# [1971] 3 S.C.R. 629

- **Citation:** [1971] 3 S.C.R. 629
- **Court:** Supreme Court of India
- **Decided:** 1971-02-02
- **Case number:** Civil Appeal No. 2128 of 1969
- **Bench:** J. M. Shelat, V. Bhargava C.A. Vaidial!Ngam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1971-3-s-c-r-629-5218
- **Pages:** 10

## Headnote

Payment of Bonus Ac~ 21 of 1965-Exemption under s. 16(1) to new
estabUshmenu-Al/oy Steel Project conl(olled and managed by Hinduslan
Steel fad.
whether an
'estab/ishment'-Word 'establishment
whether
synonymous with compa]!y'-A department or undertaking of an establishment is separate establishment for computation of bonus under the
proviso to s. 3 if separate accoullls are maintained as in case of Alloy Steel
-Section 16(2) comes in way only if bonus is distributed on basis of consolidared accounts which was never done in the case of Hindustan Steel.
The Alloy Steel Project was an undertaking controlled and managed
by a government company, namely, the Hindustan Steel Ltd. Alloy Steel
was started in 1961 and went into production in 1964-65. No profit was
earned up to 1967-68. The workmen claimed bonus at the minimum rate
prescribed under the Payment of Bonus Act, 21 of 1965 in respect of the
year 1965-66. On behalf of the Alloy Steel Project exemption from payment of bonus was claimed under s. 16( 1) of the Act on the ground that
it was a new establishment and had not made profits. The Industrial Tribunal to which reference was made held that Alloy Steel could not be
treated as a separate establishment because under the Act a company is
itself an establishment so that all units of a company like Hindustan Steel
Ltd. will constitute one establishment. However, since Alloy Steel had not
been earning profits the Tribunal dir~cted payment of bonus at the minimum rate of 4% of wages as prescribed by the Act. Aggrieved by this
Award of the Tribunal the company appealed.
HELD : The Tribunal erred in holding the word 'establishment' to be
synonymous with 'company'. Jn doing so it ignored the indications which
are manifest from the language of the Act. The significant words are
those containei! in s. 2(16) which show that an establishment in a public
secto'r has to be owned, controlled or managed by a Government company
or by a corporation of the nature described in the clause.
Obviously
therefore an 'establishment in private sector'--Oefined in s. 2(15) to mean
an establishment not in the public se9tor-would be one which is owned,
controlled or managed by a person or body other than a Gove'rnment
company or a corporation of the nature described in s. 2(16). Jn this view
an establishment cannot be identified with a company. It would be absurd
to say that a company is owned, controlled or managed by a Government
company or co'rporation.
Obviously, the word 'establishment' is intended
to indicate something different from a company as defined in the Com·
panies Act. [631 F-632 DJ
(ii) Alloy Steel was a separate establiShment by virtue of the proviso
to s. 3 of the Act because for eacli of the undertakings of Hindmtan Steel
Ltd. including Alloy Steel separate accounts were kept though for the
purpose of compliance with the provisions of the Companies Act a consolidated balance-11heet and profit and loss. account were also prepared. There
was no substance in the contention that the proviso to s. 3 applies only to
departments undertaking or branches controlled and managed by persons
630
SUPREME COURT REPORTS
[1971] 3 S.C.R.
other than companies.
It would be a stcange method of construction of
Janguage to hold that the establishment referred to in the main part of
s. 3 will include all different departments undertakings and branches of a
company, while it will not do so in the proviso to the same section. There
is no reason for interpreting the proviso to s. 3 in this manner simply because in the case of separate departments, undertakings or branches of the
establishment of a company, it may not be possible to make a deduction
(ti) 8.5% of the paid up equity share capital. [635 C-D; 633 G-634 HJ
(iii) Sub-Section (!) of s. 16 grants exemption from payment of
bonus to establishments newly set up for a period of six years following
the accounting year in which the goods produced or manufactured are . sold
A
B
for the first ·time and, .in the al

## Text

• -
A
B
c
D
E
G
H
629
ALLOY STEEL PROJECT
·v.
THE WORKMEN
February 2, 1971
(J. M. SHELAT, V. BHARGAVA C.A. VAIDIAL!NGAM, J.J.]
Payment of Bonus Ac~ 21 of 1965-Exemption under s. 16(1) to new
estabUshmenu-Al/oy Steel Project conl(olled and managed by Hinduslan
Steel fad.
whether an
'estab/ishment'-Word 'establishment
whether
synonymous with compa]!y'-A department or undertaking of an establishment is separate establishment for computation of bonus under the
proviso to s. 3 if separate accoullls are maintained as in case of Alloy Steel
-Section 16(2) comes in way only if bonus is distributed on basis of consolidared accounts which was never done in the case of Hindustan Steel.
The Alloy Steel Project was an undertaking controlled and managed
by a government company, namely, the Hindustan Steel Ltd. Alloy Steel
was started in 1961 and went into production in 1964-65. No profit was
earned up to 1967-68. The workmen claimed bonus at the minimum rate
prescribed under the Payment of Bonus Act, 21 of 1965 in respect of the
year 1965-66. On behalf of the Alloy Steel Project exemption from payment of bonus was claimed under s. 16( 1) of the Act on the ground that
it was a new establishment and had not made profits. The Industrial Tribunal to which reference was made held that Alloy Steel could not be
treated as a separate establishment because under the Act a company is
itself an establishment so that all units of a company like Hindustan Steel
Ltd. will constitute one establishment. However, since Alloy Steel had not
been earning profits the Tribunal dir~cted payment of bonus at the minimum rate of 4% of wages as prescribed by the Act. Aggrieved by this
Award of the Tribunal the company appealed.
HELD : The Tribunal erred in holding the word 'establishment' to be
synonymous with 'company'. Jn doing so it ignored the indications which
are manifest from the language of the Act. The significant words are
those containei! in s. 2(16) which show that an establishment in a public
secto'r has to be owned, controlled or managed by a Government company
or by a corporation of the nature described in the clause.
Obviously
therefore an 'establishment in private sector'--Oefined in s. 2(15) to mean
an establishment not in the public se9tor-would be one which is owned,
controlled or managed by a person or body other than a Gove'rnment
company or a corporation of the nature described in s. 2(16). Jn this view
an establishment cannot be identified with a company. It would be absurd
to say that a company is owned, controlled or managed by a Government
company or co'rporation.
Obviously, the word 'establishment' is intended
to indicate something different from a company as defined in the Com·
panies Act. [631 F-632 DJ
(ii) Alloy Steel was a separate establiShment by virtue of the proviso
to s. 3 of the Act because for eacli of the undertakings of Hindmtan Steel
Ltd. including Alloy Steel separate accounts were kept though for the
purpose of compliance with the provisions of the Companies Act a consolidated balance-11heet and profit and loss. account were also prepared. There
was no substance in the contention that the proviso to s. 3 applies only to
departments undertaking or branches controlled and managed by persons
630
SUPREME COURT REPORTS
[1971] 3 S.C.R.
other than companies.
It would be a stcange method of construction of
Janguage to hold that the establishment referred to in the main part of
s. 3 will include all different departments undertakings and branches of a
company, while it will not do so in the proviso to the same section. There
is no reason for interpreting the proviso to s. 3 in this manner simply because in the case of separate departments, undertakings or branches of the
establishment of a company, it may not be possible to make a deduction
(ti) 8.5% of the paid up equity share capital. [635 C-D; 633 G-634 HJ
(iii) Sub-Section (!) of s. 16 grants exemption from payment of
bonus to establishments newly set up for a period of six years following
the accounting year in which the goods produced or manufactured are . sold
A
B
for the first ·time and, .in the alternative; upto the year when the new
establisjtment results in profit, whichever is earlier. If the Alloy Steel Project was treated as an establishment newly set ui> for the purposes of s.
16(1) the exemption claimed would be fully justified. Section 16(2) of
C
the Act makes it clear that the provisions of sub-s. (!) are to apply even .
to new departments, undertakings. or branches set up by existing establishment.
Consequently, even if Alloy Steel Project was treated as a new
undertaking set up by the existjng establishments of Hindustan Steel Ltd.
the exemption under s. 16(1) would be available to it. [637 D-E]
The proviso to Sub-s. (2) of s. 16 only comes in the way if bonus is
paid in any year to the employees of all the units on the basis of the consolidated accounts. That had never been done in the case of the Hindustan
Steel Ltd. Consequently the Alloy Steel Project should have been treated
as a separate establishment newly set up in the year 1961. It went into
production in 1964-65 and did not earn any profits at all till 1967-68.
Therefore no bonus was payable to the workmen of this undertaking Jor
the year 1965-66 in view of the provisions of s. 16(1) of the Act. [638 A-BJ
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2128 of
1969.
Appeal by special leave from the Award dated July 19, 1969
ol. the. Ninth Industrial Tribunal, West Bengal, Calcutta in case
No. VllI-396 of 1968.
C. K. Daphtary, Santosh Chatterjee and D. N. Mukherjee, for
the appellant.
S. C. Gupta, Manju Gupta and S. C. Agarwala, for the respondents,
The Judgment of the Court was delivered by
Bhargava, 1.
The appellant, Messrs Alloy Steel Project, is an
undertaking owned, controlled and managed by a Government
Company,. viz., Messrs Hindustan Steel Ltd. Alloy Steel Projec't
was started in the year 1961 and it went into production in the
yeir 1964-65. No profit was earned at Jeast right up to the year
1967-68: The workmen, however, claimed bonus at the minimum
rate prescribed uni:ler the Payment of Bonus Act No. 21 of 1965
(hereinafter referred to as "the Act") in respect of the year 1965D
E
F
G
II
...
. ALLOY STEEL PROJECT v. WORKMEN (Bhargava, J.)
631
A l 966 on the plea that this Alloy Steel Project was a part of the
:Hindwtan Steel Ltd. and could not be treated as a new establishment for purposes of section 16 of the Act. Hindustan Steel Ltd.
was itself an establiShment which had been in existence fo~ a long
period and had'been even earning profits, so that exemption could
not . be granted to this Company in respect of payment of bonus
under s. 16 of the Act. This claim of the workmen was resisted.
by the Company on the plea that Alloy Steel Project was a sepaB
rate establishment in respect of which separate balanoo-sheets and
profit and loss accounts were maintained, so that no bonus was
payable until either this Project rtself ear.tied profits, or from the
sixth accounting year following the year 1964-65 when this Pro-
. c
iect 'l\lellt into production. The dispute between the wor!."lllen and
the Company could not be resolved amicably and, consequently,
a ·reference was made under the Industrial Disputes Act, 1947
which came up before the Ninth Industrial Tribunal, West Ben-
~al. The Tribunal held that Alloy Steel Project could not be
treated as a separate establishment because, under the Act, a ComD
pany is itself an establishment, so that all units of a Company like
Hindustan Steel Ltd. will constitute one establishment. Since this
Project had not been earning any profits the Tribunal directed pay..
ment of bonus at the minimum rate of 4 per cent of wages prescribed by the Act. Aggrieved by this award of the Tribunal, the
Company has come up in this appeal to this Court by special leave,
though the name of 1lhe appellant is showa as Alloy Steel Project,
because it was under this name that the reference was dealt with
by the Tribunal.
The main basis of the ·decision of the Tribunal is that "the
word 'establishmcmt' has been used in thit Act to indicate a
"Company" as called in common parlance.". It was on this view
that the Tribunal further proceeded to eonsider wh•r this Alloy ·.
:r
Steel Project could be lield to ·be .an establisbmerit separate.frolli ·
· lfmdustan Steel Ltd., or it had to be treated 8s ·a part of the parent
establishment, viz., Hindustan Steel Ud. In this approach, it . is
clear that the Tn"bunal committed. an obvious. error, a8 it ignored
tile indications which are manifest from the language used in the
Act.
Jn section 2, sub-section (15) and (16), establisbm•
G . have been divided into two classes and their meaning has been
defined. In clause ( 16) , "establishment in public sector" is
defined as meaning an establishment owned, controlled or managed
by-
( a) a Government company as defined in section 617
of· the Companies Act, 1956;
· II
(b) a corporation in which not less than forty per
cent of its capital is held (whether singly or taken
together) by-
632
SUPREME COURT REPORtS
(1971] 3 S.C.R.
(i) the Goveljlllllent; or
(ii) the Reserve Banlc of India; or
(iii) a corporation owned by the Government or
the Reserve Bank of India.
ln clause ( 15) of s. 2, "establishment in private sector" is defined
to mean any establi.shment other thain an establishment in public
sector.
Thus, between these two clauses, all establishments are
covered. If an establishment is in public sector, it is covered by
the definition in clause ( 16). If the establishment is not in public
sector, it will be covered by the definition of "establishment in
private sector" in clause ( 15). The significant words are those
contained in clause ( 16) which shGw that an establishment in a
public sector has to be owned, controlled or managed by a Government compainy, or by a corporation of the nature described in
that c1ause.
Obviously, therefore, an establishment in a private
sector would be one which is owned, controlled or managed by a
person or body other than a Government company or a corporation of the nature described iin clause ( 16) . In this view, an
establishment cannot be identified with a company. It would 'be
absurd to say that a company is owned, controlled or managed by
a Government company or a corporation. Obviously; the word
"establishment" is intended to indicate something. different from
a company as d.efined in the Companies .Act.
This is further
clarified by the provisions of sub-s. ( 3) of section 1 which lays
down the applicability of the Act.
The Act has beeu made applicable to every factory and every other establishment in which
twenty or more persons are employed on any day dming an
accounting year.
Supposing a company has a factory in · one
premises and has another workshop entirely distinct and separate
from that factory, 1in which the number of persons employed 's
Jess than 20. The Act itseli will apply to the factory, but will not
apply to the·-0ther estl!blishment in which the number of employees·
is Jess than 20.
This applicability of the Act will be independent
of the other provisions of the Act.
Learned counsel for the
respondent-workmen relied on section 3 of the Act to urge that
. even the estab~ishment employing less than 20 persons will be a
part of the parent establishment consisting of the factory.
Section 3 is as follows :-
A
B
c
D
E
F
G
"3. Where an establishment consists of different
departments or unclertakings or has branches, whether
situated in the .same place or in different places, all such
clepartments or undertakings or branches shall be treated
H
as parts of the same establishment for the purpose of
computation of bonus under this Act :
-
ALLOY STEEL PROJECT v. WORKMEN (Bhargava, J.)
633
A
Provided that where for any accounting year a separate balance-sheet and profit and Joss account are prepared and maintained in respect of any such department
or undertaking or branch, then, such department or
undertaking or branch shall be treated as a separate
establishment for the purpose of computation of bonus
B
under this Act for that year, unless such department or
undertaking or branch was, immediately before the commencement of that accounting year treated as part of the
establishment for the purpose o( computation of bonus."
It is to be noted that the principal J?llrt of section 3 Jays down
that different departments or undertakings or branches of an estabC Iishment are to be treated as part of the same establishment only
for the purpose of computation of bonus under the Act. They
cannot be treated as part of one establishment for purposes of subsection ( 3) of section 1 of the Act.
In fact, section 3 cannot be
resorted to at all when the Act itself is inapplicable in
view of the provision contained in section 1, sub-s.
( 3). It
D is, thus, quite clear that the Tribunal went entirely wrong in holding tllat simply because Alloy S!P...el Project is owned, controlled
and managed by Hindustan Steel Ltd., it has to re treated as a
part of Hindustan Steel Ltd. which is itself an establishment.
Hindustan Steel Ltd. cannot be descnlx:d as an establishment. The
facts appearing on the record show that Hindustan Steel Ltd. has
a number of establishments. These include Alloy Steel Project
E besides the Head Office, Rourkela Steel Plant, Bhilai Steel Plant,
Durgapur Steel Plant, Coal Washeries Project and Bokaro Steel
Project. The Company, Hindustan Steel Ltd., cannot be equated
with any one of these units. They are all separll_te undertakings,
departments or branches owned, controlled and managed by one
single Compaiiy and, consequently, the point raised has to be
F decided on the basis whether, under the proviso to section ~ the
AIJoy S~l Project is to be treated as a separate establishment, or
is to be treated as part of the main establishment owned by
Hindustan Steel Ltd.
Learned counsel for the respondent-workmen, however,
G advanced a new argument which was not put forward before the
Tribunal.
His submission was that, if an establishment . of a
Company consists of a number of departments, undertakings or
branches, the prin~ipal part of section 3 will apply and all such
departments, undertakings or branches must be treated as parts of
one single establishment for purposes of computation of bonus
H under the Act, but the proviso to section 3 will not apply in such
a case. According to him, the proviso to section 3 will apply to
establishments consisting of different departments, undertakings or
branches which are owned, controlled or managed by persons other!
6H
SUPREME COURT REPORTS
[1971 J 3 s.c.R.
t.han companies. This argument was based on the reasoning that, A
in order to calculate available surplus for distribution of bonus
in the case of a company, the Act Jays down in section 6(d) read
with the Third Schedule that the deductions to be made from net
profits will also include dividends payable on preference share
capital, and 8.5 per cent of its paid u)J equity share capital as at
the commencement of the accounting year.
This provision can- B
not be given effect to in· respect of separate units of a Company,
because the paid up capltal or the preference share capital is not
allocated between different unit§.
In the case of the present Company, viz., Hindustan Steel Ltd., the entire paid up capital is §hown
in the accounts of the Head Office.
The money needed for working of the various units, including the Alloy Steel Project, is.shown C
as remittance received from the Head Office and not as paid up
capital of the Alloy Steel Project etc. The result is that, if Alloy
Steel Project or other' units of the Hindustan Steel Ltd. are treated
as separate establishments and
available
surplus is calculated
separately for each unit, there will be no deduction @8.5 per cent
of the paid up equity share capital as envisaged by section 6 ( 4)
and the Third Schedule of the Act.
D
We do not think that there is any force in this argument.
First, it would be a strange method of construction of language
to hold that the establishment referred to in the main part of
section 3 will include all di£' erent departments, undertakings and
branches of a company, while it will not do so in the proviso to E
the same section.
Such different meanings in the same section
in respect of the same words or expression cannot be accepted.
Secondly, it seems to us that no difficulty of the nature pointed
out by learned counsel can arise in calculating available surplus.
Wherever the Act lays down that certain deductions are to be
-made, It is obvious that those deductions will only be effective if,
in fact, circumstances do exist justifying such deductions.
In the F
Third Schedule itself, the first deduction envisaged is · dividend
payable on preference share capital. A number of companies do
not have preference share capital. In such cases, clearly, no
occasion would arise for" making such a deduction.
Very similar
is the position with regard to certian other deductions which are
permissible under the Second Schedule which principally Jays down G
the method of calculation of available surplus.
There is, therefore, no reason for interpreting the proviso to section 3 in the
manner urged by learned counsel simply because, in the case of
separate departments, undertakings or branches of the establishment of a company, it may not be possible to make a deduction
@8.5 per cent of the paid up equity share capital.
H
In the present case, there is very clew- evidence that, though the
Company, Hindustan Steel Ltd., has a number of undertakings,
•
•(
..
ALLOY STEEL PROJECT v. WORKMEN (Bhargava, J.)
635
A
Separate accounts are kept for each separate undertaking.
The
annual reports for three years were produced before the Tribunal.
They clearly indicate that separate balance-sheet was prepared for
each unit and separate profit and loss account was worked out for
each unit, except that, for the Head Office, though a separate
palance-sheet was prepared, the profit and loss w:,s worked out on
B
the basis of the consolidated accou,nts.
The Tribunal, in support
of its view that Alloy Steel Project is a part of the establishment
constituted by the Company, Hindustan Steel Ltd., relied on the
circumstance that a consolidated balance-sheet is prepared for the .•
Company in respect of all its units and after such consolidati~.
profit ~nd loss is also worked out for all the establishments together
c
so as to find out the actual profit and loss earned or incurred by
the Company itself. From this, the tribunal sought to infer that
there ~ere no separate accounts in respect of each unit as are
required to be maintained before they can be treated as separate
establishments under the proviso to section 3. The Tribunal has
obviously gone wrong in ignoring the fact that separate balancesheets and profit and loss accounts are in fact maintained for each
D
separate unit and the consolidated accounts are prepared only for
the purpose of complying with the requirements of the Companies
Act.
The Companies Act does lay down the requirement that a
consolidated balance-sheet and profit and loss account for all the
units of the Company must be prepared and, for that purpose,
quarterly statements of accounts have to be sent by each unit to
E
the Head Office.
There is, however, no provision even in the
Companies Act containing a prohibition to mainte_nance of separate
balance-sheets and separate profit and loss statements for each
unit for purposes of the Act.
That accounts are separately maintained for each unit is not only established from the various annual
reports filed before the Tribunal a.nd the evidence of the ComF
pany's witness Umapada Chakraborty, but is also admitted· by
Suprakash Kanjilal, the only witness examined on behalf of the
workmen.
The latter also admitted that separate bonus calcula,
tion is made in respect of each unit and bonus was declared
separatejy in each unit.
No bonus was, however, declared in
respect of the Alloy Steel Project.
That declaration was not made
G
because of the claim that Alloy Steel Project was exempt from
payment of bonus under section 16 of the Act. Section· 16 runs
as follows :-
"16. (1) Where an establishment is newly set up,
whether before or aft~r the commenceme11t of this Act,
the employees of such establishment shall be entitled to
H
be paid bonus under this Act only-
(a) from the accounting year in which the employer
derives profit from such establishment; or
ll-918Sup CI/71
636
SUPREME COURT REPORTS
(1971] 3 S.C.R.
( b) from the sixth accounting year following
the
accounting year in which the employer selis the
goods produced or manufacturecl by .him or renders services, as the case, may be, from such
establishment,
whichever is earlier :
Provided that in the case of any such establishment
the employees thereof shall not, save as otherwise provided in. section 33, be entitled to be paid bonus under
this Act in respect of any accounting year prior to the
accounting year commencing on any day in the year
1964.
Explanation !.-For the purpose of this section, an
establishment shall not be deemed to be newly set uir
merely by reason of a change in its location, manageme.nt, name or ownership.
Explanation H.-For the purpose of clause (a), an
employer shall not be deemed to have derived profit in
any accounting year unless-
( a) he has made provision for that year's depreciation to which he is entitled under the Income-tax
Act or, as the case may be, under the agricultural income-tax law; and
(b) the arrears of such depreciation and losses incurred by him in respect of the establishment
for the previous accounting years have been
fully set off against his profits.
. Explanation III.-For the purpose of clause (b),
sale of the goods produced or manufactured during the
course of the trial run of any factory or of the prospecting stilge of any mine or an oil-field shall not be taken
A
B
c
D
E
F
into consideration and where any question arises with
G
regard to such production or manufacture, the decision
of the appropriate Government, made after giving the
parties. ·a
reasonable opportunity of representing the
cas\l, shall be final and shall not be called in question
by any court or other authority.
( 2) The provisions of sub-section (1 ) shall, so far
as may be, apply to new departments or undertakings or
branches set up by existing establishments :
H
A
B
c
ALLOY STEEL PROJECT v. WORKMEN (Bhargava, J.)
637
Provided that if an employer in relation to an exist
ing establishment consisting of different departments or
undertakings or branches (whether or not in the same
industry) set up at different periods has, before the 29th
May, 1965, been paying bonus_to the employees of all
such departments or underta:kings or branc,hes irrespective of the date on which such departments or undertakings or branches were set up, on the basis of the
consolidated profits computed in respect of all such
departments or undertakings or branches, then, such
employer shall be liable to pay bonus in accordance
with the provisions of this Act to the employees of all
such departments or undertakings or branches (whether
set up before or after that date) on the basis of consolidated proits computed as aforesaid."
Sub-section (1) of section 16 grants exemption from payment of
bonus to establishments newly set up for a period of six years.
following the accounting year in which the goods produced . or
D
manufactured are sold for the first time and, in the alternative; up
to the year when the new establishment results in profit, whichever
is earlier. If the Alloy Steel Project is treated as an establishment
newly set up for purposes of s. 16 (1), the exemption claimed
would be fully justified.
Section 16(2) of the Act mak~ it clear
that the provisions of sub-section (1) are to apply even to new
E
departments, undertakings or branches set up by existing establishments.
Consequently, even if Alloy Steel Project is treated 1as a
new undertaking set up by the existing establishments of Hindustan
Steel Ltd., the exemption under section 16(1) would be available
.to it.
The proviso to sub-s, (2) of section 16 also does. not stand
in the way of this claim, because there is no evidence at all that
F
in any year, after Alloy Steel Project was set up, bonus was pald'-
to the employees of all the units on the basis of consolidated
profits of all such uiiits.
The only exception has been in Tue case·
of workmen of the Head Offi~e where no separate profit and loss
was worked out and the bonus was paid on the basis of the consolidated profits of all the units belonging to Hindustan Steel Ltd.
G
That, of course~ was fully justified, because the Head Office was
working for all the units, thQugh as a separate unit. It was in the·
accounts of the Head Office that the entire paid up capital wa~
credited and advances were made by the Head Office to the various
units out of this capital or out of loans taken by the Head Office.
In the case of the Head Office, therefore, the calculation of bOnus
on the basis of consolidated acCOU;llts was iustified; but that does
H
not affect the principle to be applied to the separate 'llllits for
which separate accounts, separate balance-sheets and sep11,rate
profit and loss statements are maintained. · The proviso to sub-
'638
SUPREME COURT REPORT.S
[1971] 3 s.c.R.
A
section ( 2) of section 16 only comes i,n the way if bonus is paid
in any year to the employees of all the units on the basis of consolidated accounts.
That has never been done in the case of the
Hindustan Steel Ltd. Co,nsequently, the Alloy Steel Project should
have been treated as a separate establishment newly set up in the
year 1961. It went into production in 1964-65 and did not earn
any profits at all till 1967-68. Therefore, no bonus was payable, B
to the workmen of this undertaking for the year 1965-66 in view
of the provisions of section 16 ( 1) of the Act.
The appeal is allowed, the order of the Tribunal is set aside, .
and the reference of the dispute ,is answered accordingly. In the
circum~tances of this case, we direct parti.es to bear their own
·costs of the appeal.
·G.C.
Appeal allowed.
c
•
..