# M:;S. PEIRCE LESLIE & CO., LTD., KOZHIKODE v. THEIR WORKMEN

- **Citation:** [1960] 3 S.C.R. 194
- **Court:** Supreme Court of India
- **Decided:** 1957-09-16
- **Bench:** P. B. Gajendragadkar, K. SuBBA RAO, K. c. DAS GUP'l'A
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-peirce-leslie-co-ltd-kozhikode-v-their-workmen-1832
- **Pages:** 14

## Headnote

Industrial Dispu.te-Bonus-Full Bench formula-Variation ofUnusual risk in bu.siness and employment of small capital-If good
grounds for variation-Rehabilitation allowance, purpose of-Claim
for bonus by small percentage of workmen-Whether entire su.rplus
can be taken into accou.nt.
During the year 1954-1955, the appellant paid a sum equivalent to 3 months basic wages as bonus to its monthly paid clerical
staff. These employees raised an industrial dispute claiming an
additional bonus equal to 7 months basic wages.
The Industrial
Tribunal to which the dispute was referred. awarded additional
bonus equal to 5 months basic wages.
The appellant contended
that (i) since the element of risk in the business was great and the
capital employed was small the Full Bench formula had to be
materially altered and rates higher than 6% on paid up capital
and 4 % on reserves employed as working capital should be allowed (ii) a higher allowance ought to be made for rehabilitation;
and (iii) the entire surplus ought not to be treated as available
for distribution as only a small percentage of the workmen had
made the claim for bonus.
Held, that since the claim for additional bonus was made
only by a small prcentage of the workmen the entire available
surplus could not be treated as available in distributing bonus to
them.
Not only the 882 staff members who had raised the claim
but rr, 247 other workmen as well had contributed to the emergence of the surplus. The sum still in the hands of the company
could not be treated as a matter only between the company and
these present claimants.
Indian Hume Pipe Co., v. Their Workmen, [r959] Supp. 2
S.C.R. 948. L.L.]. 357, applied.
Return on invested capital had always to provide for pure
interest plus compensation for the risks of business.
In a particular industry where the risk vvas appreciably less than
usual there would be good cause for providing less than 6%; and
in an industry where extraordinary risks were run more than 6°/0
could reasonably be provided for.
There was no unusual risk
run by the appellants in their business and no case was made out
for allowing any higher return on the paid up capital or working
capital. There was no justification for compensation of the enterpreneur for the fact that with a small amount of capital considerable profits were earned.
As fixed capital was liable to gradual deterioration reserves
had to be created out of profits for replacing any portion of it as
soon as it became too deteriorated for efficient use. It was neces-
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3 S.C.R. SUPB,EME COURT REPORTS
195
sary that the company's capital fund remained intact. An amount
I96o·
reasonably sufficient for the notional requirement of rehabilitation
during the relevant year was deducted as a prior charge in ascerM /s. Peirce
taining surplus profits from which bonus could be paid. The basis Leslie & Co. Ltd.
of the prior charge was the assumption that rehabilitation was a
Kozhikode
continuing process and needed allotment from year to year. But
v.
in the present 'case the appellant had failed to make out any Their Workmen
case for rehabilitation allowance in addition to the ordinary
depreciation.
Associated Cement Company's case, [1959] S.C.R. 925, relied
on.
CrvrL APPELLATE JURISDICTION: Civil Appeal
No. 209/58 .
Appeal by special leave from the Award dated
September 16, 1957 ofthe Industrial Tribunal No. II,
Ernakulam, in Industrial Dispute No. 34 of 1957.
G. B. Pai and Sardar Bahadur,for the appellants.
A. V. Viswanatha Sastri and M. S. K. Sastri, for
l
the respondents.
1960. March 9.
The J udginent of the Court was
delivered by
DAS GUPTA, J.-The appellant-M/s. Peirce Leslie
& Co., Ltd., is a private limited company engaged in
various enterprises mainly in South India. It started
business in this country over a century ago and
though it is registered in England almost ll.ll its
activities appear to be carried on in this country .
The principal activities that require mention are the
business in cashe

## Text

March 9
•
194
SUPREME COURT REPORTS
[1960]
M:;S. PEIRCE LESLIE & CO., LTD., KOZHIKODE
v.
THEIR WORKMEN
(P. B. GAJENDRAGADKAR, K. SuBBA RAO AND
K. c. DAS GUP'l'A, ,J,J.)
Industrial Dispu.te-Bonus-Full Bench formula-Variation ofUnusual risk in bu.siness and employment of small capital-If good
grounds for variation-Rehabilitation allowance, purpose of-Claim
for bonus by small percentage of workmen-Whether entire su.rplus
can be taken into accou.nt.
During the year 1954-1955, the appellant paid a sum equivalent to 3 months basic wages as bonus to its monthly paid clerical
staff. These employees raised an industrial dispute claiming an
additional bonus equal to 7 months basic wages.
The Industrial
Tribunal to which the dispute was referred. awarded additional
bonus equal to 5 months basic wages.
The appellant contended
that (i) since the element of risk in the business was great and the
capital employed was small the Full Bench formula had to be
materially altered and rates higher than 6% on paid up capital
and 4 % on reserves employed as working capital should be allowed (ii) a higher allowance ought to be made for rehabilitation;
and (iii) the entire surplus ought not to be treated as available
for distribution as only a small percentage of the workmen had
made the claim for bonus.
Held, that since the claim for additional bonus was made
only by a small prcentage of the workmen the entire available
surplus could not be treated as available in distributing bonus to
them.
Not only the 882 staff members who had raised the claim
but rr, 247 other workmen as well had contributed to the emergence of the surplus. The sum still in the hands of the company
could not be treated as a matter only between the company and
these present claimants.
Indian Hume Pipe Co., v. Their Workmen, [r959] Supp. 2
S.C.R. 948. L.L.]. 357, applied.
Return on invested capital had always to provide for pure
interest plus compensation for the risks of business.
In a particular industry where the risk vvas appreciably less than
usual there would be good cause for providing less than 6%; and
in an industry where extraordinary risks were run more than 6°/0
could reasonably be provided for.
There was no unusual risk
run by the appellants in their business and no case was made out
for allowing any higher return on the paid up capital or working
capital. There was no justification for compensation of the enterpreneur for the fact that with a small amount of capital considerable profits were earned.
As fixed capital was liable to gradual deterioration reserves
had to be created out of profits for replacing any portion of it as
soon as it became too deteriorated for efficient use. It was neces-
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3 S.C.R. SUPB,EME COURT REPORTS
195
sary that the company's capital fund remained intact. An amount
I96o·
reasonably sufficient for the notional requirement of rehabilitation
during the relevant year was deducted as a prior charge in ascerM /s. Peirce
taining surplus profits from which bonus could be paid. The basis Leslie & Co. Ltd.
of the prior charge was the assumption that rehabilitation was a
Kozhikode
continuing process and needed allotment from year to year. But
v.
in the present 'case the appellant had failed to make out any Their Workmen
case for rehabilitation allowance in addition to the ordinary
depreciation.
Associated Cement Company's case, [1959] S.C.R. 925, relied
on.
CrvrL APPELLATE JURISDICTION: Civil Appeal
No. 209/58 .
Appeal by special leave from the Award dated
September 16, 1957 ofthe Industrial Tribunal No. II,
Ernakulam, in Industrial Dispute No. 34 of 1957.
G. B. Pai and Sardar Bahadur,for the appellants.
A. V. Viswanatha Sastri and M. S. K. Sastri, for
l
the respondents.
1960. March 9.
The J udginent of the Court was
delivered by
DAS GUPTA, J.-The appellant-M/s. Peirce Leslie
& Co., Ltd., is a private limited company engaged in
various enterprises mainly in South India. It started
business in this country over a century ago and
though it is registered in England almost ll.ll its
activities appear to be carried on in this country .
The principal activities that require mention are the
business in cashew nuts which the Company sells after
roasting raw cashew nuts purchased in this country
and in Africa, and business in coir products and several
other country produce like ginger, lemon grass oil etc.
A large portion of the products in which it trades is
exported to foreign countries. Apart from these
trading activities the company is also engaged in
agency business including working as managing
agents of many companies. For many years the
company as a whole had made good profits, though
in some bf its many lines losses were incurred. The
company has on its pay roll a large number of
employees and apart from superior officers in its
covenanted and uncovenanted staff both Indian and
European it employs in its various lines of business a
large number of workmen including clerical staff. The
Das Gupta].
M /s. Peirce
Leslie & Co. Ltd.
J{ozhikode
v.
Their Workmen
Das Gupta ].
196
SUPREME COURT RE~ORTS
[1960
clerical . staff alone consists of 882 monthly paid
employees. For many years the Company has voluntarily paid bonus to all its employees out of the
surplus profits. To the monthly paid employees with
whom we are concerned in the present appeal the
company paid during the year 1954-55 a sum equivalent to three months' basic wages as bonus. Not
content with this these employees through their
Union put forward a claim for additional bonus. The
industrial dispute thus raised was referred by the
Government to the Industrial Tribunal sitting at
Coimbatore. Before the Tribunal tho workmen
claimed an additional bonus equal to seven mouths'
basic wages.
The company's case was that the
peculiar nature of its activities specially the fact that
in its a.gency business very little capital was employed
and the fact that in the cashew business and other
produce business the element of risk was unusually
great justify material alteration in the Full Bench
:Formula for ascertainment of the available surplus in
several respents. The main alteration ·asked for
before the Tribunal appears to have been that ratl's
higher than 6% of paid up capital and 4% on reserves
employed as working capital should be allowed in
working the Full Bench Formula in view of the
special risks in its business. and i he further fact that
its agency business requir~s very little capital. These
claims were rejected by the Tribunal. The Tribunal
also accepted only partially the company's claims as
regards rehabilitation allowances for the year and as
regards actual amounts used as working capital.
Having arrived on its calculations at the figure of
£55,137 as the available surplus after meeting all prior
and necessary charges the Tribunal awarded bonus
equal to five months' basic wages in addition to three
months' basic wages already voluntarily paid by the
company. In making this distribution the Tribunal
rejected the company's case that as this claim was
raised by only a small percentage of the workmen the
entire available surplus should not be treated as
available in distributing bonus to these few workmen.
The first contention urged in appeal before us is
that the Tribunal was wrong in rejecting the com-
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3 S.C.R.
SUPREME COURT REPORTS
J 97
pany's claim for higher return than usual on paid up
z960
capital and reserves used as· working capital. The
.
appellants' counsel has taken us through the evidence, Le1;i;~s~P~:~"ltd.
oral and documentary, as regards what he characKozhikode
terized as the heavy "fluctuations" in the price of
v.
raw cashew nuts which the company had to pl,lrchase Their Workmen
and the price in the foreign market of the finished
goods. That there is some amount of risk is undoubDas Gupta f.
tedly true.. We are not convinced however that the
company's business whether in cashew nuts or in any
other line is attended with such unusual risk as would
justify the provision of more than the usual rate of
return. ·Return on invested· capital has always to
provide for pure interest plus compensation for the
risks of the business. Prevailing interest in the money
market yielded by giltedged security is ordinarily
taken to be a fair index of what should be considered
reasonable as pure interest. For many years now
this figure has varied from 3 to 4 per cent. If no
risks were involved, this percentage should have been
considered a fair return on invested capital. It is
because most businesses contain an element of risksome more some less-because of fluctuations, on the
one hand in the prices of raw material and on the
other hand in the effective demand for the finished
goods-apart from cyclical booms and depressionsthat an additional return of 2 to 3% is generally
considered necessary to compensate for the risks. lt
is in view of this that a return of 6% is ordinarily
considered to be a fair return on the capital invested
in the shape of paid up capital. In a particular
industry where the risk is appreciably less than usual
there will be good cause for providing less than 6%.
And similarly, in an industry where extraordinary
risks are run more than 6% should . reasonably be
provided for.
If therefore there was reason to think that the
appellant company's contention that its business was
attended with unusual risks was correct there would
have been good reason to allow a higher rate than
6% on the paid up capital and also a higher rate than
4% on the reserves used as working capital. We are
not however satisfied that any such unusual'risk is
z960
11-fjs. Peirce
Leslie & Co. Ltd.
Kozhikode
v.
Their Workmen
Das Gupta].
198
SUPREME COURT REPORTS
[1960]
run.
The1·e is no more speculation in buying raw
nuts and roasting the same and selling them than
there is, say, in buying raw cotton in the market,
spinning yarn therefrom, making it into cloth and
selling such cloth, or in buying raw jute, spinning
yarn therefrom weaving it into gunny cloth and
selling the same. No case for any higher return on
the paid up capital or working capital has been made
out by the evidence.
Nor can the fact that the agency business of the
company does not require much in the way of capital
be considered to be a reason for allowing a higher
rate of return in those lines. If in the agency businesses considerable profits are earned with a small
amount of capital the contribution to such earning by
labour including both those at the top and those at
the bottom is necessarily considerable. There is no
justification for compensating the entrepreneur for
the fact that with a small amount of capital considerable profits are earned.
This brings us to the appellant's case about higher
rehabilitation allowance than what has been allowed
by the Tribunal. The company put its claim for
rehabilitation allowance at the figure of£ 31,780 but
the Tribunal accepted only a. sum of£ 11,250 as the
reasonable figure towards statutory depreciation and
rehabilitation together. In support of its claim, the
Company produced a number of statements prepared
by witnesses claimed to be experts showing the
replacement value of buildings, machinery, furniture
and sundry plants which constituted the fixed capital
of the company.
Statements are also produced
showing the further expectation of life of each of
these items. The services of a chartered accountant
firm were also requisitioned and we have on the
record a statement showing how the figures required
for replacement have been worked out for the various
items of buildings, machinery and furniture and
sundry plants. According to Exhibit E-50, the statement on which great reliance was placed by the
company, the total replacement value of its assets
was Rs. 1,08,02,330 made up of Rs. 77,86,350 for
buildings, Rs. 18,52,320 for plants and machinery,
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3 S.C.R. SUPREME COURT REPORTS
199
Rs. 3,63,550 for furniture
and
Rs. 8,00,110 for
sundry plants. Different items of buildings and
machinery are put in separate groups according as
the replacement is necessary in view of the residual
age, during 1955-60, 1960-65, 1965-70, 1970-75,
1975-80, 1980-85,
1985-90,
1990-95,
1995-2000,
2000-2005.
2005 is taken as the last year, as the
residual age is calculated from 1955 and the maximum residual age. is taken to be 50 years. Exhibit
E-43 shows the detailed calculations on this basis how
the sum of Rs. 77 ,86,335 was arrived at as the
replacement cost of buildings. Exhibit E-46_ is a
similar statement in respect of replacement costs of
plant and machinery. Ex. E-29A shows how after
taking reserves for rehabilitation for the different
groups of buildings into consideration, the rehabilitation charge for the season 1952-53 is worked out at
Rs. 19,"878 for buildings and the rehabilitation for
plant and machinery is worked out as £ 5,435. Details
are also give:q as regards the calculation of£ 4,744 as
the rehabilitation costs to be provided for sundry
plants and £ 1, 723 as the rehabilitation costs for
furniture in the year 1954-55 .
The very fact that such care has been taken in
furnishing details to the Court inclines one prima
facie to accept the correctness of these figures without
much scrutiny. Scrutiny is however. very much
needed before the figures and the calculations are
accepted. Mention may first be made of the fact that
though it was stated by the witness who is responsible
for the preparation of the replacement costs of the
machinery that he obtained quotations from different
firms, no such quotation has been placed on record.
That, as the Tribunal itself recognized, affected very
much the value of these figures.
As however after
mentioning the infirmities of the evidence the Tribunal
decided to accept as a reasonably accurate statement
this figure of Rs. 1,08,02,330 as the total replacement
value we need not consider whether we ourselves
would have been prepared to accept the evidence if
the matter was being considered by us in the first
instance.
1960
Mfs. Peirce
Leslie & Co. Ltd.
KczJ.ikode
v.
Their Workmen
Das Gupta].
•
200
SUPREME COURT REPORTS
[1960]
'96°
A more serious question however is whether the
M,s. Peirce
basis adopted by the appellant's expert for the calcuLeslie & co. Ltd. lation of this sum as the replacement costs to be
Kozhikode
provided over the years in the application of the Full
v.
Bench Formula can be accepted. As the appellant's
Thefr Workmen expert himself bas stated the value he has given as
Da-< Gupta J.
the rehabilitation cost for any particular building is
on the basis of what would be required to construct a
similar building if the existing building was pulled
down in 1955. He has proceeded on the same way as
regards the machinery and other assets. The Tribunal
after accepting the figure of Rs. 1,08,02,330 as the
correct figure for replacement deducted the sum
1 which in its opinion was available in the reserves
towards such rehabilitation and then divided the
remainder by 50 as 50 ye;,trs would be the period that
these buildings and machinery would last if replaced
in 1955 by new buildings and new machinery.
It has been urged befm•e us that the Tribunal was
wrong in dividing ·the sum obtained after the total
amount to be provided was ascertained by 50 inasmuch as the figure of Rs. 1,08,02,330
was itself
arrived at on the basis of the sum that would have to
be provided for the different groups of buildings and
the sum to be provided in 1954-55 for all these
different groups should have been accepted at these
figures worked out in Exhibit E-29A.
It appears to us that this method of arriving at the
rehabilitation costs to be provided in a particular
year is not useful and cannot be safely relied upon.
To understand the fallacy of the method applied we
may briefly state the logic behind the provisions for
rehabilitation. Because the fixed capital of any
industry is the victim of gradual deterioration the
prudent businessman
creates reserves out of his
profits so that as soon as any portion of the fixed
capital has become too deteriorated for efficient
working it may be replaced. The economic welfare
of the country as a whole no less than the interests of
the businessman requires that the company's capital
fund should remain intact. It is for this reason that
an amount reasonablv sufficient for the notional
requirement of rehabilitation during the relevant
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3 S.C.R. SUPREME COURT REPORTS
201
year is deducted as a prior charge in ascertaining
x960
suprlus profits from which bonus can be paid. The
~'.!/
P .
basis of the prior charge is the assumption that Le;li;~ ~:.c~td.
rehabilitation is a_ continuing process and so needs
Kozhikode
allotment from year to year. ';,['hat is why it has now
v.
been held that if the amount allotted for a specific Their Workmen
year is not used, it should be taken into account in
the later year.
Das Gupta ].
This has been recognized in the Full Bench Formula
and has received the authoritative recognition from
this Court in numerous cases. A full· discussion of
the principle involved can be found in Associated
Cement Company's Case (1). It is important to note
what was pointed out there as regards the replacement value being calculated on the basis of what
would be required to replace the fixed assets in
question at the date when replacement is due. One
way of ascertaining that was to multiply the original
cost, by the figure which would reflect the expected
rise or fall in prices at the date for replacement.
After the replacement cost is ascertained it is necessary to deduct therefrom the amount already lying in
reserves for this purpose and then to see over what
period the balance will have to be found.
There will
no doubt be difficulties in the way of estimating the
re-replacement costs in this manner, but that cannot
justify the attempt at over simplification by working
out the replacement cost on the hypothesis that
replacement cost at the date of replacement will be
the same as on the present date. If the prices fall in
the meantime too much will have been riet apart for
rehabilitation, if prices rise too little. To take the
instance of buildings which form the greater portion
of the assets of the appellant company, it may well
be that by the time some of these buildings require
replacement, the cost of construction will have
become less than at the present time by reason of
more efficient production of cement and steel in. the
country. So, also the price of machinery some years
later, may well be less than the price now, by reason
of such machinery being produced in our own country. The layman's apprehension that prices rise
(1) [1959] S.C.R. 9:a5.
36
M/s. Peirce
Leslfe & Co. Ltd.
Kozhikode
v.
Their Workmen
Das Gupta].
202
SUPREME COURT REPORTS
[1960]
never to fall again cannot be accepted as a correct
basis for calculation of the replacement cost on a
future date.
The entire basis of the calculation of the replacement cost by the appellant's experts is what such
costs will be if the building was pulled down or the
machinery scrapped in 1955 and had to be replaced
by a new machinery on that date. His estimate of
the replacement cost cannot therefore be accepted as
a sure basis for any calculation of the rehabilitation
costs to be provided.
It is unnecessary therefore to go into the further
question as to whether the Tribunal was justified in
treating the sum of £20,000/- and also another sum of
£44,760 as available towards rehabilitation. We may
however indicate that if it were necessary to go into
the question we would have probably hesitated to
hold that these sums were not in fact available for
rehabilitation.
A strict view of the evidence thus justifies a
conclusion that the appellant company has failed to
make out any case for rehabilitation allowance in
addition to the ordinary depreciation.
As however
the learned counsel for the respondent did not challenge the correctness of the allowance of £11,250
assessed by the Tribunal as the total allowances
towards statutory depreciation and rehabilitation
together it would be proper to apply the formula on
that basis.
The other question in dispute was as regards the
amount of reserves actually used as working capital.
Out of what was claimed by the company as reserves
employed as working capital the Tribunal disallowed
two items. One was in respect of a sum of £2,09,339
which appeared in the balance-sheet as provision
for taxation liability; another was an item of £8,250
as provision for proposed dividend on deferred ordinary
shares. The Tribunal was of opinion that the company had not made any attempt to prove that these
amounts had actually been used in the business. The
appellant contends before us that a scrutiny of the
balance.sheet is sufficient to satisfy any one that these
amounts had actually been employed as working
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3 S.C.R. SUPREME COURT REPORTS
203
capital. It is stressed in this connection that when
x96o
the balance-sheets were put in evidence through the
M/
P .
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h
t
s.
eirce
company s o cer no c a enge as to t e correc ness Leslie & co. Ltd.
of the statement made therein was made in cross-·
Kozhikode
examination. Though no direct challenge to the
v.
correctness of the statements appearing in the balanceTheir Workmen
sheets about the value of the different assets appears
to have been made it is important to notice that the
Das Gupta f .
employer's witness No. 2 through whom the balairnesheets and the profit and loss accounts of the company
were put in evidence was asked in cross-examination
as regards the discrepancy between the statements in
the balance-sheet E-8 where the bank overdraft was
shown as £1,95,990 and the statement Exhibit E-12
which showed the bank overdraft in June 1955 as 37·5
lakhs which is equivalent to £2,75,000. The difference
·being of about £80,000, the witness was asked which
is correct, ·whether E-8 or E-127 and when the witness
answered that both were correct, he was asked "how".
His .answer was "I do not know".
It may be that there is a satisfactory explanation
of this difference but the evidence on record does not
disclose this. When there remains prima facie such
discrepancy as regards the very important figure as
regards bank overdraft the. Tribunal would well be
justified in refusing to base any conclusion on the
valuation of different assets as stated therein.
There is apart from this the important fact that the
company itself does not claim that whatever appears
to be on the asset side over and above the paid tip
capital has come from the reserves. Exhibit E-30 is
the statement prepared by the company's Chartered
Accountant to show "Reconciliation of working capital
as on 30th June, 1958." It arrives at the figure of
£6,05,564 as the working capital by deducting from
the current assets as per balance-sheet as on June 30,
1955, six out of nine items under "Current liabilities &
provisions'',-3 items not deducted are those under (1)
liability for taxation other than U.K. Income-tax,
(2) proposed dividend on deferred ordinary shares and
(3) capital profits on proposed distribution. The
obvious reason for deducting the six items from the
c:mrrent assets to arrive at the working capital is tha,t
Ig6o
M/s. Peirce
Leslie &- Co. Ltd
Rozhikode ·
v.
1'heir Worl~men
Das Gupta ].
204
SUPREME COURT REPORTS
[1960)
these items in the balance-sheets under current liabilities and provision would have to be met during the
year out of a portion of the current assets, which
·portion would accordingly not be available for use as
working capital. If that is the case as regards the
other items under current liabilities and provisions
it is not clear why that should not also be the case
as regards the current liabilities under "liabilities for
taxation other than U.K. Income-tax" and under
"proposed dividend on deferred ordinary shares". In
the absence of evidence to the contrary there is no
ground for thinking that these current liabilities had
not also to be met out of the current assets during
the year. No such evidence has been produced. The
Tribunal is therefore right in our opinion in rejecting
the company's claim that these amounts were also
employed as working capital.
As regards the other prior charges there is no dispute. The Tribunal applying the Full Bench Formula
on the basis of the different findings held after deducting the bonus already paid voluntarily by the company
that the company had still in its hand a sum of £55,137
out of which it could pay a reasonable amount to
these workmen.
When deciding how much out of this £55,137 could
reasonably be paid as additional bonus to these workmen the Tribunal had to consider the contention raised
on behalf of the appellant-company that it would be
unfair to ignore the fact that not these staff members
alone but 11,247 other workmen as well have contributed to the emergence of this surplus. The appellant's argument was that staff members who have
raised this dispute should not be allowed to steal an
advantage over the numerous other workers of the
company and that just as results of the different
branches of the company have been considered as a
whole in arrivingiat the figure of available surplus it is
just and proper that these workmen who have raised
the dispute should be given only a fair share out of
that portion of the surplus which may be considered
properly payable to all the workmen of the company.
In dealing with this question the Tribunal has said :-
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3 S.C.R. SUPREME COURT REPORTS
205
"But the fortune of the 11,247 workers depend
upon the trading results of the department in which
M/s. Peirce
they are working; the bonus of the workers is Leslie & co.:Ltd.
decided compartment-wise ana not on the basis of
the overall profits of the-company. Cashew workers
are given bonus on the basis of the cashew department profits and not on the basis of the total profits
of the company. The staff members are transferable from one department to another and from one
branch to another branch."
We are not able to understand how in spite of the
way the company's balance-sheets and profit and Joss
accounts have been kept the different d"partments of
the company could be treated separately for the
purposes of bonus. The mere fact that the company
has actually done so does not make such distribution
right. Obviously if cashew workers would .in fact be
entitled to a larger bonus on the overall results of the
company they have been unfairly treated by the
company in having been given lesser bonus on the
basis of cashew department profits. It is urged on
behalf of the appellant that the fact that the workmen
other than these staff members have got less than
they would have been entitled to does not justify the
grant of a larger share to the present workmen than
what they would be entitled to if thos<:i other workmen
had been given a fair share.
This Court had to deal with a somewhat similar position in Indian Hume Pipe Go. v. Their W orkmen(1 ). The
respondents there were workmen only of the W adala
factory. The appellant had however paid to various
workmen elsewhere as and by way of bonus varying
between 4% and 29% of the basic wages for the year
in question. It was clear that the sum ofRs.1,23,138/-
only had been paid in full and final settlement to the
workmen in some of the factories and the . bonus
calculations Qn an all-India basis would work to the
advantage of the appellant, in so far as they would
result in saving to the appellant of the difference
between the amounts to which those workmen would
be entitled to on the basis of the all-India figures
adopted by the tribunal and the amounts actually
(r) [1959] Supp. ; S.C.R. 1148.
Kozhikode
v.
Their Workmen
Das Gupta].
I960
M /s. Peirce
Lesli~ 6- Co. Ltd.
Kozhikode
v.
Their Workmen
Das G_upta ].
SUPREME COURT REPORTS
[1960]
paid to them as a result of agreements, conciliation or
adjudication. On behalf of the respondents it was
therefore contended that the calculations should be
made after taking into account the savings thus effected. Dealing with this contention.this Court observed:-
" We are afraid. we cannot accept this contention.
If this contention was accepted, the respondents
before us would have an advantage over those
workmen with whom settlements have been made
and would get larger amounts by way of bonus
merely by reason of the fact that the appellant
had managed to settle the claims of those workmen
at lesser figures. If this contention of the respondents was pushed to its logical extent, it would also
mean that in the event of the non-fulfilment of the
conditions imposed by the tribunal in the award of
bonus herein bringing in savings in the hands of
the appellant, the respondents would be entitled to
take advantage of those savings also and should be
awarded larger amounts by way of bonus, which
would really be the result of the claimants entitled
to the same not receiving it under certain circumstances-an event which would be purely an
extraneous one and ·unconnected with the contribution of the respondents towards the gross profits
earned by the appellant. The tribunal was, therefore, right in calculating the bonus on au all-India
basis."
. Though in the present case there has been no
"settlement" strictly speaking with the other workers
in the various branches, the considerations which
weighed with the Court in the above case are fully
applicable to this case and the Tribunal must be held
to have committed an error in treating the sum still
in the hands of the company as a matter only between
the company and these present claimants.
In deciding what relief may reasonably be given to
the appellant company in view of this error in the
Tribunal's approach to the question of distribution of
the amount still available, we have however to take
into account two errors which have been made by the
Tribunal in this connection in favour of the appellant.
One of these is that in distributing the available
. '-
-~ .
..
.,.; .
,.. .
3 S.C.R.
SUPREME COURT REPORTS
207
surplus the Tribunal omitted to take into account the
important fact that a sum of no less than £1,10,000/-
has been capitalised out of the reserves at the beginning of the year. The second error was that the
Tribunal in saying thal after paying 8 months' bonus
there is a balance of £34,397 with the employer,
omitted to take into consideration the fact that the
company would also have the benefit of a large
amount as income-tax rebate in respect of the bonus·
paid to its clerical staff .
Taking all these facts into oonsideration we a!'e of
· opinion that a fair order would be to award to the
staff bonus equivalent to 3 months' basic wages· in
addition to the amount already paid voluntarily .
We therefore allow the appeal in part and in
·modification of the award made by the Industrial
Tribunal award to the staff of M/s. Peirce Leslie Co.,
Ltd., bonus equivalent to 3 months' basic wages in
addition to the amount already voluntarily paid by
the company. There will be no order as to costs.
··Appeal partly allowed.
TEA DISTRICTS LABOUR ASSOCIATION,
CALCUTTA ;;
v.
EX-EMPLOYEES OF T~A DISTRICTS LABOUR
ASSOCIATION AND ANOTHER
(P. B. GAJENDRAGADKAR AND K. N. WANCHOO, .JJ.)
Industrial Dispute-Closure of business centres held mala fideIf no closure in the eye of law in spite of actual closure-Industrial.
Disputes (Appellate Tribunal) Act, r950 (XLVII ofr950),ss.22,
23, 25F(C).
As there was appreciable decline in the activities and business of the appellant it decided, by means of a resolution, to
close down two local agencies at Koraput and Berhampur
{Ganjam) by May 31, 1957. About the same time the appellant
also thought of retrenching its employees and decided to retrench
ten of its employees with effect from December r, 1956. An
industrial dispute having arisen as a result of the said closure and
M/s. ·Peirce
Leslie Q>. Co. Ltd.
Kozhikode
v.
Their Work1nen
Das Gupta .f.
Mar~h 9.