# )INNYLTD v. THEIR WORKMl!:N - **Citation:** [1972] 3 S.C.R. 462 - **Court:** Supreme Court of India - **Decided:** 1972-02-15 - **Case number:** Civil Appeals Nos. 1291 B c D E F and 1292 of 1967 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/innyltd-v-their-workml-n-5560 - **Pages:** 23 ## Headnote 462 )INNYLTD. v. THEIR WORKMl!:N February 15, 1972 [C. A. VAIDIALINGAM, I. D. DuA AND G. K. MITTER, 1J.] The Payment of Bonus Act, 1965. $1'. 17 and l~Direcll'o# to' pay half yearly bonus-If justified-Payment of additional bonus-Metliod of calculation. B The appellant company was making two payments of bonus every year one for too half year ending 30th June and the other for the half year c ending 3 !st Dece111ber, The payment wao on the basi• of profits earned by it and the payment was not a condition of service and had nothing to do with any custom or festival. When the Payment of Bonus Act, 1%5 came into force, the appellant issued a circular that as bonus was payable under Jaw only within a period.of 8 months from the end·of the accounting year (the appellant's accounting year was the calendar year), no bonus was payable for the accounting year 1965 until the accoun!S for · the year are closed, and the announced payment· of one month's basic D wages as advance against wages for the half year endi~g. 30th June 1965. The questions, (l) whether the appellant was justified in.announcing the payment as advance against wages iiistead of as advance bonus, and (2) whether the respondents were justified in claiming bonus for the years 1962 and 1963, in addition to what had already been paid by the appellant were referred to the Industrial Tribunal. On the first question the Tribunal held that the appellant was not justified ln anncunc1ng the payment towards advance wages and directed the appellant to pay profit bonus in .two instalments-one as advmce against the final declaration of bonus, and the balance; if any, as the second instalment. On the second question the Tribunal held that the question of bonus payable was to be calculated in accordance with the Labour' Appellate Tribunal Full Bench Formula approved in AS30Ciated Cement Companies Ltd. v. Workmen, [19591 S.C.R.25; that in calculating the re~ on Reserves the claim of the appellant to iJtclude in the working C84>ltal the amounts sunk in \a) fixed assets and (b) capital work in progress should be disallowed; and that the claim of the appellant for a provision for rehabilitation should be rejected: In apeal to this Court. · HELD; (I) (a) Under the Act, bonus for a particular accoiJnting'year will have to be computed in accordance with the provisions of the Act (Ill the basis of the gross profits determined at the close af the accounting year. . The Act makes pr~vision as to how the gross profits, available and allocable surplus are to be calculated, and s, 19 prescribes 8 montha from ll>c close of the accounting year as the period within which the ,bonus was to be normally paid., The scheme of the Act shows that a claim for llonus can be made only after the close of the accounting year, because, groa profits and the ~vailable and allocable surplus can be worked out only at the end of the accounting year and not earlier, whereas the direction' given by the Tribunal requires the employer to make two computati~ at the end of each half y~ar. /469 E-H; 470 A-Bl E. F G H A B c D E F G H BINNY LTD. 1'. WORKMEN 463 (b) The direction given by the Tribunal making it obligatory on the ntanagement to make half yearly payments of bonus apart from being .. ipposed to the scheme of the Act. runs counter to s. 19. Under the section, whether it is the minimum bonus of 4% under s. 19 or the maximum bonus of 20% under s. 11, they have to be paid only within a period 'bf 8 months from the closing of the accounting year. [470 C-E] ( c) Section 17 (b) is an enabling section in favour of the employer in that it visualises a situation when he may have paid during the accounting year a part of the bonus payable under the Act, before the date on which such bonus becomes payable. lf the payment was by way of profit bonu8, he is entitled to deduct it from the final amount that may be payable under the Act. But that provi:;ion does not give a right to an emplo)'ee to claim payment of bonus by way of par ## Text _Characters 0–39,722 of 58,945. This is a partial read: ask again with offset=39722 for what follows._ 462 )INNYLTD. v. THEIR WORKMl!:N February 15, 1972 [C. A. VAIDIALINGAM, I. D. DuA AND G. K. MITTER, 1J.] The Payment of Bonus Act, 1965. $1'. 17 and l~Direcll'o# to' pay half yearly bonus-If justified-Payment of additional bonus-Metliod of calculation. B The appellant company was making two payments of bonus every year one for too half year ending 30th June and the other for the half year c ending 3 !st Dece111ber, The payment wao on the basi• of profits earned by it and the payment was not a condition of service and had nothing to do with any custom or festival. When the Payment of Bonus Act, 1%5 came into force, the appellant issued a circular that as bonus was payable under Jaw only within a period.of 8 months from the end·of the accounting year (the appellant's accounting year was the calendar year), no bonus was payable for the accounting year 1965 until the accoun!S for · the year are closed, and the announced payment· of one month's basic D wages as advance against wages for the half year endi~g. 30th June 1965. The questions, (l) whether the appellant was justified in.announcing the payment as advance against wages iiistead of as advance bonus, and (2) whether the respondents were justified in claiming bonus for the years 1962 and 1963, in addition to what had already been paid by the appellant were referred to the Industrial Tribunal. On the first question the Tribunal held that the appellant was not justified ln anncunc1ng the payment towards advance wages and directed the appellant to pay profit bonus in .two instalments-one as advmce against the final declaration of bonus, and the balance; if any, as the second instalment. On the second question the Tribunal held that the question of bonus payable was to be calculated in accordance with the Labour' Appellate Tribunal Full Bench Formula approved in AS30Ciated Cement Companies Ltd. v. Workmen, [19591 S.C.R.25; that in calculating the re~ on Reserves the claim of the appellant to iJtclude in the working C84>ltal the amounts sunk in \a) fixed assets and (b) capital work in progress should be disallowed; and that the claim of the appellant for a provision for rehabilitation should be rejected: In apeal to this Court. · HELD; (I) (a) Under the Act, bonus for a particular accoiJnting'year will have to be computed in accordance with the provisions of the Act (Ill the basis of the gross profits determined at the close af the accounting year. . The Act makes pr~vision as to how the gross profits, available and allocable surplus are to be calculated, and s, 19 prescribes 8 montha from ll>c close of the accounting year as the period within which the ,bonus was to be normally paid., The scheme of the Act shows that a claim for llonus can be made only after the close of the accounting year, because, groa profits and the ~vailable and allocable surplus can be worked out only at the end of the accounting year and not earlier, whereas the direction' given by the Tribunal requires the employer to make two computati~ at the end of each half y~ar. /469 E-H; 470 A-Bl E. F G H A B c D E F G H BINNY LTD. 1'. WORKMEN 463 (b) The direction given by the Tribunal making it obligatory on the ntanagement to make half yearly payments of bonus apart from being .. ipposed to the scheme of the Act. runs counter to s. 19. Under the section, whether it is the minimum bonus of 4% under s. 19 or the maximum bonus of 20% under s. 11, they have to be paid only within a period 'bf 8 months from the closing of the accounting year. [470 C-E] ( c) Section 17 (b) is an enabling section in favour of the employer in that it visualises a situation when he may have paid during the accounting year a part of the bonus payable under the Act, before the date on which such bonus becomes payable. lf the payment was by way of profit bonu8, he is entitled to deduct it from the final amount that may be payable under the Act. But that provi:;ion does not give a right to an emplo)'ee to claim payment of bonus by way of part payment during the currency of the accounting year. Therefore, the mere fact that the appellant has heen making payments on previous occasions half yearly, does not confer a right on the employee to 'have such payments by way of bonus in the same manner after the Act has come into force. Hence, the Tribunal had r:io jurisdiction to give a direction to ~he appellant to pay bonus at the end of each half year. [471 A-CJ (2) (a) In coa.idering the claim for return on workins capital two questions have to ·be kept in viev.·: (i) whether Reserve,, were available, and (ii) \Yhether they were used as working capital, and if $0, what was 1he- atnount used. 1477 GJ In the present case, the Tribunal has correctly kept the two principles in view in arriving at the amount of Reserves used as working 'capital and on which a return is to be allowed. The balance sheets of the appellant do not have any figures from which the Tribunal would be able to draw a conclusion. The Tribunal, therefore, while acceptin1 the s~ents of account filed by the appellant for the two years, for showing how it had calculated the amQunt ,of Reserves utiliz.ed as working a.pita], held~ that t_he two items should be deducted; because, working capitil represents the funds required for day-to-.day work of the company and carinot include~ fixed assets, and the capital works in progress. r477 G-H; 478 A'Cl . Workmen of M/s. Hindustan Motors Ltd. v. M/s. Hindustan Moiors Lid. & Anr. [1968] 2 S.C.R. 311 and M/s.'A/uminium Corpn. of India v. Workmen, [1969] 3 S.C.R. 832, referred to. Therefore, the contention that the Tribunal had committed a mistake Jn calculating the amount of Reserves used as working capita.I cannot be acc~pted. [478 D-EJ (b) A company should build up rehabilitation reserve takinr into consideration the increase in price in plant and machinery which bu to be repJaced at a future date. But since it is a substantial item which goes bl: reduce the available surplus and as a resul~ affects the right ·of the employees to bonus, the employer will have to place all .relevant material, before the Tribunal for its scrutiny. The burden of ·proof is on the employer to prove the price of the plant and machinery, its age, the period during which it requires replacements, the cost df replacemen~ \he amount standing in the Debunture and' Reserve Funds and to what extent t.he funds at its disposal would meet the cost of replacement. If the employer fails to lead satisfactory evidence on these points his claim for rehabilitation will be rejected. Also. if a company has no scheme for rehabilitation then its claim on that head must he rejected. r 479 A,E' 481 B-C]' 464 SUPREME COURT REPORTS [1972] 3 S.C.R. Azam Ja/1i Mills Ltd. v. Workme11, [1967] 2 L.L.J. 18 and National Engineering Industries Ltd. v. Workmen, [1968] 1 S.C.R. 119, referred to. In the present case, the averment in the written statement of the respondents,· that the appellant's machinery was among the most modern and .. no provision for rehabilitation was necessary, was not controverted by the appellant. The balance sheets for the two years showed that some amounts were spent on machinery. But when the respondents were contesting the claim of the appellant on the ground that it had no scheme of rehabilitation and that it had not spent any amount by way of replaooment, it was the duty of the appellant to have made a proper claim and to adduce evidence regarding that aspect. Mere production of balance sheets , and profit and Joss accounts and adding a note in the statements -0[ account filed that the figure is 'subject to claim for rehabilitation' will not entitle the appellant to sustain its claim for rehabilitation. More<>Yer, lhe appellant had large Reserves to meet rehabilitation expenses. It had also floated a debenture for buying new machinery. r481 G-H; 482AC, Dl Further, in determining the claim of an employer far rehabilitation, two factors are essential to be ascertained, namely, (i) the multiplier, which has to be done by reference to the purchase price of the machin!"Y and the price "hich has to be paici for replacement; and (ii) the divl'IOr, which has to be done by deciding the probable life of the machinery. [479 E~FJ Ho110rary Secretary, South India Mil/owners' Assn. v. Secretary Coimbato,.. District Textile Workers' Union, [1962] SUpp. 2 S.CR. 926 and M /s. Gan110n Dunkerley &. Co .. v. Their' Workmen, A.I.R. 1971 S.C. 2567, re!erred to. In the present case no material was placed before the Tribunal by the appellant from which the multiplier and divisor can be properly- worked rlan"1 leaving the remaining 40% to the company. In the pr.sent case, the method of calculation adopted for 1962, by the Tribunal, shows that the amount of 'bonus awarded by the Tribunal together with the amount already paid by the appellanr exceeded (,()% and the award of the excess was not justified. [484 A-CJ Ml s. Ganncn Dunkerley &. Co. v. Their Workmtn, A.I.R. 1.9'11 S.C. 2567. referred to. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1291 B c D E F and 1292 of 1967 ,, G Appeals by special leave from the awatd dated June 30, 1967 of the Addi1ional Industrial Tribunal, Bangalore m A.I.D. Nos. 6 and 8 of 1966. 0. P. Malhotra and D. N. Gupta, for the appe11ant. l. N. Keshava and K. Rajendra Chowdhary, for respondents H Nos. 2 and 3. Vineet Kumar, for respon'dents No5. 4 to 10. A BINNY LTD. v. WORKMEN (Vaidialingam, !.) 465 The Judgment of the Court was delivered by V aidialiDgam. 1. These two appeals, by specal leave, are directed against the common Award, dated June 30, 1970 of the Additional Industrial Tribunal, Bangalore, in two References, A.I.Ds. 6 and 8 of 1966. B c D On December 8, 1965, the Government of Mysore referred to the Industrial 'tribunal for adjudication the following question : · . "Is 1the Management of the Bangalore Woollen, Cotton and Silk Mills C!)mpany Limited, Bangalore, justified in announcing payment of one month's basic wages as advance against wages for the half-year ending June 1965 instead of declaring this' payment as an advance against payment of bo1Vi~ as was being done all these years ? If not, what other relief the workers are entitled to?" This was numbered as Reference No. A.I.D. 6 of 1966. Civil Appeal No. 129'1 of 1967 is directed against that part of the order of the Tribunal regarding ithis Reference. · · . On March 5, 1966, the Government of Mysore referred to E the same Tribunal for adjudication the following question : "Whether. the demand. of the workers of Bangalore Woollen, Cotton and Silk Mills Co., Ltd., Bangalore, for additional bonus for the year 1962 and 1963 at the rate of 2 months additional bonus and 4 months additional bonus on total wages respectively is justified. F If not, to what other relief or reliefs a:re the workmen c;ll'titled ?" This Reference was numbered as A.J.D. 8 of 1966. Civil Appeal No. 1292 of 1967 is directed against that part of the order of the Tribunal regardinjl this Reference. Both the appeala are G by the Company. We will ·first take up Civil Appeal No. 1291 of 1967. The appellant was making two 1>8ymetl'!S of bonu8 every year, one.for the half-year ending 30th June and half-year ending 30th De. cember. The accounting year is the Calendar year. The balf H yearly payments were unilaterally declared by the appellant and not on the basis of any aJU"eemell'I: between the pal'lies. The quantum of bonus that was paid for each half-year was also not cbostant. Half-yearly payments were made at the end of the half-year when 466 SUPREME COURT REPORTS (1972] 3 S.C.R. the working result of 'the said year was known and if there was sufficient profit to pay bonus. The payment of bonus for the halfyears also depended upon the approximate estimate that the Directors used to make about their prospective future earnings for the ne~t half-year. According to the appellant the bonus amounts were paid out of profits. As the Payment of Bonus Act, 1965 (hereinafter to be referred as the Act) had come into force on August 28, 1965, the appellant issued a circular to 1he efP>..ct that for the half-year ending June 30, 1965, payments will be made a' advance of wages equivalent to I/ 6th of the basic earnings of the. employees. In this circular there is a reference to the Payment of Bonus Ordinance 1965, promulga~.!d on May 29, 1965 and that under the terms of the Ordinance, bonus is payable only within a period of 8 months from the end of the accounting year. The circular fu~ther states that no bonus is payable for the accounting year 1965 unti) the accounts for the year are closed. It was further mentioned that the amounts are paid as advance wages in view of the representations made by the employees. The circular further mentioned that the amounts paid as advance wages will be set off against the bonus that may be found payable for the accounting year 1965 and that if no bonus is payable, the amount paid will be adjusted against the wages due for any month after March, 1966. The issue of the above circular led to the Unions concerned raising a dispute with the Management that the payment of bonus irt the end of each half-year has become a condition of service of the workmen as the same was being paid for several decades without any relation to profits. The appellant was charged by the Unions of having changed the conditions of service by offering to make payments as advance against wages instead of payment by way of bonus. As conciliation proceedings failed, the workmen resorted to a strike in December 1965, which led to the Reference being made by the State Government on December 8, 1965, No. A.I.D. 6 of 1966. The short stand taken by the appellant before the Tribunal A B c D E F was that the payments were being made as bonus 11'1 the end of each half-year on the basis of the profits earned by the Company. G Such payment was a voluntary act of the appellan!t and related to profit and it had not become a condition of service of the employees. The further case of the appellant is that as· the Act had CO!lJe into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965. H The Unions pleaded that the payment of bonus at the end of each half-year, which was being done for a long number of years, BINNY LTD. V, WORKMEN (Vaidialingam, J.) 467 A has become .ll. condition of serviee and too amounts paiq were not related to the profits earned by the Company. The Unions furtller contended that the Act has not in any manner afiected the right of the employees getting bonus in the manner paid by the appellant namely, at the end of every half-year. B c The Tribunal has recorded the following findings : The pay· ment of bonus was not a settled condition of service, but is de· pendent upon the profits earned during the half·yGar. Payments made by the appellant at the close of the half-year cannot be con· sidered as customary or festival bonus and that the appellant has made no change in the conditions of service of rthe workmen by altering the quantum of bonus. Though bonus was paid at the close of each half-year, the quantum of such bonus varied depending upon the profits earned by the Company. The Company has no doubt been paying for a long time profit bonus in two instalments, namely, in the month of August for the half year end· ing 30th June and in the month of March or April of the succeed· ing year for the half-year ending 31st December. The coming D into force of the Act has not created any right in the appellant to withhold the payment for each half-year as it used to do. The appellant will be entitled to deduct the amount of bonus paid for the first half year from the amount of bonus payable to its em· p!oyees under the Act in respect of the accounting year and the employees will be entitled to receive only the balance for th" £ second half-year. On these findings the Tribunal held that the appellant was not justified in announcing the payment of the amount. towards advance wages under the circular dated August 28, 1965. In the end Pellant is liable to pay profit bonus in two insta!ments--Olle as advance against the final declaration of bonus to oo paid durF ing the last week of August or first week of September and the balance, if any, was to be paid in the month of March or first week of April of the succeeding year. It further gave a direction that the first payment that is to be paid is to be as advance against payment of bonus and not as against wages. Mr. Malhotra, learned counsel for the appellant, has cha!· G Ienaed . t,be above directions given by the Tribunal. The counsel pointed out that after the OOllling into force of t'he Aot, the rights and liabllitiOB·of the parties, re~g bonus, are governed by its provisiODI. · Under the Act, the compurtalions of the available and allocable ~rplus have to be made on the basis of the gross-profits .asceitained e.t the end of the relevant accounting year and the.pay· H ment of bqnus has to be made within eight months of the close of the 11ccou,ntin11; year. As the Act envisages payment of only one. bonus, at the end of tho aci:ountiug year, .after computation qf the amount as per llhe Act, the· ~on given by the Tribunal 468 SUPREME COURT REPORTS [ 1972] 3 S.C.R. regarding paymell"t of half-yearly bonus is illegal and contrary to A · the provisions of the Act. This direction, the counsel pointed out. given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years. On .the other hand, Mr. H. K. Puri, learned counsel for the respondents Nos. 2 and 3, whose contentions have been.accepted B by the counsel for the other respondents, urged '!hat the Act does not prohibit an employer from paying bonus at the end of each half-year. The appellant has been paying bonus in two instal· ments, nan1ely, at the end of each half-year. It is always open !O the appellant, both by virtue of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus c at the end of the accounting year. any amounts that may have been paid for the first half-year. Therefore, accordinit to Mr. Puri. the directions Jtiven by '!he Tribunal are neither illegal nor con· trary to the provisions of the Act. We are not inclined to accept the con~ntion of Mr. Puri. We D have already referred to the findings of '!he Tribunal to the effect that the amount that was paid by the appellant as bonus at the end of each half-year was on the basis of the profits earned by i't. The Tribunal has re.iected the claim of the Unions that the pay· mcnt of bonus, in the manner claimed by them, was not a condition of service and th:it the payment had nothing to do with any custom or festival. These findings have not been and in fact could E not be challenged by the respondents. There is also no controversy that payment of bonus for the accounting year 1965 is governed by the provisions of the Act. If so, the question is whether the directions given by the Tribunal and referred to above. can be supported by the provisions of the Act. The Act has come into force with effect from August 28. 1965. As provided under sub-section ( 4) of seotion 1, it applies to all accounting years commencing on any day in the year 1964 and in respect of every subsequent accountinl!: year. ·Section 2 defines amongiit others the expressions, "accounting year", "al!o· cable surplus", "available ·surplus" and "~ross profits" Section 4 deals with •the computation of gross-profits. So far as the· appellant is concc;ned, under s. 4, cl. (b) the gross-profits are to be calculated in the manner specified in the Second Schedule. SecF G tion 5 provides for computation of available surplus. It is to be ascertained after deducting from the gross-profits the various items, referred to in s. 6. Section 6 deals with the items to be deducted as prior charges from the gross-profits. Section l O H makes it obligatory on an employer ·to pay minimum bonus to the employees in an accounting year of 4% of his salary or wages or Rs. 40/- whichever is higher. This payment is irrespective of the I A B c D E F BINNY LTD. v. WORKMEN (Vaidialingam, J.) 469 fact whether a Company has or has not earned profits in an ac· countinl!; year. But this provision is subject to ithe provisions of ss. 8 and 13. Section 11 provides for payment of bonus subject to a maximum of 20% of the salary or wages, if the conditions mentioned. therein are satisfied. Section 17 enables an employer, who has paid .during any accounting year Puja Bonus or other customary bonus or a part of the bonus payable under the Act before the due date, to deduct the amount so paid from the amount of bonus payable by him to an employee under the Aot in respect of that accounting year. It further provides th!!t under such cir· cumstances the employee will .be entitled to receive only the balance. Seotion 19 fixed the tinie limit for payment of bonus. If there is a dispute regarding payment of bonus pending before any authority, the .bonus will have to be paid within a month from the date, on which the Award becomes enforceable or ithe settlement comes into operation. In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year. Under ithe proviso to s. 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein. Section 34 provides that the Act exoopt as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965. We. have referred to some of the relevant provisions of the Aot. From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross-profits which are determined at the close of the accounting year. The Act itself provides as to how the gross-profits are to be calculated and the available and allocable surplus arrived at. The Act also provides the outer limit, the period within which bonus has to oo paid. It further gives the employer a right to deduct any amount that any have been paid during the accountil).g year as part of .the bonus payable under the Act. G It will be seen ·from the scheme of the Act that the claim f6r bonus can be made only after the close of the accouttting year and in accordance with the provisions of the Act. The gross-profits can be calculated only· at the end of the accountirig year' and the available and allocable surplus can also be worked out only at the end of the. accounting year. There is no question of an employer H computing the gross-profits, available and allocable surplus in the middle of an accoilnting year or at any time before the close of the relevant accountinl!; year. The direction l!;iven by the Tribti· nal really amounts to the employer having to make two .2-1031 Sip CI/72 470 SUPREME COUl!.T REPORTS [1972] 3 S.C.R. computations at the end of each half-year. No doubt, the Tribunal A ha.s given a direction to the effeet that any amount paid for the first half~year can be deducted when the final bonus is paid at the end of t]je accounting year. Even without any such comideration be· in!f shown by the Tribunal allowing an employer to so deduct, section 17 iiself clearly gives such a right to an employer. We are not impress~d with the contention of Mr. Puri that as there is no B prohibition .in the Act against an employer making the paymel1t by way of bonus at the end of a half year, the direction given by the Tribunal can be sustained. Mr. Puri referred us particularly to the provisions contained in s. 17 of the Act. He pointed out that though a time limit is fixed bys. 19, the Act itself as is evident from s. 17, clearly en· C visages payment of bonus at the end of each half year. We are not inclined to accept this contention of Mr. Puri. The direction given by the Tribunal making !t obligatory on the ManageD!ettt to make half yearly payment of bonus, apart from being opposed to the scheme of the Act, also runs counter to the provisions of s. 19. Whether it is the minimum bonus of 4% under D s •. 10 or t}te maximum bonus of 20% under s. 11, they have to be paid, as is made clear by s. 19, only within the period mentioned therein. It may be that an employer voluntarily pays amount during the accouating year by way of- part bonus which he is en· titled to take into account and adjust when making final payment at the close of the accounting year. It is one thing to say that an E 1'11lployer can make voluntary paY1Dent, but it is a different thing for the Tribunal to give a direction to that effect. Section 17 on which reliance is placed by Mr. Puri is as follows : "Where in any acC®nting year- (a) an employer haS paid any puja bonus or other cu&to.mary' bonus to an employee; or (b) an emploJ'Cl' has ~d a part of !lie . qonus pay· able under this· Act to an employee before the date on which such bonus becomes PllYl!ble, then, the cnployer shall be entitled to deduct the lllllOUllt ofbo11119 so Paid froni .the·"'3101Jnt of bonua pay-· able by bbil to'the eniplilyee undu tbl1 'Act in resiieot of that aee<>i.illlim vear 'lilld 1he em,,loyee atrall be' entitled to 1'ecei\re aniy'llbe balance." p G Clallse (.&) Ids po "1Jlllica~ ·as 1hlJ :Tribunal has catejClriff ·~ ~~ that·~ u :!10 qu.esaoo of .Hr paymeat by way.ill pWJa bonus Or• otller cuatlllilarr ~ Even thein, if uy SllCll bon'os I BINNY LTD. V. WORKMEN (Vaidialingam, J.) 471 A has been p~d, the employey is entitled to deduct the same ~om the amount of bonus payable under the. Act. Clause (b) JS an enabling section in favour of the emplo}'er in that it visualises a situation or contingency where he may have paid during the accountin11: year a part of bonus payable under the Act "before tbz date on which such bonus becomes payable". If an employer has B paid any amount during an accounting year by way of part of the bonus he is entitled to deduct the same from the final amounts that n:ay be payable under the Act. That provision does not give a riJ?ht to an employee to claim payment of bonus even by way of part payment during the currency of tlie accounting year. If so, the Tribunal has also no jurisdiction to give a direction to an c employer to pay bonus at the end of each half-year. In tl!is case, it is no doubt, seen tha't the appellant has been paying bonus at the end of each half-year. But the Tribuna1 has found that such payment has not become a condition of service. Therefore by the mere fact that the appellant has been making payments on previous occasions every half-yearly, does not confer D a right on the employee to have such payments by way of bonus in the ~ame manner even after the Act came into force,. From the above discussion it follows that the directions given by the Tribunal in A.I.D. No. 6 of 1966 have to be set aside. __ Now coming to Civil Appeal No. 1292 of 1967, as mentioned E earlier, it is a2ainst that part of the Award of the Tribunal in A.J.D, No., 8 of 1966. The question 1that was referred to !he Tribunal has also been extracted in the earlier part of the judgment. That relates to a claim for additional bonus for the years 1962 and 1963. There is no controversy that 'the appellant has already paid for the year 1962, three months basic wages as bonus. F Similarly for the year 1963 also four months basic wages as bonus has already been paid. The claim was for two months total wap,cs as additional bonus for 'the year 1962 and four months' total wages as additional bonus for the year 1963. The findings recorded by the Tribunal in A.I.D. No. 6 of 1966 regarding the nature of ·bonus paid to the employees have been adopted for thi~ reference also. The respondents-Unions do not challenge those G findings. Therefore, even in respect of .!Pe years 1962 and 1963, what is P.,ayable is only profit bonus .. JJ:'here is also no controversy 'Iha~ for thele two years the quantum of bonus payable has to be calculated in accordance with what is known as the Labour Appellate Tribunal Full Bench :Formula, which has been approved by this Court in The Associated Cement Companies Ltd., H Dwarka Cement Works, Dwarka v. Its Workmen and Another(!). BOth the parties have filed ·statements of calculations according to (I) [19'9J S.C.R. 92S. 472 SUPREME COURT REPORTS [1972] 3 S.C.R. the said Fonnula. The statements Bxs. M.1 and M.2 filed by the A Management represent the c0mputation of available surplus for the years ended December 31, 1962 and 1963 respectively. Ex. 1. M.l is as follows: · "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surplus for the B year ended 31st December,' 1962 (Under L.A. 'T, Formula/ Profit as per profit and loss Ac.count '. 68017S6 Add: Provision for Bonus 1614000 Depreciation on Fixed As°sets 1696481 c Donations 107362 .Additional Bo~us fo; l 96i 146000 3563843 10365599 Liss: Profit on sale of asaets 1745426 8620173 D Leis: Normal Depreciation and Shift Allowance • '1465812715,4361 Less: Tax Liability : 7154361 E Profit as aobove .. Liu Devolopment Rebate 586415 6567946 IncS is as claimed by the Company. Sd/- lllegible Chartered Accountants." Similarly Ex. M2 regarding the year 1963 is as follo\\'S : "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surpJus for the year ended 31st December 1963 (Under L· A. T. Formula) Profit as per Profit and Loss Acco~nt 5239220 ADD: Provision for Labour Bonus Depreciation on Fixed Assets Donations ' Provi'iion for Taxation LESS: Profit on Sale of Assets . • • Excess Provision of Electricity charges written back , . . • • LESS: 1°nd interest .... 2245000 1733719 8804 8110000 12097523 83093 675184 17336743 Normal depreciation and Shift Allowance . 758277 16'78466 . 1647555 14930911 LESS: Tax Liability Profit as above USS Development Rebate Income-tax Liability at SO"·On Rs. 2!1 /0 tOD Rs. Dividend-tax . . • Companies (Profit) Surtu Liability on Rs. 14455825 Return on Capital Empioyed': Preference Share ·eapitat 7 ·8 % on Rs. 600000 Ordinary Share Capital 6% on Rs.12150000· Reoerves employed in the busiMss 4 % on Rs. 46937947 • Available s~rpl¥•· Subject to claim for rehabilitation. 14930911 460548 14470363 .. 46800 7290oo 14455825 7227912 14538 3635 164025 1786212 -.--.-. 9111784' 1877518 2653318 11835102 3095809 474 SUPREME COURT REPORTS [1972] 3 S.C.R. We have prepared the above statement from tht; audited accounts of .the co1npany and c'rtify that it is in accordance therewith. The return ~n capital and reserves is, as claimed by the company. Sd. Illeg~bile Chartered Accountants. A B The Tribunal has accepted as correct the gross-profits as given by the appellant in these two exhibits for the two years in question. Even though the Unions contested the return on Preference Share Capital at 7 .8 % , the Tribunal has rejected their objections. It has held that under the Preference Share Regulations Act, the Company is bound to pay 7.8% on Preference Share C Capital. The Workmen did not raise any coll'lroversy regardi11g the return on Ordinary Share Capital at 6%. The Tribunal, therefore, accepted the figures given in both Exs. M. 1 and M. 2 and to the return of Ordinary Share Capital. But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years. It will be noted that D neither in Ex. M. 1 nor in Ex. M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement that they &re subject to a claim for rehabilitation. The two points in controversy between the parties regarding these two :years were : ( 1) The claim for Return on Reserves E and (2) Provision for. Rehabilitation. We will first take up the question regarding the claim of the appellant for return on Reserves. In Ex. M. 1, the appellant has claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00 being the amount employed in business. Similarly in Ex. M.2, F for the year 1963, it had claimed Rs. 1877518.00, being 4% return on Reserves on Rs. 46937947.00, employed in the business. The Unions contested the claim of the appellant on the ground that they are not entitled to any return on Reserves. The appellant had filed two statements Exs. Ml(a) and M.2(a) for the years 1962 and 1963 respectively, showing how the amounts claimed as Reserves employed in business have been arrived at. G Ex. M.1 (a) for the year 1962 is as follows : ,,THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LID. Year ended 31st December 1962. Reconciliation of c.apital employed in the business during the year ended 31st December. 1962. H ; BINNY LTD. V, WORKMEN (Vaidialingam, J.) 475 A "As at 31-12-1961: Fixed Assets and Capital Works 43139570 in Progress Investments ' ' ' 595216 Interest accrued on Investments 17477 Stores and spare parts 6179042 Raw Materials 6886058 B Process Stocks 5053558 Finished Stocks 1381082 Sundry Debtors 2473722 Advances . 2768233 Balance with Rail~av and Excise Authorities • 292529 D~posits 18993 6880fi470 ---- c LESS: Sundry Creditors 7077709 Due to Directors 63744 Unclaimed Dividends 18257 Provision for Taxation 1057850 Proposed Dividends 1481400 Provision for Gratuity 1860431 D Officers• Retiring Fund 26764 (Fund loss investments) 11588155 57218315 LESS.- E Share Capita] 12750000 ---- Rs. 44468315" --- Exhibit M.2(a) for the year 1963 is as follows :- F "THE BANGALORE WOOLLEN, COITON & SILK MILLS CO. LTD. G H Year ended 31st December, 1963. Reconciliation of Capital employed during the year ended 31-12-1963. As at 31-12-1962 Investments . . . . Interest accrued on Investments Stores and Spare Parts Raw Materials Process Stocks Finished Stocks Sundry 'Debtors Advances . . . . • . Balances with Rai'lway a11d Excis.e Authorities Deposits . • . . · . . 45229453 548575 8703 6553343 4701434 7285534 1688931 3429299 3165324 346450 24234 72981280 4 7 6 SUPREME COURT REPORTS LESS: Sundry Creditors Due to Directors . Unclaimed Dividends Provision for Taxation Proposed Dividends Provision for Gratuity Officers Retiring Fund (Fund less investments) Less Share Capital [1972] 3 S.C.R. 7686123 65278 22837 2305645 1481400 1706251 25799· 13293333 ---- 59687947 12750000 ---- Rs. 46937947'" --- It will be seen that the last figures: shown in both the state• ments have been clalined by the appellant as Reserves employed in business for each of these two years. A B c The Tribunal after a reference to the evidence of the Char~ tered Accou..!ltant, M.W.l, has held that the amounts which. should have been used as Working Capital are those mentioned in Exs. D M.l(a) and M.2(a), less the fixed assets and capital works in progress. ·The Tribunal has further held that the working capital cannot .include fixed assets nor the capiial works in progress,. as they represent the funds required· for day to day work of the· Company. According to the Tribunal these fixed assets have been accumtilated over years and they cannot form part of the E working capital. However, the Tribunal accepted the claim of the appellant that the other items in Exs. M.l(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc. are the amounts available to be used as working ca~taj. On this reasoning the Tribunal held. that in cal- · F culating the return on working capital, the amounts mentioned in Ex.M.1(1!) and M.2(a) less the amount sunk in fixed assets and working capital in progress1 have to be deducted. On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570,'and fixed a sum of R~. 1328745, as Reserves employed in business during· the year ended December 31, 1962. On this amount it allowed· a sum of Rs. 53150/- as return on Reserves at 4 % for the year G 1962. Similarly, for the year 1963, it deducted from Rs. 46937947, a sum of Rs. 45229423, and fixed a sum of Rs. 1708524/- as Reserves employed in business during that year. On this amount it a'llowed ~· 68340/- as return on Reserves at 4 % . H Mr. Malhatra, learned counsel for the appellant, while accepting that the principle adopted by the Tribunal in this regard is. -( BINNY LTD. v. WORKMEN (Vaidialingam, J.) 477 A correct, contended that it had made a mistake in calculation. According to the learned counsel, the claim must have been allowed in the manner calculated by the appellant. In this connection, the learned counsel pointed out that e\-en in cases where the evidence regarding the utilisation of Reserves as Working Capital as cla.imed by the Company, is not very satisfactory, this B Court, on the bas\s of the balance sheets, which indicated that some amount must have been used as working capital has allowed such a claim. In this connection, he relied on Workmen.of Mis: Hi1u/11s1an Motors Ltd. v. Mis Hindustan Motors Ltd., and Another(') and Messrs. Aluminium Corporation of India v. Their Workmen('). c We may straightway say that these decisions do not assist the appellant. In the· case before us it is not necessary to do any guess work as the appellants wants us to do. The appellant has filed g1atements showing how it has calculated the amount of Reserws utilised as working capital and we have to find out whether the calculations made by it are. correct. In fact, Mr. Malhotra has D not been ab]!l to point out from ~he balance sheets, as to what amount, according to the appellant, can be considerd to have been used as working capital. In the two decisions, relied on by him, the company concerned was llble to refer to ithe figures in the balance sheets from which this Court was able to draw a conclusion regarding the approximate amount that would have been utilised as working capital. The position before us is el}tircly E different. On the other hand, Mr. Puri, learned counsel for the respondents, referred us to the balance sheets for the years in question regarding tb_e share capital of 1the company being shown as Rs. 12750000/-. The counsel further pointed out that the said share capHal must have been sunk in acquiring the fixed assets F and for capital works in progress and, therefore, the Tribunal was justified in deducting the amount of fixed assets and capital works in progress shown in Exs. M.l(a) and M.2(a) from the totaI shown by the appellant in those statements.