determination  of
\nthe deviser and that has to be done by deciding the probable
\nlife of the machinery. [vide The Honorary
\nSecretary, South India Millowners’ Association and others  v
\nThe Secretary Coimbatore District Textile Workers’  Union(3)
\nand  M\/s Gannon Dunkerley and Co. Ltd. and another v.  Their
\nWorkmen(4)].\n<\/p>\n
Mr.  Malhotra,\tlearned\t counsel  for  the  appellant,\tvery
\nstrongly  relied on the statement Ex.  M.S. as well  as\t the
\nevidence  of  M.W.  2,\tthe Mill Manager  and  M.W.  3,\t the
\nAssistant  Officer,  Efficiency\t Section  of  the  Mill,  in
\nsupport\t of his contention that the appellant has  a  scheme
\nfor rehabilitation and that the claim made by the  appellant
\nfor  making  provision for rehabilitation  is  proper.\t The
\ncounsel\t also  pointed out that the evidence  of  these\t two
\nwitnesses  clearly  establishes that most of  the  items  of
\nmachinery have long out lived, their normal age of 25  years
\nand
\n(1)  [1967] 2 L.L.J. 18.\n<\/p>\n
(2) [1968]1 S.C.R. 779.\n<\/p>\n
(3)  [1962] Supp. 2 S.C.R
\n(4)  A.I.R. 1971 S.C. 2567.\n<\/p>\n
480<\/span><\/p>\n
therefore they require replacement in order to ensure proper
\nproduction.   The  counsel  further  pointed  out  that\t the
\nrejection  by  the  Tribunal of\t the  claim  made  by  the
\nappellant,  on\tthe  basis  that the  life  of\tthe  textile
\nmachinery is only 25 years, is not correct and that the view
\nof the Tribunal that the normal age is more than 25 years is
\nopposed to the decisions of this Court.\n<\/p>\n
So  far as the age of the machinery is concerned, it  is  no
\ndoubt  true  that  in The Honorary  Secretary,\tSouth  India
\nMillowners’   Association  and\tothers\tv.   The   Secretary
\nCoimbatore  District Textile Workers’ Union<\/a>(1), this  Court,
\nafter  a  reference to the evidence  adduced  confirmed\t the
\nfindings  of  the Tribunal that the estimated  life  of\t the
\ntextile\t machinery  in\tquestion should be taken  to  be  25
\nyears,\tbut in the said decision itself it is  observed\t ,is
\nfollows
\n\t      “We are not prepared to accept either argument
\n\t      because,\tin  our\t opinion, the  life  of\t the
\n\t      machinery\t in every case has to be  determined
\n\t      in  the  light  of  evidence  adduced  by\t the
\n\t      parties.”\n<\/p>\n
But  it is unnecessary for us to pursue this aspect  further
\nas we are disallowing the entire claim for rehabilitation.
\nMr. Malhotra, also criticized the view of the Tribunal\tthat
\nin  this case the evidence of the witnesses on the  side  of
\nthe  appellant clearly shows that the machines\tare  working
\nvery  efficiently though they have been running for over  50
\nyears.\t On  the  other hand, the  counsel  urged  that\t the
\nprinciple  to be borne in mind, when considering  the  claim
\nfar rehabilitation, is that the life of the machinery is the
\nperiod during which it is estimated to work with  reasonable
\nefficiency  and not the period during which it has  actually
\nbeen operated, that is, till it becomes too deteriorated for
\nuse.   No  doubt  the last  proposition\t enunciated  by\t the
\ncounsel\t in  the abstract is correct; but  the\tquestion  is
\nwhether\t  the  appellant  has  discharged  its\t burden\t  of
\nsatisfying   the   Tribunal  that  it  had  a\tscheme\t for
\nrehabilitation and whether it had placed the necessary mate-
\nrials for the purpose of working out the multiplier and\t the
\ndeviser.\n<\/p>\n
Mr.  Keshava,  learned\tcounsel for  the  first\t respondent,
\nreferred  us  to the written statement filed by one  of\t the
\nUnions,\t Benny\tMills  Labour Association,  wherein  it\t has
\nspecifically  stated that the plant and machinery  owned  by
\nthe  Mills are amongst the most modem, machineries and\tthat
\nno   provision\t for  rehabilitation  is   necessary.\t The
\nappellant, it is pointed out, in its reply statement did not
\ncontrovert  these averments.  EN-en in the  statements\tExs.
\nM.  1  and  M.\t2, filed by  the  appellant,  no  claim\t for
\nrehabilitation\thas  been  made.  He also  referred  to\t the
\nevidence or
\n(1)  [1962] Supp. 2. S.C. R. 926.\n<\/p>\n
481<\/span><\/p>\n
M.Ws.  2 and 3 and pointed out that their evidence does\t not
\nshow that the Company had any scheme for rehabilitation.  On
\nthese  grounds, the counsel pointed out that  the  appellant
\nhas  not placed sufficient materials before the Tribunal  to
\nsustain its claim for rehabilitation.\n<\/p>\n
It  must be emphasized that in dealing with the claim of  an
\nemployer  for  rehabilitation, as pointed out  earlier,\t the
\nonus of proof is on the employer.  He has to prove the price
\nof  the plant and the machinery, its age, the period  during
\nwhich it requires replacement, the cost of replacement,\t the
\namount\tstanding in the Debentures and Reserve Funds and  to
\nwhat extent the funds at its disposal would meet the cost of
\nreplacement.   If the, employer fails lo  lead\tsatisfactory
\nevidence on these points, the result will be that the  claim
\nfor rehabilitation will have to be totally rejected.
\nIt  is no doubt true that a chart Ex.M. 8 has been filed  by
\nthe appellant and M.W. 3, the Assistant Officer,  Efficiency
\nSection, has spoken regarding the same.\t But he has admitted
\nthat  the  original  quotations received  from\tthe  dealers
\nregarding  the\tprice of new machinery for  the\t purpose  of
\nreplacement have not been produced before the Tribunal.\t  He
\nhas further admitted that the appellant has not produced the
\nletters\t written by it calling for quotations regarding\t the
\nprice  of  the machinery.  He has further admitted  that  no
\ncharts\thave  been  produced  to  show\tthe  value  of\t the
\nmachineries  in\t 1962.\tThe multipliers, according  to\tthis
\nwitness,  have\tbeen adopted as advised by  the\t appellant’s
\nLegal Adviser.\n<\/p>\n
It is clear from the above answers of the witness that there
\nis  no material placed before the Tribunal by the  appellant
\nfrom which the multiplier and deviser can be properly worked
\nout   for   the\t purpose  of  considering  the\t claim\t for
\nrehabilitation.\t In fact the Mill Manager, M.W. 2 has stated
\nthat the company has floated a debenture for 1 1\/2 crore for
\nbuying new machinery.  This clearly shows that the appellant
\nhad  no\t scheme\t for rehabilitation and\t that  explains\t the
\nreason why it had not made any provision for rehabilitation.
\nMr.  Malhotra,\tthen  urged that at any\t rate  the  Tribunal
\nitself\thas  proceeded\ton the basis that  some\t amount\t for
\nrehabilitation\tis necessary to be provided for\t each  year.
\nBased  on  this\t observation of The  Tribunal,\tthe  counsel
\npointed\t out that the appellant should be allowed  at  least
\nthe  amount  that it has actually spent for  replacement  of
\nmachineries in the years 1962 and 1963.\t According to him  a
\nsum  of Rs. 2619608 and Rs. 2124102 have been spent  in\t the
\nyears  1962  and 1963 respectively for machinery  and  plant
\ninstalled in those years.  In this connection he referred us
\nto the balance sheet and profit and loss accounts for  these
\ntwo  years and stressed that the Tribunal has  committed  an
\nerror in not
\n482<\/span>
\nallowing  at  least these amounts by way  of  provision\t for
\nrehabilitation.\n<\/p>\n
it  is\tno doubt true that these amounts are  shown  in\t the
\nschedules  to  the balance sheets for the  years  concerned.
\nAdmittedly,  there  is, no such claim made  in\tthe  written
\nstatement filed by the appellant before the Tribunal.\tWhen
\nthe Unions were contesting the claim of the appellant on the
\nground that it has no, scheme for rehabilitation and that it
\nhas  not  spent\t any amount by way  of\treplacement  of\t old
\nmachinery,  it was the duty of the appellant to have made  a
\nproper\tclaim and it should have adduced evidence  regarding
\nthat aspect before the Tribunal.  Mere production of balance
\nsheet  and profit and loss accounts by themselves will\triot
\nentitle\t  the\tappellant   to\t sustain   its\t claim\t for
\nrehabilitation.\n<\/p>\n
For  all  the  reasons given above, it\tis  clear  that\t the
\nTribunal was justified in holding that the appellant has not
\nbeen  able  to make out its claim for making  provision\t for
\nrehabilitation.\t In this view the Tribunal was justified  in
\nrejecting this claim of the appellant.\n<\/p>\n
We  may\t also state that the Tribunal is also  of  the\tview
\n‘that  the  appellant has large Reserves with which  it\t can
\nmeet  rehabilitation  expenses of the  machinery.   In\tthis
\nconnection the Tribunal has also referred to the evidence on
\nthe  side  of  the appellant, that  even  according  to\t the
\nappellant  rehabilitation  will have to\t be  completed\tonly
\nwithin\teight years from 1962 and that only a sum of  rupees
\neighty\tlakhs  will  be required for each  year.   On  ‘this
\nreasoning  the tribunal has held that this amount of  rupees
\neighty lakhs can be easily met with from the large  Reserves
\navailable with the appellant.  It is not necessary for us to
\nconsider this aspect further because we have already  agreed
\nwith the findings of the Tribunal that the appellant has  no
\nscheme\tfor  rehabilitation and that it has not\t placed\t any
\nsatisfactory evidence before the Tribunal in support of\t its
\nclaim.\n<\/p>\n
The  last point that arises for consideration  is  regarding
\nthe  available\tsurplus\t for  the years\t 1962  and  1963  as
\ncalculated  by the Tribunal and the award by it of 1\/3rd  of
\nthe  amount  as\t additional bonus for the  two\tyears  after
\ndeducting  the\tbonus already paid by  the  appellant.\t The
\nTribunal,   after  rejecting  the  appellant’s\t claim\t for
\nrehabilitation and also allowing return on Reserves used  as
\nworking\t capital  in the manner, already  referred  to,\t had
\narrived\t at the available, surplus for the year 1962 in\t the
\nsum  of\t Rs. 2635914 and for the year 1963 at  Rs.  4904987.
\nThe appellant filed a statement Ex.  M. 4 showing the Amount
\nof  bonus  already paid for the years 1962 and 1963  to\t all
\nemployees drawing a total of Rs. 500\/- and less per  mensem.
\nFrom that statement it is seen that for the year 1962 it had
\npaid a sum of Rs. 1441455 and for the year 1963 a sum of Rs.
\n1960795.   On the basis of the available surplus worked\t out
\nfor the years 1962 and 1963, the balance
\n 483<\/span>
\navailable surplus after deducting bonus already paid will be
\nas follows:\n<\/p>\n
     1962<\/span><\/p>\n
Rs.\n<\/p>\n
     Available surplus as worked out by the Tribunal2635914
\n     Amount already paid as bonus by the appellant1441455
\n     Balance . .    .\t.     .\t    .\t  .\t     1194459
\n     1963<\/span>
\n     Available surplus as worked out by the Tribunal4904987
\n     Amount already paid as bonus by the appellant1960795
\n     Balance  ..   .\t.    .\t  .    .\t    2944192
\nWhat  the Tribunal has done is to distribute 1\/3rd  of\tthe,
\namount\tshown  as balance above, for each of  the  years  as
\nadditional  bonus.  That results in the workmen getting\t Rs.
\n398153 representing 25 days basic wages as additional  bonus
\nfor  the  year1962.  Similarly, the workmen get\t Rs.  981397
\nrepresenting two months basic wages as additional bonus\t for
\nthe year 1963.\n<\/p>\n
     Therefore, it will be seen that the total bonus thatthe
\nworkmen will get for each of the years will be as follows
\n     1962<\/span>
\nRs.\n<\/p>\n
     1. Amount already paid by the appellant   1441455\n<\/p>\n
     2. Additional amount awarded by the Tribunal 398153
\n     TOTAL    .\t  .    .    .\t .    .\t  .   . 1839608
\nFrom the available surplus of Rs. 2635914 in 1962, the work-
\nmen  will get a total sum of Rs. 1839608 as bonus  for\tthat
\nyear  which  works  out to more than 60%  of  the  available
\nsurplus..\n<\/p>\n
Similarly for the year 1963 the figures are as follows
\n     1963<\/span>
\nRs.\n<\/p>\n
     1. Amount already paid by the appellant   1960795\n<\/p>\n
     2. Additional amount awarded by the Tribunal981397
\n     TOTAL   .\t  .\t   .\t\t    .\t 2942192
\nFrom the available surplus of Rs. 4904987 in1963,\tthe
\nworkmen\t will  get  a  sum of  Rs.  2942192  for  that\tyear
\nwhich  works  out more or less about 60%  of  the  available
\nsurplus, falling short by a sum of Rs. 800\/-.\n<\/p>\n
484<\/span><\/p>\n
Mr. Malhotra, learned counsel for the appellant attacked the
\nmethod of calculation adopted by the Tribunal.\tAccording to
\nhim the Tribunal should not have fixed more than 60% of\t the
\navailable surplus as bonus payable for a year.\tOn the other
\nhand, the amounts of bonus now awarded by the Tribunal\tand
\nalready\t paid by the appellant exceed 60%.  In our  opinion,
\nthere is considerable force in the contention of the learned
\ncounsel.   The available surplus, as found by  the  Tribunal
\nfor  the year 1962 is Rs. 2635914.  Working out roughly\t 60%
\nof  this surplus to be distributed as bonus to the  workmen,
\nthe  amount  of\t bonus\twill  be  about\t Rs.  1581600.\t The
\nappellant  has\tadmittedly paid a sum of Rs.  1441455.\t The
\nbalance\t that  the workmen will be entitled to will  be\t Rs.
\n140145.00,  whereas the Tribunal has directed the  appellant
\nto pay for this year by its Award a sum of Rs. 398153.\t The
\naward of this amount is not-.justified.
\nSo far as 1963 is concerned, the available surplus as  found
\nby  the\t Tribunal  is Rs. 4904987.  60%\t of  this  available
\nsurplus,  to which the workmen will be entitled to  will  be
\nRs.  2942992.  On the other hand, the total amount that\t the
\nworkmen\t will  get  as per the award  including\t the  amount
\nalready paid by the appellant as bonus is Rs. 2942192.\t The
\nappellant  will\t have to pay only an additional sum  of\t Rs.
\n800\/- to make up 60%.  There is no appeal by the Unions\t and
\ntherefore,  the\t bonus awarded for the year  1963  does\t not
\nrequire any interference.\n<\/p>\n
In allocating the available surplus between the company\t and
\nthe workmen, it has been held by this Court that it will  be
\nequitable  if roughly 60% of the surplus is  distributed  as
\nbonus  to  the\tworkmen and the Company\t is  left  with\t the
\nremaining  40%.\t  The Company will get in addition  to\tthis
\n40%,  the benefit of the Income-tax rebate on the 60%  bonus
\npayable to the workmen. [vide M\/s.  Gannon Dunkerley and Co.
\nLtd. and another v. Their workmen(1)].\tWe have ‘adopted the
\nsame principle in the case on hand.\n<\/p>\n
To  conclude the Award of the Industrial Tribunal in  A.I.D.
\nNo. 6 of 1966 is set aside and Civil Appeal No. 1291 of 1967
\nis allowed.  There will be no order as to costs.
\nThe Award of the Industrial Tribunal in A.I.D. No. 8 of 1966
\nis  modified to the following extent: For the year 1962\t the
\nappellant  will be liable to pay as additional bonus only  a
\nsum of Rs. 140145 instead of a sum of Rs. 398153 as directed
\nby  the Tribunal in the Award.\tTo this extent Civil  Appeal
\nNo. 1292 of 1967 is allowed in part.  In other respects,  it
\nis dismissed.  There will be no order as to costs.
\nV.P.S.\n<\/p>\n
(1) A.I.R. 1971, S.C. 2567
\n485<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Binny Ltd vs Their Workmen on 15 February, 1972 Equivalent citations: 1973 AIR 353, 1972 SCR (3) 462 Author: C Vaidyialingam Bench: Vaidyialingam, C.A. PETITIONER: BINNY LTD. Vs. RESPONDENT: THEIR WORKMEN DATE OF JUDGMENT15\/02\/1972 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. DUA, I.D. MITTER, G.K. CITATION: 1973 AIR 353 1972 SCR (3) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-7991","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nBinny Ltd vs Their Workmen on 15 February, 1972 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/binny-ltd-vs-their-workmen-on-15-february-1972\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Binny Ltd vs Their Workmen on 15 February, 1972 - 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