Full Judgment Text
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PETITIONER:
THE MANAGEMENT OF PRAGA INDUSTRIESLTD., COIMBATORE
Vs.
RESPONDENT:
THE WORKERS
DATE OF JUDGMENT:
08/05/1959
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.
WANCHOO, K.N.
CITATION:
1959 AIR 1194 1960 SCR (1) 161
ACT:
Industrial Dispute-Award by consent-lnterim increment Of
wages in lieu of fixation of wage structure-Such award, if
open to challenge-Wage structure of piece-rate workmen-
Whether entitled to annual increment-Machinery, land,
building on lease-Rehabilitation charges, if
allowable-Bonus-Calculation of available surplus.
HEADNOTE:
The appellant was the lessee under Praga Industries and took
on lease buildings and machinery for five years with option
of renewal. The subject matter of dispute for adjudication
was with regard to the questions about (1) the quantum of
bonus payable to the workmen for the year 1954, and (2)
fixation of scale of wages with graded annual increments for
different categories of workmen.
In view of the fact that the lease in its favour was due to
expire shortly, the appellant had suggested to the Tribunal
that the question of classifying the workmen into skilled
and unskilled workmen and providing for systematic grades of
pay with increments may conveniently be deferred to a future
date; the
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respondents agreed to this proposal and so both the parties
represented to the Tribunal that they would be satisfied if
an interim order was made providing for the increment in
the wages of the workmen. Accordingly, the Tribunal
refrained from fixing any wage structure, and as an interim
measure, ordered increment of wages at 4 per cent. and
directed the appellant to grant such an increment every year
until the workmen were classified and their pay scales were
introduced to reach a particular maximum.
The above increment applied to the monthly, time and piece
rated workmen.
The appellant challenged the propriety of the course adopted
by the Tribunal and contended that the Tribunal was asked to
fix a wage structure, but instead it had passed merely an
interim order which was irregular.
The appellant also contended that the claim for the
additional bonus for the year 1954 by the workmen was not
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justified as the financial position of the appellant was not
satisfactory, and it was in debts and had not even paid rent
due to the lessor, and in fact, had ploughed back the amount
of rent due into the business as working capital. The
appellant also resisted the direction for payment of bonus
on the ground that the award involved an unfair distribution
of the available surplus and claimed rehabilitation charges
for the leased property and machinery and interest on the
amount of unpaid rent.
Held, that where the parties themselves represented to the
Tribunal that the question of classifying respondents into
skilled and unskilled workmen and providing for systematic
grades of pay with increments may be conveniently deferred
to a future date and they would be satisfied with a
reasonable interim order providing for increment in the
wages of the workmen, it was not open to the parties to
challenge the award based on such representation at a later
stage.
That although generally a wage structure with annual
increments was not provided for piece rate workers, who are
paid for the work they do, the rate of wages fixed for such
workers could legitimately be revised on a proper case being
made out in that behalf.
Held further, that where an amount earmarked as due for
payment for some other purpose was utilised as working
capital, it should carry interest, even though shown as
liability in the profit and loss account and the same should
be taken into consideration for arriving at the surplus
available for the purposes of bonus.
That no prior charges for rehabilitation could be allowed
where land, machinery and building for business were taken
on lease. Where new machinery was purchased the amount of
rehabilitation was covered by the depreciation allowed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 226 of 1958.
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Appeal by special leave from the award dated May 30, 1957,
of the Labour Court, Coimbatore, in Industrial Dispute No.
89 of 1955.
A. V. Viswanatha Sastri and T. V. R. Tatachari, for the
appellants.
M. S. K. Sastri, for the respondents.
1959. May 8. The Judgment of the Court was delivered by
GAJENDRAGARKAR J.-This appeal by special leave arises out of
an industrial dispute between the Management of Praga
Industries (P) Ltd., (hereafter called the appellant) and
its workmen (hereafter called the respondents). The dispute
which was referred by the Government of Madras for
adjudication to tile Industrial Tribunal at Coimbatore
covered four items. Two of them were settled by compromise
between the parties and the remaining two were the subject-
matter of adjudication. They are the question about the
quantum of bonus payable to the respondents for the year
1954 and the question of fixing scales of wages with graded
annual increments for different categories of respondents.
The tribunal has ordered the appellant to pay to the
respondents by way of bonus three months’ wages. The
appellant had already paid one month’s bonus and so it had
been directed to pay bonus for two months more. In regard
to the fixation of the wage structure the tribunal has
refrained from fixing any wage structure at present and as
an interim measure it has ordered the appellant to grant all
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its workmen all increment at the rate of 4% and to continue
to grant such an increment every year until they are
classified and their pay scale is introduced to reach a
particular maximum. It is these two directions in the award
which are challenged by the appellant in the present appeal.
The appellant is a private limited company carrying on the
business of manufacturing nut and plastic buttons in
Coimbatore as a lessee under Praga Industries, Coimbatore,
which is a partnership firm. The appellant took on lease
from the said firm land, buildings
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and machinery belonging to it under an indenture of lease
executed on January 15, 1954. Under this deed a monthly
rental of Rs. 5,000 has to be paid by the appellant for five
years; the lease includes a clause by which a right of
renewal is given to the appellant for a period of three
years.
The appellant’s case was that its financial position was not
satisfactory; that it had to borrow an overdraft from the
Indian Bank Limited, Coimbatore, under an overdraft account
which left the appellant a debtor to the said Bank to the
extent of Rs. 48,414 in 1954. The appellant had also not
paid the rent due to the lessor for the said year and had in
fact ploughed back the said amount of rent of Rs. 60,000
into the business of the appellant as working capital.
According to the appellant, under the Full Bench formula the
respondents’ claim for additional bonus was not justified.
On the other hand the respondents urged that the appellant
was making large profits and their claim for bonus was fully
justified. The respondents also alleged that it was high
time that a proper wage structure was fixed by the tribunal
guaranteeing to the respondents the payment of fair wages
with fair annual increments with a view to reach specified
maximums.
On behalf of the appellant Mr. Viswanatha Sastri has
challenged the propriety of the course adopted by the
tribunal in making an interim order about the increments in
wages of the appellant’s employees. The tribunal was asked
to fix a wage structure under issue No. 3. Instead it has
come out with an interim order which is very irregular, says
Mr. Sastri. In our opinion this argument is wholly
untenable. It is clear from the award that the appellant
itself suggested to the tribunal that the lease in its
favour was due to expire within a year and a half and that
the question of classifying the respondents into skilled and
unskilled workmen and providing for systematic grades of pay
with increments may be conveniently deferred to a future
date. The respondents agreed to this suggestion, and both
parties represented to the tribunal that they would be
satisfied if a reasonable interim order
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was made providing for increment in the wages of the
respondents. That being so, it is not open to the appellant
now to contend that the tribunal should have fixed a wage
structure and not passed an interim’ order.
On the merits of the interim order the only objection which
has been raised by the appellant before us is in respect of
the application of the said order;-to piece-rate workers.
It appears that on October 25, 1955, an agreement had been
reached between. the appellant and the respondents and by
cls. 5 and 6 of this agreement it was settled that an annual
increment of 4% of the basic pay for all the monthly-rated
and time-rated employees should be given, and that the
revised wages should come into force from November 1, 1955.
That being so, Mr. Sastri has not challenged the interim
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order passed by the tribunal in respect of the monthlyrated
and the daily-rated workmen. His grievance is that the
tribunal was in error in making a similar order in regard to
the piece-rated workmen.
It is true that generally annual increments in the wages of
piece-rated workers are not provided. These workers are
paid by the work which they do though the rates fixed for
such payment relay be legitimately increased in proper cases
usually a wage structure with annual increments is not
provided for such piecerated workers. It is on this aspect
of the matter that Mr. Sastri has laid considerable
emphasis. On the other hand, Mr. Joseph Nejedly who gave
evidence for the appellant frankly admitted that piece-rate
wages had been fixed in 1947 and though there were some
changes in them they were insignificant. He also conceded
that since 1947 the cost of living had gone up in
Coimbatore. These statements make it clear that a case for
revising the rates of wages payable to piecerated workers
has been made out Asmuch as in the case of monthly-rated or
daily-rated workmen. Therefore we think that the appellant
cannot successfully challenge the direction issued by the
tribunal in regard to the increment of 4% in the case of
rates of wages fixed for piece-rated workers. We would,
however, like to modify the interim order in regard to
piece-rated
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workers by directing that though their rates of wages should
be increased at the rate of 4% they should not have the
benefit of the annual increment at the said rate until all
the workers are classified and their pay scales are
introduced. In other words, we confirm this part of the
award with the only modification that future annual
Increment at the rate of 4% should not be granted to the
piece-rated workers.
The next contention raised by Mr. Sastri is in regard to the
order made by the award directing the appellant to pay two
months’ additional bonus to the respondents. It is now well
settled that the claim for bonus must be decided by the
application of the Full Bench formula. In the application
of the formula, there are only two items which have given
rise to a controversy in the present proceedings. The
appellant claimed that he should be allowed 4% interest on
Rs. 60,000 either on the basis that this interest would be
payable to the lessor since default had been committed in
the payment of rent due to him ; or on the basis that the
said amount had been utilised as working capital and so
should carry 4% interest. In our opinion the latter claim
is well founded and must be upheld. There is no doubt that
the monthly rent of Rs. 5,000 payable to the lessor, though
shown as a liability in the profit and loss account, has in
fact not been paid to the lessor; and it is also clear that
the whole of this amount has in fact been used as working
capital by the appellant. Therefore its claim to have
interest at 40% on this amount cannot be resisted by the
respondents. The tribunal was inclined to dissect this
claim month by month and to consider the question of return
on the amount month by month. We do not think that it is
necessary to adopt such a course in the present case.
The other clam made by the appellant is in respect of
improvement and modernisation of its machinery. The
appellant claimed Rs. 20,000 under this head. This claim
has been rejected by the tribunal, and we think rightly, As
we have already observed, the appellant has taken the land,
machinery and buildings for its business as a lessee from
the Praga Industries, Coimbatore, and so the appellant
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cannot claim to
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rehabilitate any of the said machinery and plant. If the
appellant has purchased new machinery in 1954 the amount of
rehabilitation which the appellant can claim in respect of
the said machinery for 1954 is covered by the depreciation
allowed to the appellant., This position is not disputed by
Mr. Sastri. Therefore we are satisfied that the appellant
is not entitled to claim Rs. 20,000 as a prior charge for
rehabilitation.
If the Full Bench formula is worked out in the light of
these findings there can be no doubt that the tribunal was
justified in directing the appellant to pay additional bonus
for two months. It is common ground that, taking the net
profit at Rs. 42,726, if the depreciation and the bonus paid
for 1953 are added back, the figure of gross profit would be
Rs. 69,546. From this figure if the notional normal
depreciation, income-tax, return at 6% on paid-up capital
and return at 4% on working capital of Rs. 60,000 are
deducted, it still leaves a balance of over Rs. 26,000. The
three months’ bonus, including one month’s bonus already
paid by the appellant; awarded by the tribunal is in the
neighborhood of Rs. 22,000 but in respect of this bonus the
appellant would be entitled to a rebate of income-tax to the
extent of Rs. 12,300. That being so, it cannot be said that
the order passed by the tribunal involves an unfair
distribution of the available surplus.
In the result the appeal substantially fails and the award
passed by the tribunal is confirmed with the modification as
to the future annual increments in regard to piece-rated
workers. In the circumstances of this case we direct that
the parties should bear their own costs.
Appeal substantially dismissed; award partially modified.
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