Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5
PETITIONER:
WORKMEN OF ASSAM CO.
Vs.
RESPONDENT:
ASSAM CO. LTD.
DATE OF JUDGMENT:
28/03/1958
BENCH:
ACT:
Industrial Dispute-Bonus-Formula applicable to tea industry-
Deductions allowable for return on capital and on reserves-"
Unit Scheme " of Payment of bonus, if suitable.
HEADNOTE:
The appellants claimed bonus for the years 1950, 1951 and
1952 at the rate of six months’ wages per year. The
Industrial Tribunal to which the dispute was referred
allowed, in calculating the surplus available for payment of
bonus, inter alia return on paid up capital and on the
reserves at 7% and 5% respectively and accepted the " unit
scheme " of payment of bonus which the company had been
following since 1926. Under this scheme units were credited
to each workman taking into consideration the importance of
the job he held, the wages he got and the number of years he
had been employed in that particular job, and each workman
was paid bonus in proportion to the units to his credit. On
appeal the Labour Appellate Tribunal modified the award and
raised the return on the reserves from 5% to 6% :
Held, that the formula laid down in Sree Meenakski Mills v.
Their workmen, ([1958] S.C.R. 878 at 884) for ascertaining
the surplus on the basis of which bonus becomes determinable
and distributable could be applied to the tea industry with
suitable adjustments.
The allowing Of 7% return on capital as against 6% held
allowable under that formula was justified by the additional
risk factors in the tea industry. The allowing Of 5% return
on reserves by the Industrial Tribunal as against 4% allowed
by the formula was not unreasonable, it being sufficient to
safeguard the interests of the company. But the increasing
of this to 6% by the Appellate Tribunal was insupportable in
the absence of any claim in the respondent’s written
statement for rehabilitation or ,of any figures for
determining this amount.
The " unit scheme " was suitable for the payment of bonus
and would result not only in the fair distribution of bonus
but would also lead to improvement in the quality and
quantity of work.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 34 of 1957.
Appeal from the judgment and order dated August 31, 1955, of
the Labour Appellate Tribunal of India, Calcutta in Appeal
Nos. Cal-187 & Cal-188 of 1954, arising out of the Award
dated May 15, 1954, of the
328
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5
Industrial Tribunal, Assam in Reference No. 20 of 1953
published in the Assam Gazette dated June 16, 1954.
C.B. Aggarwala and K. P. Gupta for the appelants.
P.K. Goswami, S. N. Mukherjee and B. N. Ghosh, for the
respondent.
1958. March 31. The Judgment of the Court was delivered by
KAPUR J.-In this appeal brought by special leave against the
order of the labour Appellate Tribunal, Calcutta dated
August 31, 1955, the controversy between the parties is
confined to the question of bonus. The appellants are the
workmen including members of the Indian staff and artisans
employed by the respondent, the Assam Co. Ltd., a company
incorporated in the United Kingdom and engaged in tea,
industry in the State of Assam. The appellants claimed
bonus for the years 1950, 1951 and 1952 at the rate of 6
months’ wages per year. The respondent offered to the
Indian staff excluding the artisans Rs. 51,061 as bonus for
1950, Rs. 48,140 for 1951 and Rs. 15,493 for 1952 which
works out at 2.3% of the net profit for the year 1950, 3.1 %
for the year 1951 and 3.9 % for the year 1952. This dispute
was referred to the Industrial Tribunal by a notification of
the Assam Government dated August 27, 1953.
The Industrial Tribunal allowed depreciation as given in the
company’s balance sheets for the three years and allowed as
return on the paid up capital and on the reserve 7% and 5%
respectively and held the artisans also to be entitled to
bonus. For the purpose of mode of payment the Industrial
Tribunal accepted the " unit scheme" under which the company
had been paying bonus since the year 1926. It was of the
opinion that the scheme was fair and rational and gave
incentive to industrial efficiency and to production.
Both the appellants and the respondent appealed against this
order, the former as to the correctness of
329
the accounts, the amount of the return on capital and
reserves and the " unit scheme " and again claimed six
months’ wages per year as bonus. The latter appealed
against the percentages allowed on the capital and the
reserves and claimed 10% and 8% respectively as a fair
return. It objected to the inclusion of the artisans
amongst the workmen eligible for bonus and also to the
application of what is known as the Bombay formula to Tea
industry.
The Labour Appellate Tribunal varied the Tribunal’s award
and allowed depreciation at the rate allowable under the
Indian Income Tax Act, confirmed 7% on the paid up capital
but raised the return on the reserves from 5% to 6% in order
to meet the claim of the company for rehabilitation which
though not claimed before the Industrial Tribunal, was put
forward before it as a basis for increase in return on
reserves. In this Court the appellants again repeated their
objection to the amount of depreciation, the return on
capital and on reserves and to the " unit scheme " but were
prepared to confine their claim to two months’ was as bonus.
Counsel for the respondent objected to the applicability of
the formula to an industry like the ’tea industry, his
contention being that circumstances and considerations
applicable to the textile industry cannot apply to Tea
industry which, being connected with agriculture, is
affected by various factors which must be taken into
consideration in the matter of depreciation, return oil
capital and return on reserves.
The principles on which the ascertainment of the surplus on
the basis of which bonus becomes determinable and
distributable have been laid down by this Court in Sree
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5
Meenakshi Mills v. Their Workmen The formula there laid down
is:
" Distributable surplus has to be ascertained after
providing from the gross profits for (1) depreciation, (2)
rehabilitation, (3) return at 6 per cent. on the paid up
capital (4) return on the working capital at a lesser but
reasonable rate, and (5) for an estimated amount in respect
of the payment of income-tax."
(1) [1958] S.C.R. 878.
42
330
Under this formula the depreciation allowable in cases
arising under the Industrial Disputes Act is the normal
depreciation including shift depreciation. We did not
understand counsel for the respondent to contend that there
was anything in the formula which was wrong in principle but
that it had to be adjusted to suit the circumstances of the
Tea industry. No circumstances, were however, given by him
which would make it unfair to apply the formula nor were any
figures or particulars furnished for varying it in regard to
depreciation.
The Industrial Tribunal allowed 7% return on capital as
against 6% held allowable under the formula. Its reasons
for this increase were :
That the tea industry here may have often to face various
adverse circumstances-more adverse than those that may come
upon other industries and may have more risks than other
industries. It may however be noted that the company in the
instant case-is more than a Century old one faring well all
through and has thus been so far a prosperous one and on a
sound footing and as such it is expected to have built up a
substantial reserve."
The Labour Appellate Tribunal maintained this higher rate of
return on capital on the ground " of its being exposed to
greater risks than any other industry namely weather, pests
in the plants and gradual deterioration of the soil over
which no man has any control These additional risk factors
are no doubt present in an industry connected with
agriculture like the tea industry and in our opinion they
justify the giving of a higher rate of return on capital.
Instead of 4% allowed by the formula the industrial Tribunal
fixed the return on reserves at 5% on the ground of its
being sufficient to guard the interests of the company but
the Labour Appellate Tribunal increased it to 6% to meet
replacements and rehabilitation charges since the " usual
method of calculating these charges is not possible in the
present case " and, " we are to see that the industry does
not. suffer for want of replacement and rehabilitation funds
and must
331
provide such funds in some other way, namely, by allowing a
return on the working capital at higher rates ". In the
absence of any claim in the respondent’s Written Statement
for rehabilitation or any figures for determining this
amount, this extra one per cent. is insupportable. It is
not a case where a claim could not be made or figures could
not have been given at the proper stage. The additional one
per cent. cannot therefore be allowed. In our opinion the
reasons given by the Industrial Tribunal sufficiently
support the giving of 5% on the reserves as being fair
considering the risks of the tea industry which is exposed
to various adverse circumstances and elements. The
Industrial Tribunal has not acted unreasonably nor in
disregard of any accepted principles in calculating the
return on reserves at 5% and we see no cogent ’reason for
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5
varying this rate.
The respondent has, since 1926, been paying bonus to its
employees according to a scheme called the " unit scheme "
which according to the Industrial Tribunal has the merit of
being more rational and gives incentive to industrious
habits and efficiency loading to more production. The
Labour Appellate Tribunal did not go into the merits of the
scheme but ordered payment according to it. Under this
scheme units are credited to each workman, taking into
consideration the importance of the job he holds, the wages
he gets and the number of years he has been employed in that
particular job. The value of units so awarded thus vary
commensurate with considerations of efficiency and
experience. The establishment is divided into twelve
categories and the medical staff into three each based on
the relative importance of the nature of work done by a
workman. Thus in the descending order of their importance
the jobs are classified as: 1. Head Mohori; 2. Head Clerk;
3. Divisional Mohori ; 4. Land Mohori; Hazaria Mohori; 5.
Kamjari Mohori; 6. Godown Mohori; 7. 2nd Tea House Mohori;
2nd Kerani; 2nd Hazaria Mohori; 8. 2nd Godown Mohori;
9.Gunti Mohori; 10. 3rd Tea House Mohori; 11.Mondal; 12.
Apprentices.
Units would thus be awarded to workmen in the
332
particular category they are in and the more qualified the
worker the better his work and the higher his wage, the
higher the number of units he would be entitled to. The
amount available for distribution as bonus is divided by the
aggregate number of units of all the workmen participating
in the scheme and each worker would be entitled to a
multiple of the amount payable on one unit and the units to
his credit. It appears to us that the estimate of the
Industrial Tribunal as to the suitability of the scheme was
fully justified and payment of bonus in accordance with this
scheme will not only result in fair distribution of bonus
but would also lead to improvement in the quality and
quantity of work. This scheme is not to be confused with
production bonus though it has the merit of combining the
fair distribution of the surplus available and the
maintenance of efficiency in the establishment.
Taking the figures on the basis of the award made by the
Industrial Tribunal we find that Rs. 7,64,608 would be the
surplus for the year 1950, Rs. 77,823 for 1951 and a deficit
of Rs. 10 lacs for the year 1952. The total sum available
for three years will be nil. On the basis of the claim
which counsel for the appellant has made before us, i. e.,
two months’ wages, we find that the amount of bonus required
for the members of the staff for the year 1950 will be one
sixth of Rs. 4,63,095 and for the year 1951, one sixth of
Rs. 4,83,893 and for 1952 one sixth of Rs. 5,31,202 which
works out to Rs. 77,182 for 1950, Rs. 80,647 for 1951 and
Rs. 88,533 for 1952. The amounts required for the artisans
further increase these figures. No doubt on the
calculations which have now been made the appellant may
justify the claim of two months’ bonus for the year 1950 but
the same cannot be said in regard to It-)he claim for the
years 1951 and 1952 because of the available surplus which
is only Rs. 77,823 for 1951 and there is a deficit of about
10 lacs of rupees for the year 1952. Taking all these
figures into consideration, we are of the opinion that the
amounts awarded by the Industrial Tribunal are fair and
proper. As the Labour Appellate Tribunal
333
allowed depreciation and rehabilitation on an erroneous
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5
basis, we would set aside the order of the Labour Appellate
Tribunal and would restore that of the Industrial Tribunal
with this modification that the Respondent shall make
available the additional amount required for payment of the
proportional bonus to the artisans.
The appeal is, therefore, allowed to this extent, the order
of the Labour Appellate Tribunal set aside and the award of
the Industrial Tribunal restored with this modification that
the respondent shall also provide an additional amount for
these three years for payment to the artisans of
proportionate bonus on the basis of the " Unit System ". As
neither of the parties have succeeded in their main
contentions, the fair order in regard to costs should be
that the parties do bear their respective costs throughout.