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TMI Blog1972 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s basic wages as advance against wages for the half-year ending June 1965 instead of declaring this payment as an ad- vance against payment of bonus as was being, done all these years ? If not, what other relief the workers are entitled to. This was numbered as Reference No. A.I.D. 6 of 1966. Civil Appeal No. 1291 of 1967 is directed against that part of the order of the Tribunal regarding this Reference. On March 5, 1966, the Government of MysorE referred to the same Tribunal for adjudication the following question "Whether the demand of the workers of Bangalore Woollen, Cotton and Silk Mills Co., Ltd., Bangalore, for additional bonus for the year 1962 and 1963 at the rate of 2 months additional bonus and4 months additional bonus on total wages respectively is justified. If not, to what other relief or reliefs are the workmen entitled ?" This Reference was numbered as A.I.D. 8 of 1966. Civil Appeal No. 1292 of 1967 is directed against that part of the order of the Tribunal regarding this Reference. Both the appeals are by the Company. We will first take up Civil Appeal No. 1291 of 1967. appellant was making two payments of bonus every year, one for the half-year ending 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. A.I.D. 6 of 1966. The short stand taken by, the appellant before the Tribunal was that the payments were being made as bonus at the end of each half-year on the basis of the profits earned by the Company. Such payment was a voluntary act of the appellant and related to profit and it had not become a condition of service of the employees. The further case of the appellant is that as the Act had come into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965. The Unions pleaded that the payment of bonus at the end of each half-year, which was being done for a long number of years, has become a condition of service and the amounts paid were not related to the profits earned by the Company. The Unions further contended that the Act has not in any manner affected the right of the employees getting bonus in the manner paid by the appellant namely , at the end of every half-year. The Tribunal has recorded the following findings : The pay- ment of bonus was not a settled condition of service, but is dependent upon the profits earned during the half-year. Payments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal regarding payment of half-yearly bonus is illegal and contrary to the provisions of the Act. This direction, the counsel pointed-out, given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years. On the other hand, Mr. H. K. Puri, learned counsel for the respondents Nos. 2 and 3, whose contentions have been accepted by the, counsel for the other respondents, urged that the Act does not prohibit an employer from paying bonus at the end of each half-year. The appellant has been paying bonus in two installments, namely, at the end of each half- year. It is always open to the appellant, both by virtue: of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus at the end of the accounting year, any amounts that may have been paid for the first half-year. Therefore, according to Mr. Puri, the directions given by the Tribunal are neither illegal nor contrary to the provisions of the Act. We are not inclined to accept the contention of Mr. Puri. We have already referred to the findings of the Tribunal to the effect that the amount that was paid by the appellant as bonus at the end of each half-year was on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of bonus pending before any authority, the bonus will have to be paid within a month from the date, on which the Award becomes enforceable or the settlement comes into operation. In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year. Under the proviso to s. 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein. Section 34 provides that the Act except as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965. We have referred to some of the relevant provisions of the Act. From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross-profits which are determined at the close of the accounting year. The Act itself provides as to how the gross-profits are to be calculated and the available and alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final payment at the close of the accounting year. It is one, thing to say that an employer can make voluntary payment, but it is- a different thing for the Tribunal to give a direction to that effect. Section 17 on which reliance, is placed by Mr. Puri is as follows: "Where in any accounting year-- (a) an employer has paid any paid bonus or other customary bonus to an employee; or (b) an employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable, then, the employer shall be entitled to deduct amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the; balance. Clause (a)has no application as the Tribunal has categori- cally held that there is question of any payment by way of puja bonus, or other customary bonus. Even then if any such bonus has been paid the employer is entitled to deduct the same from the amount of bonus payable under the Act. Clause (b) is an enabling section in favour of the employer in that it visualizes a situation or contingency where he may have paid during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Dwarka v. Its Workmen and Another Both the parties have filed statements of calculations according to (1) [1959] S.C.R. 925. the said Formula. The statements Exs. M. 1 and M.2 filed by the Management represent the computation of available surplus for the years ended December 31, 1962 and 1963 respectively. Ex. M. 1 is as follows-: "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surplus for the year ended 31st December, 1962 (Under L.A. T. Formula) Profit as per profit and loss Account6801756 Add: Provision for Bonus 1614000 Depreciation on Fixed Assets 1696481 Donations 107362 Additional Bonus for 1961 146000 3563843 ---------- 10365599 .Less: Profit on sale of assets 1745426 8620173 Less Normal Depreciation and Shift Allowance1465812 7154361 Less: Tax Liability Profit as above 7154361 Less -Development Rebate 586415 6567946 Income-tax Liability at 50 Y. on Rs. 65534083276704 Income-Tax at 25 % on Rs. 145383635 65679463280339 Super Profits Tax on Rs. 6553408409158 3689497 Return on Capital employed Preference Share Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exs. M. 1 and M. 2 and to the return of Ordinary Share Capital. But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years. It will be noted that neither in Ex. M. 1 nor in Ex. M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement that they are subject to a claim for rehabilitation. The two points in controversy between the parties regarding these two years were (1) The claim for Return on Reserves and (2) Provision for Rehabilitation. We will first take up the question regarding the claim of the appellant for return on Reserves. In Ex. M. 1, the appellant has claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00 being the amount employed in business. Similarly in Ex. M.2, for the year 1963, it had claimed Rs. 1877518.00, being 4% return on Reserves on Rs. 46937947.00, employed in the business. The Unions contested the claim of the appellant on the ground that they are not entitled to any return on Reserves. The appellant had filed two statements Exs. Ml (a) and M.2(a) for the years 1962 and 1963 respectively, showing how the amounts claimed as Reserves employed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk of the Company. According to the Tribunal these fixed assets have been accumulated over years and they cannot form part of-the working capital. However, the Tribunal accepted the claim of the appellant that the other items in Exs. M.1(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc. are the amounts available to be used as working capital. On this reasoning the Tribunal held that in calculating the return on working capital, the amounts mentioned in Ex.M.1(a) and M.2(a) less the amount sunk in fixed assets and working capital in progress, have to be deducted. On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570, and fixed a sum of Rs. 1328745, as Reserves employed in business during the year ended December 31, 1962. On this amount it allowed a sum of Rs. 53150/- as return on Reserves at 4% for the year 1962. Similarly, for the year 1963, it deducted from Rs. 46937947 a sum of Rs. 45229423, and fixed a sum of Rs. 1708524/- as Reserves employed in business during that year. On this amount it allowed Rs. 68340/- as return on Reserves at 4%. Mr. Malh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther they were used as working capital and if so what is that amount. The Tribunal in our opinion, has correctly kept these two principles in view in arriving at the amount of Reserves used as working capital and on which a return is to be allowed. We see no error committed by the Tribunal in the calculation made for arriving at the, Reserves which must have been used as working capital, especially as the evidence on the side of the appellant was very unsatisfactory. Even the appellant has deducted the amount of share capital before arriving at the final figures mentioned in Exs. M.1(a) and M.2 (a). But the appellant was claiming the whole of the final amount shown in these two statements as Reserves used as working capital, which it was not certainly entitled to in law. We have already pointed out that the Tribunal has held that the working capital cannot include fixed assets nor the capital works in progress as it represents 'the funds required for day to day running of the Company. The, Tribunal has further held that the appellant is entitled to deduct investments, interest accrued on ,investments etc. which have been shown in Exs. M 1 (a) and M.2(a) on the ground that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the employees to receive the bonus. Hence the employer will have to place all relevant materials and the Tribunal will have to scrutinize them carefully and to be satisfied that the claim is justified. It is no doubt true that it is but proper in the larger interest of the industry as well as the employees that proper rehabilitation Reserve should be built up taking into consideration the increase in price in plant and machinery which has to be replaced at a future date and by determination of multiplier and its deviser. It is also clear from the decisions of this Court that if a Company has no scheme for rehabilitation, then of course, its claim on that head must be rejected. [vide Azam Jahi Mills, Ltd. v. Their Workmen]. Further, since it is the employer who seeks replacement costs, it is for him to satisfy the Tribunal as to what will be the overall cost of replacement and in doing so, it is he who has to discharge, this burden by adducing proper evidence and giving other party an opportunity to test the correctness of that evidence by cross-examination. [vide National Engineering Industries Ltd. v. Its Workmen]. It is also now well-settled that in determining the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence of the witnesses on the side of the appellant clearly shows that the machines are working very efficiently though they have been running for over 50 years. On the other hand, the counsel urged that the principle to be borne in mind, when considering the claim far rehabilitation, is that the life of the machinery is the period during which it is estimated to work with reasonable efficiency and not the period during which it has actually been operated, that is, till it becomes too deteriorated for use. No doubt the last proposition enunciated by the counsel in the abstract is correct; but the question is whether the appellant has discharged its burden of satisfying the Tribunal that it had a scheme for rehabilitation and whether it had placed the necessary materials for the purpose of working out the multiplier and the deviser. Mr. Keshava, learned counsel for the first respondent, referred us to the written statement filed by one of the Unions, Benny Mills Labour Association, wherein it has specifically stated that the plant and machinery owned by the Mills are amongst the most modem, machineries and that no provision for rehabilitation is necessary. The appellant, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis that some amount for rehabilitation is necessary to be provided for each year. Based on this observation of The Tribunal, the counsel pointed out that the appellant should be allowed at least the amount that it has actually spent for replacement of machineries in the years 1962 and 1963. According to him a sum of Rs. 2619608 and Rs. 2124102 have been spent in the years 1962 and 1963 respectively for machinery and plant installed in those years. In this connection he referred us to the balance sheet and profit and loss accounts for these two years and stressed that the Tribunal has committed an error in not allowing at least these amounts by way of provision for rehabilitation. it is no doubt true that these amounts are shown in the schedules to the balance sheets for the years concerned. Admittedly, there is, no such claim made in the written statement filed by the appellant before the Tribunal. When the Unions were contesting the claim of the appellant on the ground that it has no, scheme for rehabilitation and that it has not spent any amount by way of replacement of old machinery, it was the duty of the appellant to have made a proper claim and it should have adduced evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Available surplus as worked out by the Tribunal2635914 Amount already paid as bonus by the appellant1441455 Balance . . . . . . . 1194459 1963 Available surplus as worked out by the Tribunal4904987 Amount already paid as bonus by the appellant1960795 Balance .. . . . . . 2944192 What the Tribunal has done is to distribute 1/3rd of the, amount shown as balance above, for each of the years as additional bonus. That results in the workmen getting Rs. 398153 representing 25 days basic wages as additional bonus for the year1962. Similarly, the workmen get Rs. 981397 representing two months basic wages as additional bonus for the year 1963. Therefore, it will be seen that the total bonus thatthe workmen will get for each of the years will be as follows 1962 Rs. 1. Amount already paid by the appellant 1441455 2. Additional amount awarded by the Tribunal 398153 TOTAL . . . . . . . . 1839608 From the available surplus of Rs. 2635914 in 1962, the work- men will get a total sum of Rs. 1839608 as bonus for that year which works out to more than 60% of the available surplus.. Similarly for the year 1963 the figures are as follows 1963 Rs. 1. Amount already paid by the appellant 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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