# J962 a.au v. TIN St.u •f 14 Uar11s•tra

- **Citation:** [1962] Supp. 2 S.C.R. 926
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** P. B. Ga.Jendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j962-a-au-v-tin-st-u-f-14-uar11s-tra-2356
- **Pages:** 23

## Headnote

I ndll8trial Di8puie-Boniu-Rehabilitation-Life of t.ztile
mnchinery-C/aim
in.
ruptel
of old machi~
Det1elopmntt
rebate-D•dwction-U ae
of
dtprtciatwn
amount-lnt.rut-Tu•o Reparate
conce,.,.._When
eonali·
It& one unit-Indian lnoome-kJ:c Act, 1922 (11of1922), •· IO
(2)(vi), Erp/anation (2), prolliao (b).
In respect of the di.pules which arose between certain
textile mills a.ild their respective employees in regard to the
bonus for the year 1956, the matter was reftrred to the Industrial Tribunal which made its award on September 5, ·19~8.
The Tribunal held, (1) that the period allowed for rehabilitating textile machlne1y should be 25 years and n'>t 15 as contended by the appellants, and that eome addition should be
made to the estimated life of the machinery by reference to
I
..
2 S.C.R. SUPREME COURT REPORTS
927
practical considerations as to when the employer would be
able to make rehabilitation in fact, (2) that in the case of old
machinery purchased, only half of the claim for rehabilitation
should be normally allowed and whether more or less should
be allowed would depend upon the age of the machinery
at the time of the purchase, (3) that the amount al lowed
in respect of the development rebate could not be treated
as a prior charge, and ( 4) that interest in
respect of
the amount of depreciation used by way of working capital
could not be allowed.
Held: (I) that it is well settled that in determining the
claim of the employer for rehabilitation twl factors are essential to ascertain, viz., (I) the multiplier which has been determined by reference to the purchase price of the machinery and
the price which has to be paid for rehabilitation or replacement, and (ii) the divisor which has to be determined by deciding the probable life of the machinery. When determining the
divisor, it is not open to the Tribunal to add to the estimated
life of the machinery on the ground that the employer may,
in fact, not be able to rehabilitate or replace his machinery.
In finding out the life of the machinery in a. particular
case, no rule can be laid down because the question has to
he determined on the evidence. adduced by the parties.
The Mill Owners Association, Bombay v. The Rashtriya
Mill Mazdoor Sangh, Bombay, [1950] L.L.J. 1247 and Associated Industries Ltd. v. It. Workmen, (1958) 2 L.L.J. 138,
cc,nsidered.
(2) that it would not be riitht to insist that an employer
who purchases second hand machinery must rehabilitate it by
purchasing second hand machinery in turn, and in dealing with
the question of the rehal:iilitation of second hand machinery
purchased by an employer it would he erroneous to hold" that
only 50% of rehabilitation amount should he allowed.
(3) that the development rebate allowed is in part
recognition of the claim for depreciation, and proviso (h) to
explanation (2) ofs. 10(2)(vil of the Indian Income-tax Act,
1922, as introduced by the Finance Act, i 958, cai;mot he
treated as constituting a bar against taking the said amount
into consideration in ascertaining the available surplus. The
expression "distribution by way e>f profits" in the said proviso
means the distribution of profits to the partners.
( 4) that if an employer shows that the amount of
depreciation was actually available and has, in fact, been
used as working capital during the releyant year, he would be
entitled to claim a reasonable return on the said amount.
1962
The H11r1or11ry
Seor1tory, Sout1'
India M jl/qWnlfs'
A.ssociarion
••
r1t1 Seci elarJ,
Coimbatore Distri&t
Textile Workers'
Union
11162
Tlo1 HoOOf'<':I
811«111<;,, StNJll
fUia Millnwt11rJ'
Ass1Kiohan
Y,
Th s,,,,,.,,.
CWnh11tor1 Di.Jtriel
T txlil1 W 01t,,1'
llttion
928 SUPREME COURT REPORTS [1962] SUPP.
Pet/ad Turkey Red I>ye Work. Ltd. v. [)yea&. CM,,.ical
ll'orl.·m' Unirm, Petlad, [1960] 2 S.C.R. 906 and My«Jre
Kir/nskar Ltd. v. /ts Workmen, [1961] 2 L.L.J. 657, relied on.
The appellant was runnin11, two millr, one at Coimbatore
and the other at Madurai, the latter having been started later

## Text

_Characters 0–39,782 of 48,535. This is a partial read: ask again with offset=39782 for what follows._

J962
a.au ..
v.
TIN St.u •f
14 Uar11s•tra
.SW.. c J.
JHI
FbU4? I.
926 SUPREME COURT REPORTS [1962) SUPP.
person, as laid down in els. (4) & (5) of Art. 22.
One of those safegui.rds is that the detained peraon
has the right to be communicated the grounds on
which the ordor of detention has been made against
him, in order that he may be able to make his
representation against the order of dentention. In
our opinion, in the circumstances of this oaee, it
has not been shown that the appellant had the
opportunity, which the law contemplates in his
favour, making an effective representation against
his detention. On this ground alone we declare his
detention illegal, and ~et aside the Order of the
High Court and the Order of Detention pa88ed against
him.
Appeal allo!jled.
THE HO:N'ORA:i;tY SECRETARY, SOUTH INDIA
MILLOWl\"ERS' ASSOCIATION AND OTHERS
v.
THE SECRETARY, COfMBATOH.E DISTRlill
TEXTILE WO~KERS' UNION
[And connected avpeals)
(P. B. GA.JENDRAGADKAR, and K. N. WANCHOO, JJ.)
I ndll8trial Di8puie-Boniu-Rehabilitation-Life of t.ztile
mnchinery-C/aim
in.
ruptel
of old machi~
Det1elopmntt
rebate-D•dwction-U ae
of
dtprtciatwn
amount-lnt.rut-Tu•o Reparate
conce,.,.._When
eonali·
It& one unit-Indian lnoome-kJ:c Act, 1922 (11of1922), •· IO
(2)(vi), Erp/anation (2), prolliao (b).
In respect of the di.pules which arose between certain
textile mills a.ild their respective employees in regard to the
bonus for the year 1956, the matter was reftrred to the Industrial Tribunal which made its award on September 5, ·19~8.
The Tribunal held, (1) that the period allowed for rehabilitating textile machlne1y should be 25 years and n'>t 15 as contended by the appellants, and that eome addition should be
made to the estimated life of the machinery by reference to
I
..
2 S.C.R. SUPREME COURT REPORTS
927
practical considerations as to when the employer would be
able to make rehabilitation in fact, (2) that in the case of old
machinery purchased, only half of the claim for rehabilitation
should be normally allowed and whether more or less should
be allowed would depend upon the age of the machinery
at the time of the purchase, (3) that the amount al lowed
in respect of the development rebate could not be treated
as a prior charge, and ( 4) that interest in
respect of
the amount of depreciation used by way of working capital
could not be allowed.
Held: (I) that it is well settled that in determining the
claim of the employer for rehabilitation twl factors are essential to ascertain, viz., (I) the multiplier which has been determined by reference to the purchase price of the machinery and
the price which has to be paid for rehabilitation or replacement, and (ii) the divisor which has to be determined by deciding the probable life of the machinery. When determining the
divisor, it is not open to the Tribunal to add to the estimated
life of the machinery on the ground that the employer may,
in fact, not be able to rehabilitate or replace his machinery.
In finding out the life of the machinery in a. particular
case, no rule can be laid down because the question has to
he determined on the evidence. adduced by the parties.
The Mill Owners Association, Bombay v. The Rashtriya
Mill Mazdoor Sangh, Bombay, [1950] L.L.J. 1247 and Associated Industries Ltd. v. It. Workmen, (1958) 2 L.L.J. 138,
cc,nsidered.
(2) that it would not be riitht to insist that an employer
who purchases second hand machinery must rehabilitate it by
purchasing second hand machinery in turn, and in dealing with
the question of the rehal:iilitation of second hand machinery
purchased by an employer it would he erroneous to hold" that
only 50% of rehabilitation amount should he allowed.
(3) that the development rebate allowed is in part
recognition of the claim for depreciation, and proviso (h) to
explanation (2) ofs. 10(2)(vil of the Indian Income-tax Act,
1922, as introduced by the Finance Act, i 958, cai;mot he
treated as constituting a bar against taking the said amount
into consideration in ascertaining the available surplus. The
expression "distribution by way e>f profits" in the said proviso
means the distribution of profits to the partners.
( 4) that if an employer shows that the amount of
depreciation was actually available and has, in fact, been
used as working capital during the releyant year, he would be
entitled to claim a reasonable return on the said amount.
1962
The H11r1or11ry
Seor1tory, Sout1'
India M jl/qWnlfs'
A.ssociarion
••
r1t1 Seci elarJ,
Coimbatore Distri&t
Textile Workers'
Union
11162
Tlo1 HoOOf'<':I
811«111<;,, StNJll
fUia Millnwt11rJ'
Ass1Kiohan
Y,
Th s,,,,,.,,.
CWnh11tor1 Di.Jtriel
T txlil1 W 01t,,1'
llttion
928 SUPREME COURT REPORTS [1962] SUPP.
Pet/ad Turkey Red I>ye Work. Ltd. v. [)yea&. CM,,.ical
ll'orl.·m' Unirm, Petlad, [1960] 2 S.C.R. 906 and My«Jre
Kir/nskar Ltd. v. /ts Workmen, [1961] 2 L.L.J. 657, relied on.
The appellant was runnin11, two millr, one at Coimbatore
and the other at Madurai, the latter having been started later
in 1956. The appellant's contention before the Tribunal in deal·
ing with the question of bonus payable to the employees In the
two respective mills, was that the two mills should he treated
as separate units and not as one.
The Tribunal took the
view that the two mills constituted one unit. The facts showed
that the two mills were situated at places separated by nearly
200 miles, that they manufactured different count• of yarn,
that the workers working in the two mills were different and
were not transferable from one mill to the other and that
different accounts were maintained. It was also found that
the profit and loss account for both the mills was one consoJl.
dated account.
Held, that the finding of the Tribunal that the two mills
constitut•d one unit could not be considered to be erroneous
in ta,\·,
The question as to whether two different concerns run by
the same employer constitute one industrial unit f'lr the purpose of bonus ha re· '·e detcrmir--1 In the light of the facts
in each case.
Functional integrality is a very important test but it is not
a decisive one.
In the complex and complicated forms which
modrrn industrial enterprise assumes it would be unreasonable
to su~~cst that anv one of the relevant tests is decisive ; the
importance and significance of the tests would vary according
to the facts in each case.
The question must always be
determined bearing in mind all the relevant t.,ts and
co-relating them to 'the nature of the enterprise.
Where two concerns run by the employer are allied to
••ch other, the question would have to be considered whether
thev are functionally integrated or mutually inter-dependent.
If thev are that would be an important factor in favour of
the plea that the two concerns constitute one unit.
Aaaocinlitd C•"""' Compa11iu Ltd . . v. Thar Worimti&
[19611]1 S.C.R. 703 Pratap Pr.u v. TM.ir Worl:nu11, f1960)
1 L.L.J. 497 and Pakahiraja StudW. v. If.A Work,,.u, 1961)
2 L. L.J. 380, relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Noe. 419of1960, 302of1959and159of1961,
...
2 S.C.R.
SUPREME COURT REPORTS
!i211
Appeals from the Awards dated September 5,
1958, September 15, 1958 and January ll, 1960, of
the Industrial Tribunal, Madras, in I.D. Nos. 13 of
Hl58, 32 of l9fi7 and 47 of 1959 respectively.
A.V. Viswanatlui Sastri and G. Gopalakrishnun,
for the appellants.
.B.R. Dalia and Rame,shwar Nath, for respondent
No. l (in Appeals Nos. 419 of 60 and 159 of 61).
M.K. Ramarnurthy and T.S. Ve:nkataraman, for
respondent No. 2 (in C.A. No. 419 of 60) and respondents Nos. 2 and 4 (in C.A. No. 159 of Hl6l ).
M.K. Rarnamurthy and Rarneshwar Nath, for
the respondent (in C.A. No. 302 of 59) .
1962. February l. The Judgment of the Court
was delivered by
Thi Honaraty
Secretory, South
India Milt-owners'
Association
v.
T~ 8ecrttt#y,
Coimhator• District
Textili Workeis'
Union
GAJENDRAGADKAR, J.-These three appeals arise
Gajendrafadkor J.
out of an industrial dispute between the industrial
employers who are the appellants and their respective workmen who are the respondents in
respect of the latters' claim for bonus. They have
been heard together because they raise some common questions of general importance. We would first
set out briefly the material facts in the three
respective· appeals.
The Honorary Secretary, The South India
Millowners' Association, and other mills are the
appellants in Civil Appeal No. 419/60. A dispute
arose between 44 mills and their respective employees in regard to the bonus for the year 1956. The
said dispnte wns referred for industrial adjudication
to the Industrial Tribunal, .l\fadras.' State Government on the 13th March 1958. To this reference,
the different mills and three unions which represented the employees were made parties. It appears
that for the four years prior to 1956, the question
of bonus had been disposed of by a tripartite Boan!
of Arbitration appointed for each year by the
Government. For the year 1956, negotiations were
1962
TAI H.-ary
8e&r11-,, Btidia
/Adi. J1Ulou.11s'
AssO<ialion
...
TA. 8«t1l4r:1,
o~Dislric1
r.mu w ... m,,
u,.;,,,,
Glfi-.,.il4• J ·
930 SUPREME OOURT REPORTS (1962] SUPP.
held at governmtnt&l level to evolve & &&tiafaotory
solution by consent but since the eaid negotiation11
failed, the parties agreed on some interim payment
leaving the rest of the dispute to be adjudicated
upon by the Industrial Tribunal. That Li the genesis
of the reference
On the 5th of September, 1958, the Tribqnal
made its award. It considered the several rival
contentions raised by the parties in support of their
respective claims and awarded bonus ranging from
7 months' basic wages to I month's basic wagoa
according to its finding as to the available 8Urpln1
in respect of each mill. It is against lriis award
that the appellants have come to this Court by
special leave.
At the time when the award was pronounoed
tho decision of this Court in the Assooiated Cement
Cos. Lt.d., Dwarka Cement Works, Dwarka v. lt8 Work
men (') h&d not been
pronounced, In that
decisioi;i, this Court has considered all the relevant probloms which arise in the working of the
Full Bench formula governing tho award of bonus
to industrial labour :ind some of the points which
the appella.nts wanted to raise againllt the award in
question are now concluded by that decision. That
is how in the present appeal, the appellants have
oonfined themselves to the points on whioh the
Industrial Tribunal has deoided oontrary to the
deoision of this Court in the case of Assooiated
Cement Companies Ltd. or which are not oovered
by that Judgment.
Civil Appeal No, 159/61 arises out of & reference made by the State Government of Madras on the
3rd October, 1959, in respeot of an industrial dispute
for bonus for the year 1958 between 51 mille and
their respeotive employeee.
The Industrial Tribunal whioh heard this dispute pronounoed its award
on the 11th of January, 1960. In dealing with this
(I) (1!159] S.C.R. 9'l5.
(
2. s.c.R.
SUPREM~ COURT REPORTS
931
dispute, it naturally followed the same Iirle of app·
roach which it had adopted in dealing with a similar
dispute for the year 1956 from whi<.Jh Civil Appeal
No. 419160 arises.
As a re~ult of its finding, the.
Tribunal has directed 24 mills to pay bonus to their
re8pective employees, the rate for the same ranging
from 6 months' to half a month's basic wages according to the available surplus in each case. It is
against this award that the 23 mills have come to
•this Court by special leave in this appeal.
Civil Appeal No. 3(2/59 arises from an industrial
dispute for bonus between the appellant, the Management of the Express Newspapers (rrivate) Ltd. and
its employees, the respondents. i Tl)e claim for
bonus which has been referred by the State Government for adjudication to the Industrial Tribunal at
Madras on the 19th.August 1957, relates to the years
1954-55 and 1956-1957. The appellant in this case
carries on the business of publishing certain newspapers and periodicals in English and in thevernacular from four centres in India. viz., Madras,
Madurai, Bombay and Delhi.
After hearing the
PIJ!ties an<l considering the evidence adduced by
them in support of their respective contentions, the
Tribunal
disallowed
the respondents
claim
for bonus for the years 1954-55 but allowed it for
the years 1956·57. It has found that for the year
1956-57, the appellant had in its hands Rs. 1,60,000
as available surplus and so, it has directed that not
less than 80 per cent of the said surplus should be
made available for bonus; that is to say, it has held
that Rs. 1.25 lakhs should be distributed by way
of bonus which worked roughly@ halfa month's
total wages including dearness allowance.
It is
a~fust this award that the appellant has come to
t~is Court by special leave.
In Civil Appeal No. 419/00, the first P"int
which has been raised by Mr. Sastri on behalf of the
appellant relates to the question of rehabilit tion. In
the working of the formula the multiplier has been
IHI
TA,lil_.,.,,
8'&r1lor~, Snlh
lndi• JlUltwt"1'1•
A.SJ..W...
••
Thi Sur,,.,.7,
Ooimb•tor• Dislri<I
_Tex'til.- Wtriets'
Unitn
Gajentlr•t.&Ur J.
TluH-ory
S#r1t11ry, 80Mlb
/Wia Millownns~
A s.st¥Uttioll
v.
~
S,c-r1ttll'_,,
c..ln.Neo. 1 Diahiel
TtJdil1 Wod.,r1'
u,.;.,,
932 SUPREME OOURT REPORTS [1962] SUPP.
duly determined by the Tribunal and there is no
dispute about it before us. It is against the divisor
adopted by the Tribunal that the appellant is
aggrieved and so, the question to consider is whether
the Tribunal was right in holding that the life of
the textile machinery should be taken to be 25
years and not 15 as alleged by the appellants, Mr.
Sastri contends that the appellants had examined
two experts Mr. K. Srinivasan and Mr. Seetharaman
and their evidence consistently was that the life of
the machinery would be 15 years and no more. It is
urged that this evidenoe should have been accepted
by the Tribunal bee&Ul!ll it has not been shaken in
crQBS-examinatien. We are not impressed by this
argument. The Tribunal has carefully examined the
evidence of the two experts and has given .satisfao.
tory reasons for holding that the estimate made by
them in regard to the life of the machinery is too
modest. In fact, as the Tribunal has pointed out,
though the experts purported to eay categorically
that the lifo of the machinery could not be more
than 15 years, they had to admit that in several
cases machinery which was muoh older than 15 years
was working not llll8&tisfactorily and so the
statement about the estimated life of the machinery
made be the witnesees could not be accepted at its
face value. Indeed, as the Tribunal observes, experts
while giving evidence about the estimated life of
the machinery are apt to be too teehnioal and
sometimes dogmatic but their evidence has to be
judged in the light of tho probabilitee, the admiaeione
made by them in crOBS-examination and other
evidence about older machinery which wae found
working in the different mills. Therefore, we do not
think that on the question as to the estimated life
of the textile machinery in question we would be
justified in interfering with the conolueion of the
Tribunal that the said life oan be reasonably
estimated at 25 years.
2 s.c.R. SUPREME COURT REPORTS
933
It is then contended that the estimate made by
the experts a.bout the life of the textile machinery was
consistent with the period of 15 years allowed for
the rehabilitation of textile machinery be the Labour
Appellate Tribunal which evolved the formula in
the case of The, Mill Owne,rs' Associatian, Bamhay v.
The, Rashtriya Mill Mazdoor Sangh, Bamhay('). The
argument is that since 15 years' period was allowed
for rehabilitating the machinery, that should be
taken to the normal estimate about the life of the
machinery. On the other hand, it is urged by the
respondents that 15 years' period was allowed by
the Labour Appellate Tribunal in the case of The,
J1 ill OW'Mrs Association (') even
though
the
machinery was more than 25 years old and that
would suggest that the life of the machinery is
40 years. We are not prepared to accept either
argument because, in our opinion, the life of the
machinery in every case has to be dete1mined in
the light of evidence adduced by the parties. What
the Labour Appellate Tribunal did in the ca8e of The,
Mill Owne,rs' 4ssociation(')wa.s to adopt an adhoo basis
for allowing rehabilitation within 15 yea.rs because
it was obvious, and indeed not disputed, that the
textile machinery with which the Tribunal was
dealing had become obsolescent and very badly
needed rehabilitation. Indeed, it was because of this
admitted position, that the problem of rehabilitation
assumed an important place in the discussion before
the Tribunal when it evolved the formula. Therefore,
from the decision in the case of The, Mill OW'Mrs'
Associatian(1) no rule can be safely evolved as to the
probable life of the textile machinery.
An attempt was then made to suggest that
the rate of 15 per cent at whioh depreciation is
allowed under s.10 (2l(vi) of the Income-tax Act for
machinery which is used in multiple shift would
approximate to the estimate of 15 years made by
the experts in the present case. But when the actual
(I) [1950] L.L.J. 1247.
1969
Th• Honorory
Becrltary, ~
India M illomturs'
Association
•••
Th. Stcr1tarJ,
Coim6at0re Disltiet
Textile Work.rs'
U11ion
G•ftndrfllll"fkar· J.
IHI
n.H-"'7
....... &u<J.
IW Millffl'"lf'I'
,, __
v.
n. ll ..... .,,
c.w.i..1 District
T,_,U. W•iw,'
u934 SUPREME COURT REPORTS [1962) SUPP.
calculations were ma.de, it was conceded that the
rate of 15% at which depreciation is allowed in
respect of machinery used under multiple shifts
works at 18 yea.rs and not 15 years. Therefore, even
the argument based on the depreciation rate
permitted by the Income-tax Act is of no avail. In
conclusion, we confirm the finding of the Tribunal
that tho estimated life of the textile machinery in
question should be taken to be !!5 years.
The next contention which has been seriously
pressed before us is in regard to the finding of the
Tribunal tbat some addition should be made to the
estimated life of the machinery by reference to
practical considerations as to when the employer
would be able to make rehabilitation in fa.ct. The
Tribunal oonsidbrcd the financial position of the
respective mills, the availability of the new textile
machinery, the difficulty about the foreign exchange,
and so it came to certain ad hoc conclusions while
deteqnining the divisor to be adopted. It held that
in' the C&&e of machinery purchased before 1947
whose life expired by that year, the period for
rehabilitation should be 15 year from 1917. In
regard to machinery purchased prior to 1947 whose
life does not terminate by that year, the period for
carrying out modernisation would be fixed at 10
years after the expiration of the life and in the case
of machinery purchased after 1947, that period will
be 5 years nfter its normal life. In other words, the
Tribunal decided that the rehabilitation requirement
a.bout· the first category of machinery should be
lipread over 15 years, that1for the second category
should be spread over the remainder !lf its life plus
JO years and for tho third category, the normlll life
of 25 years plus 5 years. Mr.
Sastri contends
that this ad hoc addition made to the lifo of the
machinery
determined by the
Tribunal
o~
hypothetical
or
practical considerations
1s
justified. In our opinion, this contention is wellfounded. It is now well settled that in determining
J •
. '
2 S.C.R.
SUPREME COURT REPORTS
935
the claim of the employer for rehabilitation, two
factors essential to ascertain; first the muJt.iplier and
that has to be done by reference to the purchase
price of the machinery, and the price which has to
be pa.id for rehabilitation or replacement; the second
problem is the determination of the divisor and
that has to be done by deciding the probable life
of the machinery. Once the probable or estimated
life of the machinery is determined there is no
scope for making any. additions to the number of
yea.rs
thus determined
on
any
extraneous
considerations as to the financial position of the
employer or the availability of the machinery. If
the amount awarded for rehabilitation for any
given year is not utilised for that purpose, the same
may be ta.ken into account the next year-that is
a.II. But when determining the divisor, it is not
open to the Tribunal to add to the estimated life
of the machinery on the ground that the employer
may, in fact, not bl' able to rehabilitate or replace
his machinery. Therefore, there is no doubt that the
Tribunal was in error in ma.king further additions
to the estimated life of textile machinery. The
divisor must be adopted on the basis of the finding
that 25 years is the estimated life of the machinery
and no more.
The next contention raised by Mr. Sastri is
in regard to the rehabilitation allowed by the
Tribuna.l in respect of the second hand machinery
purchased by Lotus Mills Ltd., one of the appellants
before us. The Tribunal thought that in the case of
old machinery purchased, only half the claim for
rehabilitation should normally be allowed and it
added that whether more or less should be allowed
would depend upon the age of the machinery at
the time of the purchase. 'J'hen it considered the
evidence in respect of items I to M as disclosed in
the rehabilitation statement Exhibit M. 47 (B)
furnished by the Lotus Mills Ltd. It appears that
the item~ of machinery in question had all been
I96a
Tiu HonotlllJ
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AastWitllion
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T11tli/1 Woritri'
u,.;,,,
G•jm<lrq.U.• J,
936 SUPREME COURT REPORTS [1962] SUPP.
purchased prior to l!HO and so, the Tribunal fixed
the rehabilitation at 30%. In dealing with this
question, however, the Tribunal has observed that
full rehabilitation requirement cannot he allowed
in respect of second hand machinery without the
depreoi'l.tion being deducted from out of the total
requirement. Acting on this basis, the amount has
been fixed at 30%. Mr. ~astri contends that if tho
Tribunal proceeded on the bal!is that second hand
machinery must ho replaced only by second hand
machinery. It was obviously wrong. We think this
contention is well founded. It no doubt appears that
in the case of Associated lndustrie.~ Ltd., and Its
Workmen (1) the Industrial Tribunal has observed
that in the case of second hand machinery it would
be reasonable that the employer should meet half
the cost of the rehabilitation of the plant from
other sources, either by increasing its share capital,
Qr from other reserves that may have accumulated
in the course of years. Indeed, it iii on this decision
· that the Tribunal has founded its decision in dealing
with the question about the second hand machim·ry
purchased by the Lotus Mills Ltd. in I!HO.
In our opinion, it would not be right to
insist that an employer who purebases second ham!
machinery must
r~habilitnte it by purchasing
second hand machinery in tum. Tnat would be
obviously unreasonable and unjust, for ought
one knows second hand machinery may not be
available.
BeBidee, the employer is entitled to say
that he wants ro purchase now machinery by way
of replaeement.
Therefore,
if thn
Tribunal
intended to lny down a general rule that in dealiug
with the question of the rehabilitation of a scccmd
hand machinery purchased by an cmplciycr only
50% of rehabilitation amount should Ii<' all.med,
that would bo e1·ro11cou8.
011 the otl11•r hand, it is
true that in determining tho amount of r<•habilitation and rleciding the q111•Htio11 of mult.ipli"r, thi:
(ll [1951!]2 L.LJ. 1311, H".
, ..
2 S.C.R.
SUPREME OODR.T REPORTS
937
cost price of the machinery must be ascertained and
this can be done only by enquiring for how much
the machinery was originally purehased when new,.
Depreciation amount accruing due after the first
purchase must also be ascertained. If the purchas~
money is determined but it is difficult to ascertain
the depreciation amount thereafcer, then at the
highest the whole of the purcha.se money could b3
adopted as depreciation amount and then the
amount of rehabilitation can be determined.
Whatever relevant facts are required to
be
considered in dealing with this question must no
doubt be ascertained. But if all relevant factors
are ascertained, then it cam1ot be said that because
rehabilitation is claimed in respect of second hand
machinery, therefore only half or one-third of the
amount should be allowed. In the present cabe,
the relevant material about 'the original price and
subsequent depreciation prior to the purchase by
the appellant mills has not been adduced before
the Tribunal and so, the Tribunal was justified in
adopting some ad hoc basis. But grievance is made
not so much against the particular ad hoc basis
adopted by the Tribunal in the present case as
against the general principle about which the
Tribunal has made certain observations. As we
have already made it clear, those observations do
not correctly represent the true legal position in
the matter.
That takes us to the last point raised in this
appeal on behalf of Saroja Mills Ltd. which is one
of the appellants. Saroja Mills Ltd. is a compauy
which runs two mills, viz., Saroja Mills Ltd.,
Coimbatore. and Thiagaraja Mills at Madura.
The latter has been started
in
1956, while
the former has been in existence for many
years. It was urged on behalf of the appellant
befor? the Tribunal that in
dealing with tho
question of bonus payable to the employees in the
~wo respective mills, the two mills should be
1902
T/,. Hwt!'Y
S1cr1tat,, Botti A:
India MjJJewrurs'
iJ.saotiilt Oii
v.
The 8w1lar_v,
Ca~ot1.Dist1icl
T1x1ile Wor1trs•
um..
Gojendrogadhr J.
lHB
938 SUPRJDIE OOURT REPORTS (1962) SUPP.
treated as 11eparate unitR and not as one. The
Tribunal has rejected this contention and it has
held that the two mills constitute 0no unit and tho
question
of bonus payable to the employees
working in the two respective mills, must be oon·
sidered on that basis. It iB against th is finding that
Mr. Sastri has made a serious grievanca before us.
He <'ontends that there are several factol'B which
militate against tho validity of the conclusion of
the Industrial Tribunal that the two mills consti·
tute one unit. The two mills are situated at two
different places separated by a dishnce of nearly
150 to 200 miles; in starting the Thiagaraja Mills,
the necessary cotton, stores and personnel were
secured by the Company from Mcenakshi Mills at
Madura; the workers working in the two mills are
different and they arc not transfcrablo from one
mill to the other; the two mills manufacture
different counts of yarn and diffrrent
qualities
and
the
raw
material
required
!Jy them
is different;
they maintain different
accounts
and their Tex-marks are differ1·nt; when
the
Thiagaraja Mills was started in
I 9;i6, the
Co.,
b'.lrrowed an amount uf nearly Rs.
3~.:iO lakhs
from the Indian Finance Corporation and Pudukottai Co. Ltd. and the same WBB debited to the
Thiagaraja Mills.
Therefore, all
these factors
inclicato that the two mills are different units, they
work as such and sh011ld not b1• takon to constitute
one unit for the purpose of determining tht• question
of bonus.
On the other hand, Mr. Ramamurthy contends
that there aro sevt•ral other conoiderations which
jw;tify the conclusion of the Tribunal that the two
mills constitute one unit.
Ho argues that it is
important to bear in mind that the two mills are
owned and conducted hy one Company, the Saroja
Mills Ltd. in fact, the Thiagarnja Mills at Madura
has no independ1·nt l1·gal existence except a~ a
noucern run by tho Company; ultimately, the profit
••
,
I t
>
2 S.C.R.
SUPREME COURT REPORTS
939
and loss aCC<?,~nt for both the Companies is one
consolidated account and dividend would be paid
on the said account; separate accounts are no doubt
kept for convenience because the two mills are situated in two different places; but the maintennnce of
separate cash hook and ledger are not behalf as
important as the maintenance of one profit and loss
account which the Company has to keep as a whole;
the borrowing on which the appellant reliPR is the
borrowing of the Company and as
such, the
Company is the debtor and not the mills at Madura;
the distance between the two mills can hardly be
important because the features on which
the
appellant relies may well be present in the case of
two mills owned and run by the same Co. though
the mills may be situated side by side in the same
locality; what is important in this connection is the
fact that the business carried on by the two mills
is of the same type and character though the
quality of yarn produced may not be the same.
Therefore, it is urged that the Tribunal was right
in holding that the two mills constituted one unit.
The question thus raised for our decision is
not always easy to decide. In dealing with the
problem, several factors are relevant and it must
be remembered that the significance of the several
relevant factors would not be the same in each
case nor their importance. Unity of ownership and
management and control would be relevant factors.
So would the general unity of the two concerns;
the unity of finance may not be irrelevant and
geographical
location may also be of some
relevance; functional integrality can also be a
relevant a.nd important factor in some cases. It
is also possible that in some cases, the test would
be whether one concern forms an integral part of
another so that the two ·together constitute one
concern, and in dealing with this question the nexuR
of integration in the form of some essential
dependence of the one on the other may assume
1962
The Honoraf'y
Secretary, South
India Millownn•'
Association
v.
The SecrelO'l'y,
Coimbatore District
Textile Worker1l
Union
GnjendragadkJr J.
19"
TitH_.,,
Bm1tar,, &1111'
loii• Milloam'
Au«ictiOfl
v.
T/I, s,.,.i.ry,
CoiwtHton Di•lriet
Tuli/1 Workers'
Unit>•
940 SUPREME OOURT REPORTS [1962] SUPP.
relevance. Unity of purpose or design. or even
parallel or co-ordinate activity intended to achieve
a common object for the purpose of carrying out
the busineSB of the one or the other can also
aasumo relevance and importance, r;ide Ahm~
M anuja.cturitl{J & Oalioo Printing Co. LU. v. Their
If orkrnen (').
Mr. Sastri, however, contends that functional
integrality is a very important test and he went so
far as to suggest that if the said test i~ not satisfied,
then the claim that two mills constitute one unit
must break down. We are not prepared to accept
this ar1mment. In tho complt1x and complicated
forms which modern industrial enterprise assumes
it would be unreasonable to suggest that any one
of the relevant tests is decisive; the importance and
si,iDifica11ce of the tests would vary according to
the facts in each caoe and so, the question must
always be determinetl bearing in mind all the
relevant tests and co-relating them to the nature of
tho enterprise with which the Court is concerned.
It would be soen that the test of functional integrality would be relevant and very significant when
the Court is dealing with difforenl. kinds of busi·
nesses run bv the samo industrial cstabli~hmt>nt or
employer. Where an <-mployer runs two different
kinds of businell8 which are allied to each other, it
is pertinent to enquire whether the two lines of
businel!ll are funotionally integrat!>d or are mutually
inter dependent. If they arc, that would, no doubt,
be a very important factor in favour of the plea
that the two lines of business constitute one unit.
But the test of functional in'.egrality would not be
as important when we are dealing with the case of
an employer who runs the sam11 business in two
different plaotll!. Tho fact that the test uC fun<•·
tional integrality ie not and generally cannot be
satisfied by two such concerns run b;v the i.ame
(I )[1951] 2 L.l.J. ~7.
,
•
'
"
2 s.c.R.
SUPREME COURT REPORTS
941
employer in the same line, will not necessarily
mean that the two concerns do not constitute one
unit. Therefore, in our opinion, Mr. Sastri is not
justified in
elevating
the test
of functional
integrality to the position of a decisive test in
every case. If the said test is treated as decisive,
an industrial establishment which runs different
factories in the same line and in the same place
may be able to claim that the different factories
are different units for the purpose of bonus.
Besides, the context in which the plea of the unity
of two establishments is raised cannot be ignored.
If the context is one of the claim for bonus, then it
may be relevant to remember that generally a
claim for bonus is allowed to be made by all the
employees together when they happen to be the
employees employed by the same employer. We
have carefully considered the contentions raised
by the parties before us and we are unable to
come to the conclusion that the finding of the Tribunal that the two mills run by the Saroja Mills
Ltd. constitute one unit, iil erroneous in law.
In this connection, it would be necessary to
refer to some of the decisions to which our attention was drawn. In the case of Asaociatbl CemR,nt
Campanies LUl. and their Workmen (1), this Court
held that on the evidence on record, the limestone
quarry run by the employer was another part of
the establishment (factory) run by the 11ame employer within the meaning of Section 25E (iii) of the
Industrial Disputes Act. It would thus be seen
that the question with which this court was
concerned was one under s. 25E (iii) of the Act
and it arose in reference to the limestone quarry
run by the appellant Company and the cement
tactory owned and conducted by it which are
normally two different businesses. It was in dealing with this problem that this Court referred to
several tests which would be relevant, amongst
(1) [1960] l.S.C.R. 703,
1162
The Bonorazy
Secree.r,,- South
India M illowners'
Association
v.
The Swrd"'1f,
Coia1"tor1 Di$hid
T .xti/1 W erM•'
UniMI
GqjendragAl/br J,
1962
'l'IN Hooarory
Bmll!'li.!:.:,"
hdia Mil
s'
A.ss°'*ioft
v.
:flw !it<rolary,
Coimb_, District
T ,.1;i, Wtriers'
u.Um
942
SUPREME COURT REPORTS [1962] SUPP.
them being the test of functional intogrality. In
dealing with tho question, S. K. Das, J., who spoke
for the Court, observed that it is perhaps impoBBible
to lay down any one test as an absolute and invari·
able test for all cases. The real purpose of these teats
is to find out thl' true relation betwee:Q the parts,
brancbAs, units, et-0. If in their true relation they
constitute one integrated whole, we say that the
establishment ie one; if, on the contrary, they do
not constitute one inter<,rated whole, each unit is
then a separate unit.. It was also observed by the
Court that in one case, the Wlity of ownership,
management and control may be tho important
test; in another case, functional integrality or gene·
ral unity may be nn important test; and in still
another case, the important test may be the unity
of employment. Therefore, it is clear that in
applying the test of functional integrality in deal·
ing with the question about the interrelation between the limestone quarry and the factory, this
Court has been careful to point out that no test
can be treated as decisive and the relivance and
importance of all the test will have to be judged
in the light of the facts in each case.
In the oase of Pratap Pr(',88, m. and Their
Workmen,(') this Court had to deal wit.h the question as to whether the Pratap Press started by tho
proprietor, Narendra, in 1951 and the newspaper
'Vir Arjun' started by him in 1954 constituted one
unit. It appeared in evidence that the Press also
printed and published Daily Pratap which was
ownod by Narondra and his partner. Thus, the
problem raised before this Court was whl'ther the
business of running Vir Arjun which is distinct and
different from tho business of running a Pl'f'8B, constituted a part of the same unit as tho Pratap Press
itself and in dealing with this question, this Court
reiterated the same principle that the applicability
and the signifi0&noe of the relevant tests would
(I) [1960J I LJ.J. •97.
2 S.C.R.
SUPREME COURT REPORTS
943
depend upon the facts in each case. Where the
Court is dealing with two different kinds of busi -
ness conducted by the same owner, th1> test of
functional integrality naturally aesumes importance
and it was that the test which was empha.11ised by
this Court in coming to the conclusion that the Press
and the Paper did not constitute one unit. Besides, the conduct of the proprietor in dealing with
the two businesses and other relevant facts were
taken into account in reaching that conclusion.
In Palcshiraja Studios v. Its Workmen, (1) this
Court was dealing with a case of the managem('nt
of a cinema studio which also carried on the business activities of producing films and taking dist,ribution rights of pictures, and in coming to the conclusion that the two lines of business were not distinct but together constituted one single industrial
unit, this Court emphasised the importance of the
\est as to whether there is functional integrality
and unity of finance and employment of labour.
Thus, it would be seen that the question as
to whether two different concerns run by the same
employer constitute one industrial unit for the
purpose of bonus, has to be determined in the light
of facts in each case. As we have already indicated, after carefully considering the relevant facts
in the present case, we are unable to hold that
the conclusion of the Tribunal is erroneous in
law.
That takes us to Civil Appeal No. 159/61.
The first point which has been raised in this appeal
relates to the claim made by the Coimbatore Cotton
Mills Ltd., one of the appellants, in respect of the
development rebate "llowed to it to the extent of
Rs. 1,25,000. Before the Tribunal it was urged
that this amount should be treated as a prior charge
but the Tribunal rejected the contention and we
think, rightly. In this Court, the argument has
(I) (1961] 2 L.L.J. 380.
J96S
1h1 Ho1uw•f"J
St&rttar_1, South
India Millownera•
As•oet.Nn
••
Tiu r1er1l•r.J,
~m/Jattll'I Dlffricl
Te~tih Wor.bfos•
Uniott
Gajrndrattvl/oar J,
11161
'1At llottoraty,
/he•""'· S...1'
I .Uc Ji tlltwtUrJ •
. 4Hl!Ci9'io•
•
7".&.n-11•')',
Co"""'11tte Diltricl
Te.dill Worier•'
u111 ..
G.;-k•,.,,.... J.
944
SUPREME COURT REf()RTS [1962] SUPP.
ta.ken another form. It is urged that this rebate
must ho loft out of account in determining the available surplus because there is a statutory bar which
precludes
thu
appellant
from
utilising this
amount for the payment of bonus. This argument
~ ba.sed on the provisions contained in proviso (b)
to explana.tion ( 2) of Section IO (2 )(vi) as intro·
duoed by the Finance Act XI of 1958. The relevant portion of the statutory provision on which
reliance has been placed reads thus :-
"Provided that no allowance under this
clause shall be made unless :-
(a) .................... ··········· ............ .
(b) o.xcept where the asset!Seo is a
company being a licensee within the mea·
ning of the Electricity (Supply) Act, 1948
or where th(l ship has been acquired or
the machinery or plant has been installod
before the I st day of January, 1958, an
amount equal to 75% of the development rebate to be actually allowed is
debited to the profit and loss account of
the relevant previous year and credited
to a reserve account to be utilised by him
during a period of ten yea.rs next following for the purpos~ of the business of the
undertaking, except :
(i) for distribution by way of divi·
donda or profits : .................. "
It is the last clause which is the b11.11is of the present
argument. Mr.