Full Judgment Text
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PETITIONER:
THE INDIAN OXYGEN & ACETYLENE CO.,PRIVATE LTD., BOMBAY
Vs.
RESPONDENT:
ITS WORKMEN & ANOTHER
DATE OF JUDGMENT:
05/05/1959
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
DAS, SUDHI RANJAN (CJ)
BHAGWATI, NATWARLAL H.
DAS, S.K.
WANCHOO, K.N.
CITATION:
1959 AIR 1114 1959 SCR Supl. (2)1002
ACT:
Industrial Dispute-Bonnus-Full Bench formula, if can be
disregarded-Rehabilitation, claim for-Average life,
calculation of -Method of Weighted Average-Exhausted Assets-
whether can be taken into account.
HEADNOTE:
The workmen claimed bonus for the years 1952-53 and 1953-54.
The employers contended that on a proper working
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out of the Full Bench formula there ’was no available
surplus and so no bonus was payable. The Tribunal held that
the formula was not binding on it and on genuine
considerations Of social justice it rejected the claim of
the employers for rehabilitation and awarded bonus at the
rate of and I/3 annual basic wages for 1952-53 and 1953-54
respectively. Alternatively, the Tribunal found that in
case the claim for rehabilitation had to be allowed there
would be no available surplus in either of the relevant
years.
Held that, the Tribunal was bound to give effect to the Full
Bench formula and to allow the employer’s claim for rehabi-
litation.
A.C.C. Ltd., Bombay v. Their Workmen, [1959] S.C.R. 925,
followed.
In the calculations made by the Tribunal on its alternative
finding it had acted on correct principles. It had rightly
taken into account the price level prevailing in 1956 and
not merely that prevailing in the two bonus years. The
amount of rehabilitation allowed in previous years had to be
brought into account if it had not been used up but it was
not shown that had not been in the present case.
In calculating the average life of the buildings, machinery,
etc., the method of weighted average was scientifically more
accurate and gave a more accurate and realistic result. The
rehabilitation costs of those assets which had spent their
lives and were exhausted was also admissible in making
calculations under the weightage method if in the relevant
year such assets were in existence and use.
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JUDGMENT:
CIVIL APPELLATE, JURISDICTION : Civil Appeal No. 753 of
1957.
Appeal by Special Leave from the Judgment and Order dated
the 6th October, 1956, of the Industrial Tribunal, Bombay,
in Reference (I. T.) Nos. 40 & 44 of 1956.
C. K. Daphtary, Solicitor-General of India, N. A.
Palkhivala, J. B. Dadachanji and S. N. Andley, for the
appellant.
D. H. Buch and I. N. Shroff, for respondent No. 1.
C. L. Dudhia and I. N. Shroff, for respondent No. 2.
Janardhan Sharma and B. P. Maheshwari, for the Intervener.
1959. May 5. The Judgment of the Court was delivered by
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GAJENDRAGADKAR, J.-This appeal by special leave arises from
a bonus dispute between the Indian Oxygen & Acetylene Co.,
Private Ltd., (hereafter called the appellant) and its
workmen, the relevant years for the bonus claim being 1952-
53 and 1953-54. This claim was made separately by the
workmen excluding the members of the clerical staff as well
as by the clerical staff and the two claims thus made were
referred by the Bombay Government to the Industrial Tribu-
nal for its adjudication. The claim raised by the workmen
excluding clerical staff was numbered as Ref. (I. T.) No.
40 of 1956, while that made by the clerical staff was
numbered as Ref. (1. T.) No. 44 of 1956. Both categories
of workmen will hereafter be described as the respondents in
this judgment.
The appellant is a private limited company incorporated in
1935 and it has its head office at Calcutta. Its business
is to manufacture and sell oxygen and acetylene. It is a
subsidiary of the British Oxygen Co. Ltd. It sells its
products to the hospitals and nursing homes and in large
quantities to industrial concerns for welding, cutting and
blasting operations. It voluntarily paid bonus equal to two
months’ basic wages for both the years in dispute; but the
respondents were not satisfied with the said payment and
they made a claim for 1/3 of their total earnings for the
two respective years. That is bow the dispute arose between
the parties.
It appears in evidence that all the shares of the appellant
(excepting two or three held by nominee shareholders) are
held by the British Oxygen Co. Ltd. Evidence also shows
that the appellant has been prospering and has been
expanding at a rapid rate. In has capitalised its reserves
in 1940, 1941, 1942, 1945, 1946, 1947 and 1949 with the
result that the major portion of its capital is made up of
bonus shares. It has made good profits for the year ending
September 30, 1953, as well as for the year ending September
30, 1954. There is also no doubt that a large gap exists
between the actual wages paid by it to its workmen and the
living wage. It is on these allegations that the
respondents made a claim for bonus of 1/3 of their total
earnings.
1005
The appellant pleaded that it was paying good wages to the
respondents and that under the formula the respondents were
not entitled to claim any additional bonus for the relevant
years. In fact, according to the appellant, if the formula
was properly worked the bonus already voluntarily paid by it
to the respondents could not have been claimed by them.
The tribunal has, however, rejected the appellant’s case and
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has directed it to pay to the respondents bonus at the rate
of 1/4 of the annual basic wages for 1952-53 and 1/3 of the
said wages for 1953-54 (less the bonus already paid for
these years). It has also directed that in calculating the
amount of bonus overtime and dearness and other allowances
should be excluded. This award has been made subject to the
two conditions specified by it. It is the correctness of
this award that is challenged by the appellant before us.
The first point which the appellant has urged is against the
finding of the tribunal that it was not bound to give effect
to the Full Bench formula. In determining the available
surplus the Tribunal has taken the view that the formula was
not binding on it and that on considerations of social
justice to which it has referred it was open to it to reject
the claim of the appellant for rehabilitation. This
question has been considered by us at length in the case of
A. C. C. Ltd., Bombay v. Their Workmen (1) and we have held
that in dealing with claims for bonus industrial tribunals
must give effect to the formula. We have also indicated how
the calculations under the formula should be made in such
disputes. In view of the said decision we must hold that
the Tribuual was in error is not granting to the appellant
its claim for rehabilitation.
According to the calculations made by the Tribunal, without
providing for any rehabilitation (Ex. TA) it has reached
the conclusion that the available ’surplus for the years
1952-53 and 1953-54 respectively would be Rs. 6,14,830/- and
Rs. 12,16,120/-. It is on the basis of this available
surplus that the Tribunal has made its award. However, the
Tribunal has found
(1) [1959] S.C.R. 925.
1006
alternatively that in case the claim for rehabilitation made
by the appellant has to be awarded, then there would be no
available surplus for both the relevant years. This is
shown by the calculations made by it under Ex. TB. Thus it
would be clear that on the alternative finding made by the
Tribunal the appellant would be entitled to succeed and the
award tinder appeal would have to be set aside.
It is, however, urged before us by the respondents that the
calculations made by the Tribunal on its alternative finding
are not correct. In other words, the respondents seek to
support the final award passed by the Tribunal on the ground
that some of the conclusions reached by the Tribunal in
making its calculations on the alternative basis are
erroneous. The first point which has been urged by the
respondents in this behalf is that the Tribunal was wrong in
taking into account the price level prevailing in 1956. The
argument is that the price level prevailing in the two bonus
years alone should have been taken into account. We have
considered this point in A. C. C.’s case (1) and we have
held that it is inexpedient to confine the relevant decision
of the Tribunal solely to the price level prevailing in the
bonus years. Therefore the objection that the Tribunal has
committed an error in this matter must be rejected.
Then it is urged that in making its calculations the
tribunal has not applied its mind to the fact that, though
the appellant has been allowed substantial amounts by way of
rehabilitation in previous awards, those amounts are not
brought into account in considering its claims for
rehabilitation. It appears that the tribunal was inclined
to take the view that once an allowance is made to the
employer by way of rehabilitation of plant and machinery, it
is not open to the tribunal to enquire what he had done with
the said amount. In the A. C. C.’s case (1) we have held
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that if an amount for rehabilitation is allowed to an
employer and it appears that during the relevant year the
said amount was available to him then in subsequent years
the said amount will have to be taken into account unless it
is shown that in the meanwhile
(1) [1959] S.C.R. 925.
1007
it had been used for the purpose of rehabilitation. So we
would accept the respondents’ contention that the appellant
is bound to take into consideration the amount previously
allowed to it by way of rehabilitation.
There is, however, one point which must be borne in mind in
considering this plea. In the previous awards to which our
attention was drawn by the respondents, 20% of the net
profits appear to have been awarded to the appellant on a
rough and ready basis, by way of provision for
rehabilitation as well as expansion. It is significant that
the award of the said amount expressly refers to repairs,
replacement, modernization and reasonable expansion. It is
now well settled that the employer is not entitled to claim
a prior charge under the formula for any item of expansion
but the awards previously passed between the appellant and
its workmen seem to have allowed for a claim for expansion
as a prior charge, and that fact cannot be ignored in
dealing with the respondents’ present contention.
But apart from this aspect of the matter, it is clear that
the appellant has brought into account one-half of its
general reserve as on September 30,1953, and September 30,
1954, respectively, and these amounts are Rs. 5,51,363 and
Rs. 3,95,376. In view of this fact it is difficult to
accept the argument that the amounts allowed to the
appellant by way of rehabilitation in the previous years had
not been brought into account. We would like to add that
this point had not been taken before the tribunal, and may
be could not be taken before it, because the tribunal has
held that the employer could not be called upon to bring
into account the said amount.
Then it is urged that in working out the figures of
rehabilitation the tribunal was in error in accepting the
appellant’s claim. The award shows that the tribunal was
very favorably impressed by the evidence given by Mr. Saigal
and Mr. Basak on behalf of the appellant. It appears that
in arriving at the average life of the buildings, machinery,
etc., Mr. Basak has adopted the method of weighted average.
" This method is a development of the concept of the
1008
ordinary arithmetic mean " (1). Under this method, "in
general terms, a set of quantities ’X’ is given, to each of
which is attached a weight ’W’, and the weighted arithmetic
mean is obtained as the summation of ’ W’ x ’ X’ divided by
the summation of ’ W’’’. There is no doubt that this method
is scientifically more accurate and gives a more accurate
and realistic result in determining the average life of the
assets. Let us illustrate this method by taking an example
given by the tribunal itself:
Cost of Asset. Life. Annual replacement
cost required.
Rs... Rs.
5.... 1 year 5
8.... 2 years 4
300.. 10 years 30
313.. 13 years 39
The average life calculated by Mr. Basak according to the
weighted average method is 8.02 years, while the
arithmetical average of the figures in column two is 13/3 =
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4.33 years; this latter is an incorrect estimate, for the
small items distort the average. Within two years the first
two items will go out and though the remaining machinery is
expected to last for 8 years more, the arithmetical average
would give it a remaining life of 2.33 years.
The respondents do not challenge the validity of this
method; but they contend that in working out the method some
calculations have been made which are open to objection.
Before dealing with these objections it may be stated
generally that when Mr. Saigal and Mr. Basak gave evidence
they were not asked any definite or precise questions on
which the objections urged before us are based. It is
desirable that in enquiries of this kind, when experts give
evidence on behalf of the employer, workmen should cross-
examine them on all points which they -propose to urge
against the employer’s claim in regard to rehabilitation.
However, we would like to deal with the merits
(1) " Statistics for Economists " by R.G.D. Allen, 1949
Ed., p. 96.
1009
of the said contentions in the light of such evidence as is
available on the record.
The first contention is that the assets which have spent
their lives and are thus exhausted should not be continued
in making calculations under the weightage method. This
objection applies to such assets as leasehold buildings,
cars and trucks. We are inclined to think that the method
adopted by the appellant in making its calculations gives a
more correct picture of the assets actually in use and the
rehabilitation cost claimed in respect of them. If in the
relevant year the asset is in existence and use, a claim for
its rehabilitation would not become inadmissible. The same
argument is put in another form and it is urged that where
an asset which has come to an end is taken into account it
would be wrong to take into account in the same year a new
asset which has come into existence. The suggestion is that
by this method a double claim for rehabilitation creeps into
the calculation. We are not satisfied that even this argu-
ment is wellfounded. Let us examine this argument by
reference to one item. The lease-hold buildings of the
appellant include two buildings known as D. A. and Oxygen
respectively at Bombay (Ex. C. 19). As on September 30,
1953, the estimated life of these buildings from October 1,
1953, is shown to be one year and the annual provision
claimed for rehabilitating them is shown as Rs. 97,468 and
Rs. 30,590 respectively. These claims have not been made in
the subsequent year. In the same year two new buildings
called D. A. and Oxygen respectively which were erected in
1952 have been included and the annual provision for
rehabilitation in respect of them is made at Rs. 6,474 and
6,972 respectively. Now, if the respondents’ argument is
accepted and the calculations made in regard to the new
buildings were excluded from the statements, the appellant
would apparently be entitled to claim a somewhat higher
amount. It may be mentioned that in working out the figures
for rehabilitation in respect of new -buildings Ex. C. II
has included this item of Rs. 13,000 and odd in the larger
127
1010
item of Rs. 4,58,316 mentioned against uncovered requirement
for rehabilitation and replacement in the year, whereas in
deducting Rs. 2,31,700 by way of normal depreciation for the
said year an amount of Its. 22,000 and odd has been taken to
be the normal depreciation in respect of the new buildings;
that is to say, as against a claim of Rs. 13,000 and odd
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made for rehabilitation in respect of the said two buildings
in Ex. C. 19, a deduction by way of normal depreciation has
been allowed to the extent of Rs. 22,000 and odd. Therefore
it does not appear on the evidence as it stands, that the
method adopted by the appellant in making its calculations
has introduced any serious infirmity or has given a
distorted or inflated claim about the provision for
rehabilitation.
In this connection it is relevant to refer to the fact that
the calculations made by the appellant are based upon an
item-wise study of its plant and machinery, and such a
method, it is conceded, is bound to lead to more
satisfactory results. Mr. Basak produced Exs. C. I to C.
16 which contained all the relevant calculations and he
stated in cross-examination that as a matter of business
practice a businessman has to think of replacing his
machines even though they may have been bought in the
relevant year. Of course, in considering the claim for
rehabilitation in respect of such an item the multiplier
would normally be I and the divisor would represent the
total future life of the said machines. In regard to the
exhausted assets the Witness stated that if they are not
included in the schedule the final result on Exs. C. 11 and
C. 12 would be incorrect because in these statements the
total depreciation provided up to the opening of the year
has been deducted and this sum includes proportionate
depreciation also on the assets referred to. He has also
added that the total value of all fixed assets shown in Exs.
C. 11 and C. 12 " have got to agree with the values shown in
the balance-sbects "; and he claimed that " his method of
calculating weighted average of the remaining life of assets
is the most correct that can be employed ". Similarly Mr.
Saigal was cross-examined about the Bangalore plant which
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had been installed in 1946. He stated that theoretically it
should have a life till 1968 but in effect the plant had
become so unreliable that they had to instal new one and to
keep the old one as a standby. According to this witness
actually the life of the machinery enumerated in Ex. C. 20
works out to less than 22 years but for simplicity in
accounting he had taken the figure to be 22. As we have
already mentioned the tribunal took the view that the
evidence( given by the appellant’s witnesses in the present
proceedings was satisfactory and we do not think that any
material has been brought out in cross-examination which
would justify the respondents’ contention that the tribunal
had not properly appreciated the said evidence. In the
result we hold that the respondents have failed to show that
any of the conclusions reached by the tribunal in making its
calculations under its alternative findidg are wrong.
The appeal accordingly succeeds and must be allowed and the
award passed by the tribunal must be set aside. In view of
the fact that the principal point raised by the appeal was
one of some importance and it has been argued in a group of
appeals before us, we think that the parties should bear
their own costs.
Appeal allowed.
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