# JABALPUR BIJLIGHAR KARAMCHARI PANCHAYAT v. JABALPUR ELECTRIC SUPPLY CO., LTD. & ANR

- **Citation:** [1972] 1 S.C.R. 60
- **Court:** Supreme Court of India
- **Decided:** 1971-08-09
- **Bench:** G. K. Mitter, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jabalpur-bijlighar-karamchari-panchayat-v-jabalpur-electric-supply-co-ltd-anr-5407
- **Pages:** 21

## Headnote

,
Industrial
Law-Bonus-Principles for awarding festival bonusAvailable surplus for distribution-Principles for calculation of.
A
The employees of the respondent claimed bonus on two counts : (I)
festival bonus at 10 % of their total earnings as an implied term of the conC
tract of employment and as an established practice of payment from 1-94041 without any break; and (2) bonus out of the profits quantified at 50%
of the said total earnings. The Industrial Tribunal rejected the claims.
In appeal to this Court,
·
HELO : (I) The criteria to be considered when a question of ccs'
tomary or traditional bonus arises are: (a) whether the payment was
uniform and has been over an unbroken series of years; (b) whether it
D
has been for a sufficiently long period, the length depending on the circumstances of each case (the period may have to be longer to justify an
inference of traditional and customary festival bonus than in the case
when the claim for festival bonus is based on an implied term of
employment); (c) Whether it was connected with a festival; and (d) it
must be shown that the payment was made even in a year of loss, thay E
is, it was not. a bounty depending on the earning of profits.
[67 G-H,
·
68A. 70f-G.]
in tbe present case, it was proved that the payment of bonus 'Y'ls
made at 10% for a large number of years and at II% for an mtervenmg:
period. But the payment was not related either to .any festival or to
an implied term of employment between the parties. In fact, for the
F
years from 1940-41 to 1945-46 there was no claim for the payment of
either customary bonus or festival bonus.
On the other hand, the
express claim was made for war bonus. The 111ajor part of the entire
period was covered by awards and exceptmg m one of those awards
there was no reference to any festival
bonus.
The intervening
period was covered by an express agreement between the. parties.
Further the raie was not uniform. Consequently, ·the claim made
G
by the ~mployees that they should· be paid 10%
eit~er as festival
bonus or under an implied term of employment could not be accepted.
[71A-D]
Jspahani ·Ltd.
Calcutta v. lspahani Employees Unions,
[1960]1
S.C.R. 24, The Graha Trading Co. (India) Ltd v. Its Workmen, [1960] l
S.C.R. 107, M/s Tulsidas Khimji v. Their Workmen, [1963]1 S.C.R.
H.
675
Vegetable Products Ltd v. Their Workmen
A I R 1966 S.C,
1449 and.Management of Churkulam Tea Estate (P) Ltd. v. The Workmen
fl969] t S.C.R. 930, followed.
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KARAM CHARI PANCHAYAT v. JABALPUR ELECT. co. (Milter, !. ) 61
(2) The amount of bonus must be computed in terms <tf the Full
Bench formula as accepted by this Court in the case of Associated Cements Co. Ltd. v. Its Workm""• [1959] S.C.R. 925.
[71D-E]
(i) In the present case, in calculating the net profits tLe Tribunal
should bave included the following three items, in the gross profits.
(a) The cost of coal and fuel shown in the 'summary of technicar
and Financial Particulars' for the year, prepared under r. 26(3) of the
Indian Electricity Rules, 1937 was less than the figure shown by the·
respondent in its revenue account. The respondent had failed to explain
the discrepancy. Therefore the amount of difference between the two
figures should have been added to the gross profits in the revenue account.
[71H,72A-B,H;73A-B]
(b)
There was no p~oper explanation supported by accounts for the
large amount for repairS to furniture as shown in the revenue account.
Therefore the much smaller amount suggested in the oral evidence should
alone have been taken into account. The difference between the two
figures should also be added to the gross profits.
[73F-H]
(c)
Although the statutory contigency reserve fund investments
are not to be taken into account in the statement of surpluses and deficiercies of profits, the interest earned was included by the respondent
in the statement of net profits for the calculation of the managing agetns'
commission. If the managing agents were entitled to clai

## Text

_Characters 0–39,833 of 47,445. This is a partial read: ask again with offset=39833 for what follows._

60
JABALPUR BIJLIGHAR KARAMCHARI
PANCHAYAT
v.
JABALPUR ELECTRIC SUPPLY CO., LTD. & ANR.
August 9, 1971
(G. K. MITTER AND P. JAGANMOHAN REDDY, JJ.]
,
Industrial
Law-Bonus-Principles for awarding festival bonusAvailable surplus for distribution-Principles for calculation of.
A
The employees of the respondent claimed bonus on two counts : (I)
festival bonus at 10 % of their total earnings as an implied term of the conC
tract of employment and as an established practice of payment from 1-94041 without any break; and (2) bonus out of the profits quantified at 50%
of the said total earnings. The Industrial Tribunal rejected the claims.
In appeal to this Court,
·
HELO : (I) The criteria to be considered when a question of ccs'
tomary or traditional bonus arises are: (a) whether the payment was
uniform and has been over an unbroken series of years; (b) whether it
D
has been for a sufficiently long period, the length depending on the circumstances of each case (the period may have to be longer to justify an
inference of traditional and customary festival bonus than in the case
when the claim for festival bonus is based on an implied term of
employment); (c) Whether it was connected with a festival; and (d) it
must be shown that the payment was made even in a year of loss, thay E
is, it was not. a bounty depending on the earning of profits.
[67 G-H,
·
68A. 70f-G.]
in tbe present case, it was proved that the payment of bonus 'Y'ls
made at 10% for a large number of years and at II% for an mtervenmg:
period. But the payment was not related either to .any festival or to
an implied term of employment between the parties. In fact, for the
F
years from 1940-41 to 1945-46 there was no claim for the payment of
either customary bonus or festival bonus.
On the other hand, the
express claim was made for war bonus. The 111ajor part of the entire
period was covered by awards and exceptmg m one of those awards
there was no reference to any festival
bonus.
The intervening
period was covered by an express agreement between the. parties.
Further the raie was not uniform. Consequently, ·the claim made
G
by the ~mployees that they should· be paid 10%
eit~er as festival
bonus or under an implied term of employment could not be accepted.
[71A-D]
Jspahani ·Ltd.
Calcutta v. lspahani Employees Unions,
[1960]1
S.C.R. 24, The Graha Trading Co. (India) Ltd v. Its Workmen, [1960] l
S.C.R. 107, M/s Tulsidas Khimji v. Their Workmen, [1963]1 S.C.R.
H.
675
Vegetable Products Ltd v. Their Workmen
A I R 1966 S.C,
1449 and.Management of Churkulam Tea Estate (P) Ltd. v. The Workmen
fl969] t S.C.R. 930, followed.
i
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B
c
D
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KARAM CHARI PANCHAYAT v. JABALPUR ELECT. co. (Milter, !. ) 61
(2) The amount of bonus must be computed in terms <tf the Full
Bench formula as accepted by this Court in the case of Associated Cements Co. Ltd. v. Its Workm""• [1959] S.C.R. 925.
[71D-E]
(i) In the present case, in calculating the net profits tLe Tribunal
should bave included the following three items, in the gross profits.
(a) The cost of coal and fuel shown in the 'summary of technicar
and Financial Particulars' for the year, prepared under r. 26(3) of the
Indian Electricity Rules, 1937 was less than the figure shown by the·
respondent in its revenue account. The respondent had failed to explain
the discrepancy. Therefore the amount of difference between the two
figures should have been added to the gross profits in the revenue account.
[71H,72A-B,H;73A-B]
(b)
There was no p~oper explanation supported by accounts for the
large amount for repairS to furniture as shown in the revenue account.
Therefore the much smaller amount suggested in the oral evidence should
alone have been taken into account. The difference between the two
figures should also be added to the gross profits.
[73F-H]
(c)
Although the statutory contigency reserve fund investments
are not to be taken into account in the statement of surpluses and deficiercies of profits, the interest earned was included by the respondent
in the statement of net profits for the calculation of the managing agetns'
commission. If the managing agents were entitled to claim a share of
it the workers were equally entitled to claim its inclusion in the revenue account. The result is that the gross profits of the company would
have to be augmented by this sum also.
[74D-G]
(ii) The employees' contention regarding the following four items
should be rejected.
(a) The rebate to the consumers is oot to be utilised by the Electric supply company. Therefore if the respondent could not have the
benefit of it. neither could the employees ask for a share and claim its
inclusion in the 'gross profits.
[75F-G]
(b)
The respondent claimed that the normal depreciation for the
year as per the assessment order of the Income-tax Officer and double
shift allowance should be allowed in computing the net profits. The
employee5 contended that it was only the lesser amount towards depreciation shown in the r€spondent's profit and loss ?.ccount that should
be allowed.
But according to the formula pronounded by the Full
Bench of the Labour Appellate Tribunal in U.P. Electricit.r Supply Co.
Ltd. v. Their Workmen, [1955] 2 L.L.J. 431 and approved in the Associated Cement Companies case and in T.T.E. Supply Co. Ltd. v·. Its Workmen, [1960] 3 S.C.R. 68 and in Ahmedabad Misce//ancous Industrial
Workers Union v. Ahmedabad Electricity Supply Company Ltd., [1962]
2 S.C.R. 934 the respondent's claim should be upheld. [75G-H;76A-D
E-G]
Hamdan/ Dawakhana Wakf v. Its Workmen, [1962] 2 L.L.J. (S.C.)
772, followed.
(c)
According to the Full Bench formula to arrive at the available
surplus it is not the income-tax actually paid by the respondent that
62
SUPREME COURT REPORTS
[1972] l S.C.R.
A
should be"'deducted but the amount computed notionally at 45 ",,; after
making the appropriate deductions from the gross profits.
In the present case. the amount of income tax so calculated would be greater than
the amount allowed by the Tribunal because the gross profits would be
enhanced by items (i). (a), (b) and (c).
[77F-Hj
(d) According to the Full Bench formula return at 6% of the working capital should also be deducted to arrive at the available surplus
B
for distribution. The employees contended that the working capital
should be computed in accordance with Schedule VII of the Electricity
Supply Act.
But according to the T.T.E. Supply Company case, and
the Ahmedabad Miscellaneous Industrial Workers Union case even with
respect to an electric supply undertaking in the field of industrial relatI;,
ions it is not proper to inject therein, the provisions contained in the
Seventh Schedule to the Electric Supply Act.
[78C,E-F;79A-B]
C
Jn the result the amounts in item (i) (a), (b) and (c) had to be addea
to the grocs profits. The amount in item (ii) as was not to be so added.
Depreciation including double shift allowance was to be doducted as
also the notional amount of income-tax at 45 % after making the
appropriate deductions from gross profits.
So far as rating on working
capital was concerned the computation should be in term of the Full
D
Bench Formula ar.d not in accordance with Schedule VII of the Electricity
Supply Act. In the instant case even ignoring the said section on working
capital there was no surplus left in terms of the Full Bench Formula.
The question of p1yment of bonus did not arise.
[79E-H; 80 A-BJ
C!v1L APPELLATE JURISDICTION : Civil Appeal No.
752 of 1967.
E
Appeal by special leave from the Award dated January
30, 1967 of the Industrial Court, Madhya Pradesh. r lldore
in Reference No. 6/MPIR/1961.
ilf. N. Phadke, Guiab Gupta and Vineet Kumar, for
F
the appellant.
M. C. Chagla, D. N. Mukherjee and lvf. M. Sapre,
for respondent No. I.
The Judgment of the Court was delivered by
Mitter, J. This appeal arises out of an award dated
January 30, 1967 of the Industrial Court of Madhya Pradesh
(hereinafter referred to as the 'Tribunal'). The term of
reference to the Tribunal was:
G
•
"Whether the
employees
of
Jabalpur
Electric
Supply Company Ltd., have a case for payment of H
,
bonus for the year
1960-61
and
what
should
be its quantum and terms of payment?"
-
'\ .
.,
KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co. (Mitter, J.) 63
A
The claim for bonus was made under two heads : the
first was for bonus out of the· profits quantified at 50 %
of the total earnings of the employees; and the second was
for festival bonus at 10 % of the said total earnings which
was claimed as an implied term of the contract of employB ment and as an established practice, having been paid
irrespective of profits or losses before Diwali every year
continuously from 1940-41 without any break. The Tribunal found itself unable to hold in favour of the employees under either of the heads. The appeal to this Court
c
is by special leave.
We propose to take the two heads under which bonus
was claimed in the order in which the arguments were
advanced before us.
The first head of bonus canvassed
for was the second mentioned above i.e. at 10 % of the total
earnings. So far as this claim is concerned, we are not on
D uncharted seas as the question cropped up in the past in
numerous cases before this Court wherein certain well
defined principles were formulated. But before we apply
the principles, we have to take note of the relevant facts
and circumstances relating to this claim.
E
It cannot be disputed that the employees had been
receiving at least 10% of their earnings from the company from 1940-41 onwards. This period can be conveniently split up into several parts to mark off the claims
made from time to time and the settlements by mutual
agreement or payments under awards of industrial courts
F
or even made voluntarily. The first period relates to the
years 1940-41 to 1944-45. The Provincial Government
made a reference arising out of a dispute which led to the
award of the Labour Commissioner of C. P. and Berar in
regard, inter alia, to (a) claim by the employees to a bonus
G equal to three months' wages for the year ending 31st
March, 1946, and (b) war bofius equal to six months'
wages. The adjudicator decided that.
H
"(1) The company - sh-0uld pay to each of its
employees I/10th of his total earnings including
dear food allowance during the year ending 31st
March 1946 by way of bonus; and (2) The Comnany should also pay to each of its employees as
bonus l/IOth of his total earnings including dear
64
SUPREME COURT REPORTS
[1972] ! S.C.R.
food allowance in respect of each of the years
1940-41, 1941-42, 1942-43, 1943-44 and 1944-45
against the claim for Wal° bonus."
It has to be noted that there was no mention of any festival
bonus at that time and so far as the years 1940-4 l ·to 1944A
45 are concerned, it was given on the footin11 that it was a
B
War bonus.
The next period relates to the years 1946-47 to I \14950.
Admittedly, the payment for these years was made
under an agreement between the parties as found by the
Tribunal. The finding of the Tribunal is that a consoli- c
dated amount of Rs. 74,850/- was paid by the company
on 25th January 1951. The Tribunal observed that there
was
"abundant documentary evidence (Exs. D-1/A to
D-1/F wherein workers agreed to accept the
bonus offered as voluntary payment of bonus
as
a compromise of their claim
of
25 %
of the Company's profits for the period ending 31st
March, 1951."
D
The claim for the years 1951 to 1956 was covered by· an
award conveniently described as Mujumdar Award. The
E
opening paragraphs of the award show that the employees
had claimed that payment of 10 % of their total earnings
by way of bonus had come to be included in their wages
and had been paid for about 12 years in the past, that
there had been agreement between the employees of the .
company to refer the dispute regarding bonus to GovernF
ment and thereafter for subsequent years 10 per cent of
their total earnings of the year was accepted by the employees and finally on th~ failure of negotiations and conciliations, following service of notice under s. 32 of the
Industrial Disputes Act, the matter had been referred by the
Government, the employees having pressed for at least
G
33-1/8 per cent of their total earnings for the year by way
of bonus.
The concluding paragraph of that award, a copy of
which has been placed before us, shows that in the view
of the Majumdar Tribunal :
H
"In addition to the 10% bonus already paid
the Party No. I (the company) can easily pay
••
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KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co. (Mitter. J.) 65
additional 20 % of the earnings of the year of each
employee as bonus to him.
Similarly for the year
1951-52 Party No. 1 can pay easily additional 10 per
cent of the earnings of the year as bonus to each of
the employees. For the year 1952-53 no surplus
amount is left with Party No. I. According to the
Full Bench formula and the bonus already paid i.e.
10 per cent of the annual earnings of each of the
employees was sufficient payment for that year.
For the year 1953-54 5 per cent of the earnings
of the year can easily be paid in addition to
the 10 per cent already paid. For the year 1954-55
20 per cent of the annual earnings can easily be
paid to each of the employee by way of bonus
and for the year 1955-56 though I only have been
able to get the account for the first six months I
have absolutely no doubt that taking the average
of all these years, the Party No. 1 could be able
to pay at least 10 per cent 'as additional bonus."
The said Tribunal further recorded that as the employees
had not received even the 10 per cent usual bonus for
1955-56 the same should be paid in full before 31st October,
1956.
For the year 1956-57 payment was made under an
interim award of Mr. Kher, Judge, Industrial Court.
For the years 1957-5&, 1958-59 and 1959-60 payment was
F first made under an interim award of Justice Bhat who
finally passed an award accepting the claim of the Union
for payment of J)iwali bonus. This award was the subject
matter of an appeal before this Court and on 11th March
1956 the parties to that appeal arrived at a compromise
aRd it was agreed without prejudice to their respective
G contentions that the company should pay to the employees
one per cent in addition to the bonus already paid by it
for the years 1956-57, 1957-58 and 1958-59 but the company
should not pay any additional bonus for the year 1959-60.
It was expressly recorded before this Court that as the
point of dispute between the parties which had been deciH ded by the said Tribunal had not 'been argued before this
Court it would be open to them to raise their respective
contentions in future should the occasion arise
66
SUPREME COURT REPORTS
[1972) I S.C.R.
The above statement of facts makes it amply clear
that although the employees received at least 10 % of
· their total earnings by way of bonus for the years 1940-
. 41 to 1959-60 there was no consistency in the claim to
1 bonus throughout this period, nor was there any uniformity
either in the amounts paid or the grounds under which
the several awards of bonus came to be made. The only
: award which indicated that the bonus was to be regarded
1 as a Diwali bonus was that of Justice Bhat for the period
I 1957-58 to 1959-60.
For the period 1940-41 to 1956-57
· the Company never paid bonus as a festival bonus on the
occasion of the Diwali. The amount was mostly paid
under awards but in between the awards there was a period
when it was paid by express agreement between the parties.
Strong reliance was placed on the fact of payment of
at least IO per cent by way of bonus from the year 1940-41
to 1959-60 by learned counsel for the appellant in support
of his argument that as payment had been made for t,his
long period, it had become an implied term of the contract
of employment and it was to be regarded as a festival
bonus.
In our view, this contention cannot be accepted
on the face of a long series of decisions of this Court to
some of which alone we propose to refer.
In Isphani Ltd. Calcutta v. Jsphani Employees' Union(')
this Court had to deal with the claim of the workmen to
puja bonus for the year 1953.
Referring to The Mil/-
owners' Association, Bombay v. The Rashtriya Mill Ma::door
Sangh, Bombay(') it was said that the claim for puja bonus
in Bengal could be based on either of two grounds. It
may either be a matter of implied agreement between the
employers and employees creating a term of employment
for payment of puja bonus, or, (secondly) even though no
implied agreement can be inferred it may be payable as a
customary bonus.
On the facts it was found that "the
workmen when they were in the employ of Messrs M. M.
lsphani Ltd. (the predecessor-in-interest of the appellants)
always used to get puja bonus at the rate of one month's
wages.
This was asserted by the workmen in their written
:statement and the company did not deny it in its reply.
ii) [1960)
I SC R. 24.
(2) [1950] LL.J. 1247.
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B
KARAMCHAR! PANCHAYAT \', JABALPUR ELECT. co. (Mitter, J.) 6T
It was found as a fact that the appellant had been paying
bonus ever since it came into existence in 1948 up to ·1952
without any break at the rate of one month's wages and it
was paid even in the years when the company suffered
loss.
It was observed by this Court :
"In the circumstances, it was established in this
case that (I) the payment was unbroken and
(2) it was not paid out of bounty due to profits
having arisen, for it was paid in some years. of
loss also."
C As to what would be a sufficiently long period to justify
the inference that it was an implied term of employment
for payment of bonus, this Court held that the appellant
had paid it continuously since its birth and therefore the
facts warranted the finding of an implied term of employD
ment to that effect.
A similar claim arose in the case of The Graham·
Trading Co. (India) Ltd. v. Its 1Vorkmen(1).
According
to this Court the practice of payment of bonus of the
appellant "began in 1940 and was unbroken up to 1950.
In between there was an adjudication in 1948 in which the
E company was a party". In regard to the year 1948 the
company had admitted before the relevant tribunal of
having paid bonus in. the p'ast and had no intention of
discontinuing the practice and thereupon the Tribunal
did not adjudicate on it. The payment was continued
from 1949 to 1951. In 1952 after some dispute bonus
F was paid to all the workers. It was in this case that the
Court laid down certain criteria which the Industrial
Tribunals would have to consider when a question of
customary or traditional bonus arose, namely,
(i) whether the payment has been over an unbroken
G series of years;
(ii) whether it has been for a sufficiently long period,
through the length of the period might depend on the
circumstances of each case; even so the perioq may normally
have to be longer to justify an inference of traditional and
;
H customary puja bonus than may be the case with puja.
bonus based on an implied term .of employment.
(I) [1960] 1 S.C R. 107.
68
SUPREME COURT REPORTS
[ 1972] 1 S.C.R
(iii) The circumstance that the payment depended
A
upon the earning of profits would have to be excluded and
·therefore it must be shown that payment was made in the
year of loss .
. After laying down the tests, the Court observed that
B
"Jn dealing with the question of custom, the
fact that the payment was called ex gratia by the
employer when it was made, would, however, make
no difference in this regard because of proof
of custom depends upon the effect of the relevant
factors enumerated by us; ... the payment must
have been at a uniform rate throughout to justify
an inference that the payment at such and such rate
had become customary and traditional in the
particular concern."
c
D
In M/s. Tulsidas Khimji v. Their Workmen(1) the Union
of workmen claimed profit-sharing bonus at the rate of
six months' wages and traditional or customary bonus
at a rate which was not clear but which might be said to
be either three months' wages or one month's wages plus
E
dearness allowance on the occasion of the Diwali festival.
·The claim was rather nebulous as observed by this Court.
According to the Tribunal the workmen had proved that
bonus had been paid at a uniform rate of one month's
·basic wages plus dearness allowance on the occasion of the F
Diwali festival throughout the period i.e. 15 years commencing from 1940-41 to 1956-57.
Referring to the argument
advanced on behalf of the appellant company that the four
circumstances mentioned above in Graham Trading Co.'s
. case had not established it was remarked:
" ... what is more important to negative a plea for
customary bonus would be proof that it was
made ex gratia, and accepted as such, or that it
was unconnected with any such occasion like a festival as laid down by this Court in the case of
G
B. N. Elias & Co. Ltd. Employees Union v. B. N.
H
Elias & Co. Ltd. (')."
---·------
(I) [1963] I S.C.R. 6i5.
(2) [1960]
3 SC.R. 382.
•...:.
A
KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co. (Mitter J.) 69
In Vegetable Products Ltd. v. Their Workmen (1) "the
case of the workmen for payment of puja bonus was that
it had become either an implied term of employment
between them and their employer or customary". The
Tribunal came to the conclusion that payment of one
B · month's wages before puja as customary bonus had been
established through it apparently did not ac;cept the claim
that payment of puja bonus as an implied condition of
service had been proved. The Tribunal further found that
the circumstances mentioned in Graham Trading Co.'s
case (2) had been satisfied.
Examining the evidence
c this Court found on the facts (see p. 1501) that :
D
E
F
" ... the Puja bonus was paid for the first time
on the eve of the Puja festival in 1964 at the rate of
10 days' wages.
In 1955 it was paid at the rate
of 20 days' wages.
From 1956 to 1961 the
payment has been made before Puja at 30 days'
wages. . . . from 1956 to 1958 payment was
made without any dispute and without conditions.
But in 1959 a dispute arose as to payment of Puja
bonus for that year and was settled before the
conciliation officer by a settlement between the
appellant and its workmen. The first term of that
settlement ... runs thus :-
". . . 30 days' wages will be paid as bonus
(ex gratia) for the accounting year 1957-58 to all the
workmen who will have completed 240 days' work
by the day of payment ~nd will be on the rolls of the
company on that date."
It was observed that the payment for the 1959 was ex
gratia and accepted as such by the workmen. According
to this Court :
G
"This is not a case where the employer made a
unilateral declaration that the. payment was ex
gratia.
This was a case where the appellant said
that the payment was ex gratia and the workmen
accepted the payment as ex gratia.
Besides there
was a further condition that the payment would be
H
made to those workmen only who had completed
240 days work by the day of payment."
(1) A.IR. 1965 S.C. 1499.
(2) [1960] 1 S.C.R. m7.
70
SUPREME COURT REPORTS
[1972] l S.C.R.
A
The evidence further showed that although for the year
1960 and 1961 payment had been made at the rate of 30
days' wages the workmen had given a receipt in terms which
stated that the payment was made as advance to be adjusted against profit bonus for the previous year.
In
these circumstances, this Court found itself unable to hold
B
that there had been payment for an unbroken series of
years before the dispute was referred to the tribunal and
the finding of the tribunal that payment of customary
traditional bonus on the occasion of the Puja festival
was established was set aside.
Lastly, we may refer
to Management of Churkulam
C
Tea Estate (P) Ltd. v. The Workmen & another (1).
Jn
this case there was at first an agreement in the year 1946
relating to bonus for the years 1947, 1948 and 1949.
The
agreement was extended also for the years 1950 and 1961.
A fresh agreement was entered into in 1955 for payment of D
bonus for the years 1952, 1953 and 1954 and there were
subsequent agreement also.
There was no controversy
that the appellant had paid bonus for nine years and it
was not at a uniform rate. 'So far as the year 1952 was
concerned the appellant's case was that it had not paid any
bonus as such, but on the other hand rt had made an ex E
gratia payment of Rs. 3 to each worker; but the tribunal
did not accept this plea and held that the said payment must
be treated as one having been made towards bonus. This
Court came to the conclusion that the Tribunal was wrong
in holding that an inference could be drawn for payment of
bonus as an implied condition of service, in the circumsF
tances of the case, when the payment admittedly was not
uniform and was not connected with any festival.
The
Court also negatived the plea of the workmen to treat the
bonus as a customary or traditional bonus because, apart
from the fact that.it was not connected with any festival,
one of the essential ingredients viz., that the payment
G
should have been at a uniform rate through was admittedly lacking in the case.
The above decisions all go to negative the claim of the
appellant before us.
The only fact about which there
can be no doubt is that payment was
made at the
H
rate of 10 per cent for a large number of years with an
(l) [1969]
I S.C.R. 930.
'
' '
KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co. (Mitter, J.) 7 I
A intervening period when it was made at the rate of 11 per
cent. The facts d.o not warranl any conclusion as to the
payment being ri::tated either to any festival or under an
implied terms of employment between the parties. It will
be noted that for the very first period i.e. the years from
B 1940-41 to 1945-46 there was no claim for the payment of
either customary bonus or a festival bonus.
On the other
hand, the express'. claim was made for War bonus. The major
part of the entire period was covered by awards and
excepting in one of these awards, there was no reference to
any festival bonus. There was an intervening period which,
c
as already noted was
covered by an express agreement
between the parties. The rate too, as already shown, was
not uniform. Consequently the claim made by the appellan•s that they should be paid 10 per cent either as festival
bonus or under an implied term of employment cannot be
D
accepted.
With regard to the second claim there is no dispute
that bonus must be computed in terms of the Full Bench
formula as accepted by this Court in the case of Associated
Cement Companies Ltd. v. Its Workmen (1). Learm;d
counsel for the appellant was prepared to accept the gross
E profits for the adoption ofthe.Full Bench formula as shown
in the balance of the revenue account for the year ending
31st March 1961 subject, to certain exceptions. This
figure as shown in Schedule F to the profit and loss account
was Rs. 8,88,598.29. This
was however subject to the
qualification as to several figures of expenses incurred
F
during the year. The first related to the figure in the revenue
account where the cost of coal and fuel was shown by :the
company as Rs. 21,12,875.97,
According to the appellant. the documerit Ex. P-13 prepared by the Managing
Agents of the company and certified as correct by their
chartered accountants on S<;ptember 28, 1961 showed that
G. the fuel consumed was 54,962 tons at an average cost of
Rs. 35 ·68. This according to the appellant was a solemn
document inasmuch as it had to be prepared and submitted
under sub-rule (3) of Rule 26 of the Indian Electricity
Rules, 1937. The statement is headed "Summary of Technical and Financial Particulars for the year ended 31st March,
H 196 l."' If the .figures with regard to the quantity of coal
(I l {1959] S.C.R. 925
6-M 1245 Sup Cl/71
/
SUPREME CQURT REPORTS
[1972] 1 S.C.R.
and the average cost in Ex-P-13 be taken into account,
A
instead of the figures Rs. 21,12,875·97 in the revenue
account the correct figure would be Rs. 19,55,447 /- which
would swell up by the gross profits by the difference
between ·he two amoun•s, viz., Rs. 1,57,428/-.
It was seriously contended· before us by learned counsel
B
for the respondent that we should accept the figure given
in the balance sheet as the same is supported by certificates
of the same firm of chartered accountants, and their letters
addressed to the Managing Agents of the Company.
According to the letter Ex. D-28 dated 20th September
1961 the books and records of the Jabalpur Electric Supply c
Company Ltd., for the period Ist April, 1960 to 31st September, 1960 showed the average cost of coal delivered to bunkers during the period to be Rs. 37.81 per ton or Rs. 37·21
per tonne (metric). The letter Ex. D-29 which is similarly
worded shows that for the period Ist October 1960 to 31st
0
March, 1961 the average· cost of coal delivere\} to bunkers
during this period was Rs.
39 ·09 per ton or Rs. 38 ·47
per tonne. These two figures were sought to be supported
by the certificates of the chartered accountants dated 18th
April, 1963. The above will show that there was considerable discrepancy as to the value of the coal consumed
E
as reported to the Government and as reported to the
Managing Agents of the Company by the accountants.
This was sought to be explained in the oral evidence of
one L. S. Mcleod who stated that the statement prepared
under the Electricity Act was on the basis of the record
maintained by the Head Office but the total consumption
F
of the coal during the year was 54,962 tons and the average
cost of coal per ton was Rs. 35 ·58 per ton. Oral evidence
was also adduced of one B. Chatterjee, an Assistant in the
Electricity Department of Martin Burn
Ltd. Calcutta
who stated that the rate shown in Ex. P-13 i.e. Rs. 35 ·58
per ton was the estimated value of coal received per ton and
G
that this figure has been arrived at the Power House Jabalpur
purely on estimates and that the estimate did not take into
account certain liabilities i,e. certain suppliers' bills which
were accounted for and audited at the Head Office at
Calcutta. Jn our view, the attempted explanation cannot
be accepted as Ex. P-13 was made ·under the provisions
of an Act. It was prepared in Calcutta long after the
period to which it related. It was submitted some time
H,
I
I
KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co. (Mitter, J.) 73
A after the Directors' reports to the shareholders dated 4th
September 1961 accompanying the balance sheet and the
profit and loss account. It was for the company to explain
exactly how the discrepancy arose and their failure to
explain, in our opinion, should lead to the grossing up of
B the amount of difference already mentioned with the gross
profits as per the revenue account.
The next dispu(ed item relates to the
amount of
Rs. 85,887 ·63 as shown in the revenue account towards
"miscellaneous
expenses."
The
item
reads
"misc cellaneous
expenses
including
Rs.
3,025 · 16
for
wages and Rs. 4,128 ·74 paid to
Martin Burn Ltd. as
guarantors' commission." The Company was asked to
furnish particulars of the items which added up to
Rs. 85,887 ·63. According to Ex. P-18 the said figure was
made up of the following: Rs. 34,584 ·I I as cost of printing,
D stationery and advertisement, Rs. 12,648 · 18 as travelling
expenses, Rs. 7,207 ·80 as general charges, Rs.
6,206 ·57
bank charges, Rs. 4,128.74 as guarantors' commission and
Rs. 21,112·23 as repairs to furniture etc. It was this last
figure which was challenged by the appellant. Schedule E
to the balance sheet for the relevant year (fixed capital
E expenditure) shows that the original cost of furniture and
equipment up to 31st March 1960 was Rs. 38,377 ·78 and
that additions, sales and adjustments during the year was
Rs. 5,498 · 76 and the total depreciation written off to 3 Lst
March 1961 was Rs. 29,915 ·23.
It is difficult to appreciate how furniture the total cost of acquisition of which
F
was Rs. 43,876 ·54 as shown in schedule E would require
repairs to the extent of Rs. 21,000 ·00 in one year as shown
in the particulars supplied.
Mr. L. S. Mcleod admitted
that he could not trace any expenditure having been shown
in respect of repairs of furniture in the summaries of receipts
and monthly expenditure and that his estimate of the
G amounts spent for repairs would be less than Rs. 500/-. Mr.
B. Chatterjee said the amount also included the hire
charges of the office equipment.
He did not refer to any
books of account to support the statement.
In the absence
of proper explanation supported by the books of account
of the company, the figure of Rs. 21, 112/- ought not to
H be accepted and taking into account Rs. 500/- as stated by
Mr. Mcleod as having been spent for repairs to furniture a
sum of Rs. 20,612/- should be added to the gross profits.
74
SUPREME COURT REPORTS
[1972] l S.C.R
The third item to be added-to the gross profits according A
to the appellant' was the figure of interest Rs. 16,645 ·53
shown in schedule F for computation of net profits in
accordance with s. 349 of the Companies Act, 1956 with
details of calculation of Managing Agents' remuneration
for the year ended 31-3-1961.
This amount according to
B
the appellant should have found a place in Ex. D-11 being a
"Statement of surplus/deficiency of profits for the year
ended 31st March 1961" i. e. the working sheet compiled
by the company. This interest accrued to the company out
of the statutory investments as shown in Schedule C to the
balance sheet. Schedule C gives the statutory contingec
ncies reserve fund investments, the book value thereof
being Rs. 2,30,880 ·37
quoted on the stock exchange,
besides Rs. 50,031 ·25 which was not so quoted, the total
coming to Rs. 2,80,911 ·62. Although the statutory contingency reserve fund investments are not to be taken into
account in "the statement of surpluses and deficiency of D
profits" it was included in the statement of net profits for
the calculation of managing agents' commission and we see
no reason why the same should be left out of account in
Ex. D-11. Mr. Chagla contended that the workers had
, done nothing during the year of account i.e. Jst April 1960
to 3 lst March 1961 which entitled them to claim the benefit
E
of this amount of interest. While it is true that their claim
c3-tJnot be rested on any work done by them for the company during the year of account there can be no question
thli~. the interest accrued to the company out of the efforts
of the workers in the past which had not been taken into
a:c;.;Ciunt in calculating bonus. The managing agents had
F
done nothing in the year of account to entitle them to take
into account the amount of interest which accrued to the
company during the year of account .. If they were entitled
to .claim a share of it the workers were equally entitled to
base their claim for its inclusion in Ex. D-11. The result is
G
that the gross profits of the company as shown in Ex.D-11
would have to be augmented by the sums of Rs. 1,57,428,
Rs. 20,612 and Rs. 16,645 ·53.
On behalf of the appellant dispute was also raised to the
deduction of several items in Ex. D-11 namely,(!) rebate to
cGt1sumers Rs. 17,046 ·00 (2) depreciation to the extent of H
Rs, 3.55,755, as also double shift allowance of Rs. 95,256
(3) income tax at 45% as per Finance Act i.e. Rs. 1,07,052
A
KARAMCHARI PANCHAYAT V. JABALPUR ELECT. co. (Mitter, ./.) 7 5
and (4) return of 6% on working capital which was quat:1tified at Rs. 8,25,243/-. According to the Tribunal, it
was
not necessary to consider the other two items, return at 6 %
on other
reserves
employed
in the
business i.e.
Rs. 55,38,296/- and rehabilitation reserve of Rs. 30,15,202
B as in his view even without taking these two last figures
the working sheet Ex.-D-11
showed a negative balance,
that is to say absence of any surplus resulting out of which
the workers could claim anything by way of profit bonus.
With regard to rebate to consumers it was argued
before the Tribunal that it was never paid to the consumers
c as the Sixth Schedule to the Electricity Supply Act, under
paragraph II(I) went to show that:
D
E
"If the clear profit of a licensee in any year of
account is in excess of the amount of reasonable
return, one-third of such excess, not exceeding five
per cent of the amount of reasonable return, shall be
at the disposal of the undertaking. Of the balance
of the excess, one half shall be appropriated to a
reserve which shall be called the Tariffs and Dividends Control Reserve and the remaining half
shall either be distributed in the form of proportional
rebate on th~ amounts collected from the sale of
electricity and meter rentals or carried forward in the
accounts of the licensee for distribution to the consumers in future, in >uch manner as the State Government may direct."
F
This goes to show that the rebate to the consumers is
11ol
to be utilised by the company except for distribution to the
consumers as may be directed.
If the company cr,nnot
have the benefit of it, it stands to reason that the worker
cannot ask for a share and the claim of the appellant for
inclusion of this oum must be rejected.
G
lt was next argued on behalf of the appellant that the
Tribunal should not have allowed depreciation in excess
of the figure which was shown in the profit and loss account
of the company, viz., Rs.
2,51,405 ·80. The Tribunal
accepted the depreciation to the extent of Rs. 3,55, 7.55
H
but disallowed the claim with
regard to double shift
allowance. The judgment of this Court in The Associated
Cement Companies' (supra at P. 959) shows that this Court
76
SUPREME COURT REPORTS
[1972] 1 S.C.R.
accepted the formula propounded by the Full Bench of A
the Labour Appellate Tribunal in U. P. Electric Supply
Co. Ltd., v. Their Workmen (1).
In U. P. Electric Supply
Co.,'s case the Full Bench of the Labour Appellate Tribunal had stated (see p. 440) that:
"Upon a careful consideration of the matter we
R
are of the view that only normal depreciation, including multiple shift depreciation, but not initial or
additional depreciation, should rank as a prior charge
in applying our Full Bench formula."
This case came up for consideration again in T.T.E.
c
Supply Co., Ltd. v. Its Workmen (2) and The Ahmedabad
Miscellaneous Industrial Workers Union v. The Ahmedahad Electricity Co. Ltd. (3) and was approved of in both.
That Rs. 3,55,755/- was the normal depreciation for the
year is amply borne out by the assessment order of the
1 ncome-tax Officer for the relevant year which is Ex.D-20
D
in this case. The company further filed
statements of
depreciation in respect of each of the assets from 1948
to 1961 and the totals of the figures add up to the exact
sum of Rs.
3,55,755/-.
With regard to the claim of double shift allowance Mr.
E
B. Chatterjee, the Company's witness,
stated that the
amount of Rs.
95,256/-
represented the double shift
allowance but they did not claim it in the income-tax
assessment inasmuch as if they had done so in the year of
account, this would have increased their burden of tax in
the subsequent years and it was to regulate the stability of F
profits that they did not claim double shift in the incometax returns.
We see no reason to reject the evidence of
Mr. Chatterjee. The fact that in the balance sheet the company showed only Rs. 2,51,405 ·80 was not conclusive on
the question.
What amount of depreciation the company
will claim under the Income-tax Act in order to allow
G
some profits to be distributed among the shareholders is
a concern entirely of the company, so long as they do not
claim anything more than what the law allows. It is
significant to note that this Court
pointed out in The
Ahmedahad Miscellaneous Industrial Workers'
Unio11 case
(supra) that the Income-tax Rules should be applied in
H
(1) [1955] 2 L.L.J. 431.
(2) [1960]
3 S.C.R. 68.
(3) [1962]
2 S.C.R. 934.
A
KARAMCHARI PANCHAYAT v. JABALPUR ELECT. co.