# BIHAR STATE ELECTRICITY BOARD, PATNA v. THEIR WORKMEN

- **Citation:** [1976] 2 S.C.R. 42
- **Court:** Supreme Court of India
- **Decided:** 1975-09-30
- **Case number:** Civil Appeal No. 2104 of 1969
- **Bench:** A. Alagiriswaj\U, P. K. Goswami, N. L. Untwal!A
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bihar-state-electricity-board-patna-v-their-workmen-6864
- **Pages:** 6

## Headnote

Industrial Disputes Act-Computation of financial burden before making
an award :
Eectridty Supply Act, 1948-S. 59, 64. 65, 66, 67 and 68.
The Emplo~es Provident Fund Acb applies only t!> establishments which
are
fa~tories. The industry
in question.
electricity-including
generation,
transmission and distribution thereof, is one to which tbe Act applies. But
only a small proportion of employees connected with_ the generation of electricity is establishments which are factories.
To the rest the
Act does
not
apply. The appellant maintains a contributory provident fund
for
those
employees who are not covered by the Act where the contribution is on the
basis of basic wage, the appellant and the employees contributing equally. The
contribution under the Act is 8 per cent whereas under the appellant's scheme
it is 6.t per cent.
The workmen respondents claimed before the Industrial Tribunal
in a
reference made by the Govt. of Bihar ( 1) that all workmen of the appellant
should have the ~ame and the similar benefits and that, therefore. there should
be no distinction between the appellant's contributory provident fund scheme
and the scheme under the Employees Provident Fund Act.
(2} The services of the workmen of the appellant are liable; to be transferred from one esta bli'shment to another both of which may not be covered
by the same scheme and such! ano_malies can be removed by giving the same
benefits to all the1 workmen; (3) That the State was the financier of the appellant which now charges interest at the rate of 6t per cent as against previOUSi
4 per cent; (4) That no scheme run by the Board was running at a loss; (5)
That a large amount was paid to the Gove_rnment by the appellant in the
shape of interest towards the Joans received from the Government and that
such amounts should be taken as dividends to be paid to the Government by
the appellant 3Jld should not be taken into consideration while deciding the
matters regarding benefits to be made available to its employees.
The appellant contended before the Industrial Tribunal that the demand
of the workmen would impose additional financial liabilities which the appel~
!ant would not be able to bear.
The Tribunal did not consider the validity of the above submissions. It
merely relied on an earlier award in which it wa~ observed that if the interest
realised by the Government were excluded from consideration there would
be surplus in favour of the appellant. The Tribunal held that since the posi-'
tion of th~ appellant was not worse than what it was at the time of the earlier
award, the appellant should extend the benefits of the contributory provident
fund to: all workmen who are not covered by1 the Act and that the Contributions
should be 6t per cent not on the basic wages bnt on the total wages.
Allowing the appeal,
HELD : (1) The Tribunal has treated the whole matter in a very perfunctory manner. . The main question for consideration by the Tribunal was the
financial capacity of the Board. It has made no effort at all to analyse the
balance sheet of the appellant to show the actual results of his working. It
has made no effort to work out the financial implications of its order.
Tt has
not made it clear what exactly are the total wages.
This Court in the case of
Gramophone Company_ although it was a case of ordinary commercial concern, calculated the actual burden to protect the stability of the industry and
to see that the imposition of the burden does not result in loss to the employer.
[45 B~GJ.
\
;
I
•
)
.j
!llIHAR ELECTRICITY BOARD v. WORKMEN (Alagiriswami, !.)
43
( 2) The appellant is not an ,ordinary commercial concern. It is a public
5ervice institution. lt is not expected to make any profits. lt is expected to
.extend the supply of electricity to unserved areas without reference to corn;iderations of loss that might be incurred as a result of such extension. Section
59 of the Electricity (Supply) Act, 1948 provides that as far as practicable
the Board shall carry

## Text

A
B
c
D
E
F
G
JI
42
BIHAR STATE ELECTRICITY BOARD, PATNA
v.
THEIR WORKMEN
September 30, 1975
[A. ALAGIRISWAJ\U, P. K. GOSWAMI AND N. L. UNTWAL!A, JJ.]
Industrial Disputes Act-Computation of financial burden before making
an award :
Eectridty Supply Act, 1948-S. 59, 64. 65, 66, 67 and 68.
The Emplo~es Provident Fund Acb applies only t!> establishments which
are
fa~tories. The industry
in question.
electricity-including
generation,
transmission and distribution thereof, is one to which tbe Act applies. But
only a small proportion of employees connected with_ the generation of electricity is establishments which are factories.
To the rest the
Act does
not
apply. The appellant maintains a contributory provident fund
for
those
employees who are not covered by the Act where the contribution is on the
basis of basic wage, the appellant and the employees contributing equally. The
contribution under the Act is 8 per cent whereas under the appellant's scheme
it is 6.t per cent.
The workmen respondents claimed before the Industrial Tribunal
in a
reference made by the Govt. of Bihar ( 1) that all workmen of the appellant
should have the ~ame and the similar benefits and that, therefore. there should
be no distinction between the appellant's contributory provident fund scheme
and the scheme under the Employees Provident Fund Act.
(2} The services of the workmen of the appellant are liable; to be transferred from one esta bli'shment to another both of which may not be covered
by the same scheme and such! ano_malies can be removed by giving the same
benefits to all the1 workmen; (3) That the State was the financier of the appellant which now charges interest at the rate of 6t per cent as against previOUSi
4 per cent; (4) That no scheme run by the Board was running at a loss; (5)
That a large amount was paid to the Gove_rnment by the appellant in the
shape of interest towards the Joans received from the Government and that
such amounts should be taken as dividends to be paid to the Government by
the appellant 3Jld should not be taken into consideration while deciding the
matters regarding benefits to be made available to its employees.
The appellant contended before the Industrial Tribunal that the demand
of the workmen would impose additional financial liabilities which the appel~
!ant would not be able to bear.
The Tribunal did not consider the validity of the above submissions. It
merely relied on an earlier award in which it wa~ observed that if the interest
realised by the Government were excluded from consideration there would
be surplus in favour of the appellant. The Tribunal held that since the posi-'
tion of th~ appellant was not worse than what it was at the time of the earlier
award, the appellant should extend the benefits of the contributory provident
fund to: all workmen who are not covered by1 the Act and that the Contributions
should be 6t per cent not on the basic wages bnt on the total wages.
Allowing the appeal,
HELD : (1) The Tribunal has treated the whole matter in a very perfunctory manner. . The main question for consideration by the Tribunal was the
financial capacity of the Board. It has made no effort at all to analyse the
balance sheet of the appellant to show the actual results of his working. It
has made no effort to work out the financial implications of its order.
Tt has
not made it clear what exactly are the total wages.
This Court in the case of
Gramophone Company_ although it was a case of ordinary commercial concern, calculated the actual burden to protect the stability of the industry and
to see that the imposition of the burden does not result in loss to the employer.
[45 B~GJ.
\
;
I
•
)
.j
!llIHAR ELECTRICITY BOARD v. WORKMEN (Alagiriswami, !.)
43
( 2) The appellant is not an ,ordinary commercial concern. It is a public
5ervice institution. lt is not expected to make any profits. lt is expected to
.extend the supply of electricity to unserved areas without reference to corn;iderations of loss that might be incurred as a result of such extension. Section
59 of the Electricity (Supply) Act, 1948 provides that as far as practicable
the Board shall carry on its operations so a~ not to incur loss. S. 64 enables
the State Government to advance lo.ans to the Board. S. 65 authorises the Board
to borrow. S. 66 authorises the State Government to guarantee loans raised
.by the Board.
S. 67 lays down the manner in which the profits have to be
distributed.
S. 68 imposes obligation on the Board to make a credit to the
·depreciation reserve in the prescribed manner. [46 A-C].
A
B
The assessment by the Tribunal that the interest should not be taken into
.account in working out the profits is not borne out by the provisions of the
statute.
The Tribunal did not look into the Act at all.
Whether in view of
the statutory obligations laid on the appellant under the aforesaid sections,
"!hether the same considerations which apply in the case of private commercial concerns could be applied to the Board while analysing the capacity to
C
bear th•e additional burden is rather a difficult question.
We do not express
any view on that question.
However. various sums payable under s. 67 have
to be deducted before the profits could be ascertained and with regard
to
depreciation reserve, the provision of s. 68 may have to be taken into. account.
147 C-E].
The matter was remanded back to the Tribunal to be disposed of in the
light of the observations made in the judgment.
-
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2104 of 1969.
Appeal by Special Leave from the Judgment and Order dated the
27th February, 1969 of the Industrial Tribunal, Bihar, Patna in refe-
.rence No. 54 of 1966.
S. V. (lupte and U. P. Singh for the Appella,nt.
A. K. Nag and D. P. Mukherjee for Respondents.
The Judgment of the Court was delivered by
ALAGIRISWAMI, J.-This appeal is by special leave granted by this
1Court against th~ award of the Industrial Tribunal, Bihar at Patna in
E
reference No. 54 of 1966 made by the Government of Bihar on 25th
F
November, 1966. The special leave granted is limited only to the
question wheth~r there should be a contributory provident fund scheme
·on the basis of basic wages or total wages. It was noted at the time of
granting the special leav~ that the appellant Board is willing fo extend
·that scheme to all the workers except the Government servants who are
,on deputation and those to whom the Employees' Provident Fund Act
applies. Therefore the only item in reference No. 54 of 1966 which
G
'is r·~levant for the purpose of this appeal is the following :
"Whether the benefit of the Employees' Provident Fund
Act, 1952 should be extended to any additional categories of
workmen? If so, what should be the terms and conditions
and from what date ?"
'
The Employees'. Provident Fund Act applies only to establishments
which are factories. It could be applied to establishments which are
11ot factories if the Central Government by notification in the Official
H
A
B
c
D
E
F
G
H
44
SUPREME COURT REPORTS
(1976] 2 S.C.R.
~azett.e specifies tn t~is behalf. The _industry in question,, electricitymcludmg the generation, transmission and distribution thereof is one
t_o which the Act applies. But as_ is well-known only a small 'proport1<'.n of employ~es connected _with the generation of electricity is in establishments which are factones. The transmission and distribution is
all over the Sta_te and the employees concerned with transmission and
distribution and the_ maintenance of those lines of transmission and distribution are spread all over the State and probably far outnumber those
work_ing in establishments which are factories. To them the Employees'
Provident Fund Act does not ap2Iy. The Board maintains a Contributory Provident Fund where the contribution is on the basis of basic
wage, the Board and the employees contributing equally.
The workmen claimed that all workmen of the Board should have
the same and similar benefits-and that therefore there should be no distinction between the Board's Contributory Provident Fund scheme and
the scheme under the Employees Provident Fund Act. Moreover, the
conti·ibution under the Act is 8 per cent whereas under the Board'sschcme it is 6t p·er cent. The employees also contended that the services of the workmen of the Board are liable to be transferred from one
establishment to another both which may not be covered by the same
scheme under the Act and therefore it will bring about serious injustice
if rhey are: deprived of their benefits- under the Act, and such anomalies
will be removed by making the benefits. under both the schemes similar.
The Board's contention was that this would impose additional financial
liabilities which the Board would not be abk to bear. Therefore, the
main question which the Tribunal had to consider was the Board's
financial capacity tq implement the Provident Fund scheme as demand,-
cd by the workmen. It seems to have been argued on behalf of the
workmen that the State Government is the financier of the Board which
charges interest now at the rate of 6t per cent a& against the previous
4 per cent per annum.
It was also contended that no scheme run by
the Board was running at a loss. Exhibit 17, purported to contain trading results of the Board,. was shown to the Tribunal and it was argued
that in the year ending March 1969 Board's gross profits amounted to
Rs. 305.12 lakhs and it had been continuously rising from Rs. 59.39
lakhs in 1961. Exhibit 18 shows the loans which have been received
from the Government by the Board and the balance sheet shows a very
large amount in the shape of interest payable to the Government. It
was argued on behalf of the Union that this amount should be taken
as dividend to be paid to the Government by the Board and should
not be taken into consideration whifo deciding matters regarding benefits to be made available to its employees. The validity of none of these
contentions was consider·ed by the Tribunal. It referred to an award
made by it in 1964 in reference No. 19 of 1960 in which it had held
that if the interests realised by the Stat~ were excluded from consid-er~
tion, there would be surplus in favour of the Board. In that award it
had been pointed out that it had not been explained by the management
how the depreciation had been calculated.
That award also pointed
out that one of the main reasons for the deficits shown was heavy interest on the capital investment. that in an electrical establishment capital
investments are heavy in the initial stages, that the Board expected that
after the load developed fully the scheme would start giving adequate
\-' \
•
I ,
" .
)
-
BIHAR ELECTRICITY BOARD v. WORKMEN (Alagiriswami, !.)
45
profits.
Th_e Tribunal thought that the position at present was not
worse than what it was ·earlier and that therefore the Board should extend the benefits of the Contributory Provident Fund to all workmen
other than thosei who are covered by the Act. It therefore ordered that
the contribution should be 6t per cent but not on the basic wages but
on the total wages.
The Tribunal has treated the whole matter in a very perfunctory
manner. The main question for consideration by the Tribunal was the
financial capacity of the Board. It has made no effort at all to analyse
the balance sheet of the Board to show the actual results of its working.
It has made no effort to work out the financial implications of its order.
It has not made it clear what exactly are the total wages. In Gramophone Co. v. Its Workmen( I) it was held by this Court that :
"Before the real profit for each of the relevant years is
ascertained amounts to be provided for taxation and for development rebate reserve could not be deducted in order to
ascertain the financial capacity of the employer. In considering the question of provident fund and gratuity which stands
more or less on the same footing the industrial tribunal has to
look at the profits made without considering provision for
taxation in the shape of income-tax and for reserves. The
provision for income-tax and for reserves must take second
place as compared to provision for wage-structure and gratuity, which stands on the same footing as provident fund which
is also a retiral benefit. Payment towards provident fund and
gratuity is expense to be met by an employer like any other
expense including wages and if the financial position shows that
the burden of payment of gratuity and provident fund
can b~ met without undue strain on the financial position of
the employer, that burden must be borne by the employer.
It will certainly result in some reduction in profits; but if the
industry is in a stable condition and the burden of provident
fund and gratuity does not result in loss to the employer. that
burden will have to be borne by the employer like the burden
of wage-structure in the interest of social justice. While on
tlre one hand casting of this burden reduces the margin of
profit, on the other' hand it will result in the reduction of taxation in the shape of income-tax."
That case was a case of an ordinary commercial concern. Even so it
A
B
c
D
E
F
. .;
was noticed that the stability of the industry as well as the fact that the
G
burden of provident fund and gratuity does not result in loss to the
employer are to be taken into CQ!lSideration.
The actual burden was
i
calculated and it was pointed out that 63 per cent of it would be met
by reduction In taxation. Nothing of the sort has been done by the
Tribunal in this case. It is true that in that case it was said that the
amounts to be provided for taxation and for development rebate reserve
could not be deducted in order to ascertain the financial capacity of
H
the employer. Nothing was said there .about the depreciation reserve
-------··-
(1) [1964] IIL. L. J. 131.
A
B
c
D
E
F
G
H
46
SUPREME COURT REPORTS
[1976] 2 S.C.R.
which is obligatory under s. 68 of the Electricity (Supply) Act. The
Electricity Board js not an ordinary commercial concern. It is a public service institution.
It is not expected to make any profit.
It is
expected to extend th~ supply of e1ectricity to unserved areas withouE
reference Lo considerations of loss that might be incurred as a result
of such extension. The Government makes subventions to the Board
for the purposes of the Act.
Section 59 of the Electricity (.Supply)
Act, 1948 provides that as far as practicable and after taking credit for
any subventions from the State Government the Board shall carry on
its operations so as not to incur a loss. Under s. 64 the State Government may advance loans to the Board and under s. 65 the Board itself
has the power to borrow.
Under s. 6(J the State Govanment may
guarantee the payment of principal and interest of any loan proposed
to be raised by the Board.
Under s. 67 after meeting its op~rating,
maintenance and management expenses and after provision has been
made for the paym~nt of taxes on its income and profits the revenues
of the Board have to be distributed as far as they are available in the
following order, namely :-
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
interest on bonds not guaranteed under section 66;
interest on stock not so guaranteed;
credits to depreciation reserve under section 68;
interest on bonds guaranteed under section 66;
interest on stock so guaranteed;
interest on sums paid by the State Government under guarantees under section 66;
the write-down of amounts paid from capital under the provi so to section 5 9;
tlie write-down of amounts in respect of intangible assets to
the extent to which they are actually appropriated in any
year for the purpose in the books of the Board;
contribution to general reserve of an ainount not exceeding
one-half of one per centum per annum of the original cost
of fixed assets employed by the Board so however that the
total standing to the credit of such reserve shall not exceed
fifteen per centwrz of the original cost of such fixed assets;
interest an loans advanced or deemed to be advanced to
the Board under section 64, including arrears of such in-.
terest;
(xi) the balance to be appropriated to a fund to be called the
Development Fund to be utilised for-
(a) purposes beneficial, in the opinion of the Board, to
electrical development in the State;
(b) repayment of loans advanced to the Board under section 64 and required to be repaid :
':/
\\
"
•
"r"
j
BIHAR ELECTRICITY BOARD v. WORKMEN (Alagiriswami, J.)
47
Provided that where no such loan is outstanding, one-half of the
balance aforesaid shalt be credited to the Consolidated Fund of the
:State.
'
Section 68 lays an obligation on the Board to make a credit to the
, . .I
)
'
.depreciation reserve in the prescribed manner.
The facile assumption by the Tribunal that the interest should not
be taken into account in working orit the profits is not born~ out by the
provisions of the statute.
Indeed the Tribunal did not look into the
Act at all.
Whether in view of the statutory obligations laid on it
under the various sections just now referred to in analysing the capacity of the Board to bear any additional burden in the matter of provident fund or other amenities the same considerations that applied in the
case of private commercial concerns could be applied is a rather di:ftlcult question. In_ fact the decision might very often depend on a close'
analysis of the financial condition of the Board.
We do not want at
present to express one view or the other. One thing at least is obvious,
that the variou~ sums payable under the provisions of s. 67 have to be
deducted b~fore the profits could be ascertain~d. Even with regard to
the depreciation reserve the provisions of s. 68 may have. to be taken
into account. H it is not it would have to be met by loans on which
interest will have to be paid and deduction of interest so paid will have
to be taken into account in calculating the profits. The contribution to
the depreciation reserve is a statutory obligation and is a definite proportion whereas it is open· to an ordinary commercial concern to credit
any amount to the depreciation reserve.
These and other matters
cannot be properly decided in the absence of a detailed examination
of the finances of the Board. That is why we said that the Tribunal
has dealt with the matter in a perfunctory way. It should be directed
to dispose of the matter afresh in the light of the observations made
in this judgment.
The appeal is accordingly allowed.
There will be no order as to
costs.
P.H.P.
Appeal allowed.
A
B
c
D
E