1972 (2) TMI 68 - SC - Indian Laws

Supreme Court held that an employer is not bound to keep an employee in service with whom relations have reached the point of complete loss of confidence/faith between the two.

Issues Involved:
1. Legitimacy of the management's announcement regarding payment of wages instead of bonus.
2. Justification of workers' demand for additional bonus for the years 1962 and 1963.
3. Calculation and distribution of available surplus for bonus purposes.
4. Claim for return on reserves employed in business.
5. Claim for provision for rehabilitation.

Detailed Analysis:

1. Legitimacy of the management's announcement regarding payment of wages instead of bonus:
The appellant company had been making two payments of bonus every year based on profits. With the enactment of the Payment of Bonus Act, 1965, the company issued a circular stating that payments for the half-year ending June 30, 1965, would be made as advance wages. The Unions contended that the half-yearly bonus payments had become a condition of service. The Tribunal found that the bonus payments were not a settled condition of service and were dependent on profits. The Tribunal directed the company to continue paying profit bonus in two installments. The Supreme Court held that the Tribunal's direction for half-yearly bonus payments was contrary to the provisions of the Payment of Bonus Act, which envisages bonus computation at the end of the accounting year. The Tribunal's directions were set aside.

2. Justification of workers' demand for additional bonus for the years 1962 and 1963:
The Tribunal adopted the findings from A.I.D. No. 6 of 1966, stating that the bonus was profit-based. The Tribunal accepted the company's computation of available surplus for the years 1962 and 1963. The Tribunal awarded 1/3rd of the balance available surplus as additional bonus for each year. The Supreme Court modified the Tribunal's award, reducing the additional bonus for 1962 to Rs. 140,145 instead of Rs. 398,153, while upholding the award for 1963.

3. Calculation and distribution of available surplus for bonus purposes:
The Tribunal accepted the company's gross-profits and return on Preference and Ordinary Share Capital. The controversy arose regarding the return on reserves and provision for rehabilitation. The Tribunal deducted fixed assets and capital works in progress from the reserves to calculate the working capital. The Supreme Court upheld the Tribunal's calculation of return on reserves and rejected the company's claim for rehabilitation due to lack of evidence.

4. Claim for return on reserves employed in business:
The Tribunal deducted fixed assets and capital works in progress from the reserves to calculate the working capital. The Supreme Court upheld the Tribunal's calculation, which allowed a return on reserves at 4% for the years 1962 and 1963.

5. Claim for provision for rehabilitation:
The Tribunal rejected the company's claim for rehabilitation, stating that the company had no scheme for rehabilitation and had sufficient reserves to meet rehabilitation expenses. The Supreme Court upheld this finding, emphasizing the need for the employer to provide satisfactory evidence for such claims.

Conclusion:
The Supreme Court allowed Civil Appeal No. 1291 of 1967, setting aside the Tribunal's award in A.I.D. No. 6 of 1966. In Civil Appeal No. 1292 of 1967, the Court modified the Tribunal's award, reducing the additional bonus for 1962 but upholding the award for 1963. The claims for return on reserves and provision for rehabilitation were addressed, with the Tribunal's calculations being upheld. There was no order as to costs.

← Previous Next →