# M/S. TITAGHUR PAPER MILLS CO. LTD v. ITS WORKMEN

- **Citation:** [1959] Supp. 2 S.C.R. 1012
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeals Nos. 450 & 451 of 1957
- **Bench:** S. R. Das, N. H. Bhagwati, s. K. DAS, P. B. G.Ajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-titaghur-paper-mills-co-ltd-v-its-workmen-1694
- **Pages:** 35

## Headnote

Industrial Dispute-Production Bonus, nature of-Jurisdiction of Tribunal to revise production bonus scheme introduced by
employer-Profit Bonus-If can be awarded in addition to prodi;ction bonus-Available surplus-Deduction for rehabilitation, how
calculated.
In 1949 the appellant framed a scheme called" Tonnage Production Bonus Scheme" whereunder the workmen were to get 13
days' basic wages by way of bonus on a production of 30,000 tons
and thereafter an additional one day's basic wage for every 460
tons produced upto a maximum of 36,000. The scheme was
accepted by the workmen. In 1953 the workmen raised industrial disputes claiming profit bonus for the years 1950-51 and
1951-52 in addition to the production bonus and asked for revi-
·sion of the production bonus scheme. The Industrial Tribunal,
to which the disputes were referred, rejected both the claims.
On appeal, the Appellate Tribunal awarded profit bonus equal to
one month's basic wage for 1951-52 but dismissed the claim for
1950-51 as having been made too late. It revised the production
bonus scheme by providing for rt day's basic wage for each
increase of 460 tons over 30,000 tons upto 36,000 tons and for 2
days• basic wage for each increase of 460 tons in excess of 36,000
tons. The appellant contended (i) that the Tribunal had no
jurisdiction to vary the production bonus scheme; (ii) that such
a scheme could only be varied by agreement ; (iii) that no proper
grounds had been made out for varying the scheme; (iv) that
prolit bonus could not be awarded in addition to production
bonus; (v) that the production bonus in this case was really profit bonus; and (vi) that there was no available surplus out of
which profit bonus could be paid.
Held, that the Tribunal had jurisdiction to revise the production bonus scheme.
Payment of production bonus was
payment of further emoluments depending not upon extra
profits, but, upon extra production, as an incentive to the
workmen to put in more than the standard performance.
Though it was discretionary with the appellants to intro1'
duce the scheme, once the scheme was introduced and put
into operation, it became a term of employment of the workmen
and any dispute with respect to such term of employment was
an industrial dispute which could properly be referred to a
Tribunal. The power of the Tribunal in considering the scheme
(2) S.C.R.
SUPREME COURT REPORTS
1013
was not confined to the question of mala fides etc. of the employer's action but it had power to vary the terms of the scheme
if circumstances justified it.
There was no justification for interfering with the scheme upto a production of 36,000 tons in view of the agreement between
the parties. But the scheme did not provide for production
above 36,000 tons and as such there was no agreement with respect to this, and as the production bad gone up beyond 36,000
tons it was necessary to provide for production bonus beyond
this quantity. There were two reasons for increase in the rates
of payment of production bonus, viz., (i) the intensification of the
efforts of the workmen in increasing production, and (ii) the
progressive going down of the labour cost of production per ton
as production increased. The rates had to be increased progressively with production. Consequently, for each 460 tons increase
• in production the proper rates for payment of production bonus
would be ri, I~, If and 2 days' basic wages respectJvely for production between 36,000 and 42,000 tons, 42,000 and 48,000
tons, 48,000 and 54,000 tons and 54,000 and 60,000 tons.
The "Tonnage Production Bonus Scheme" introduced by
the appellant was in fact also a production bonus scheme and not
a profit bonus scheme. The fact that one of the terms of the
scheme empowered the directors to cancel or reduce the payment
of production bonus in case the gross profit was not sufficient to
meet fixed dividends, interest, depreciation charges, taxation
and 10% dividend to ordinary shareholders did not make it a
profit bonus s

## Text

_Characters 0–39,894 of 76,509. This is a partial read: ask again with offset=39894 for what follows._

I959
May 5.
•
1012 SUPREME COURT REPORTS
[1959) Supp.
M/S. TITAGHUR PAPER MILLS CO. LTD.
v.
ITS WORKMEN
(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS,
P. B. G.AJENDRAGADKAR and K. N. WANCHOO, JJ.)
Industrial Dispute-Production Bonus, nature of-Jurisdiction of Tribunal to revise production bonus scheme introduced by
employer-Profit Bonus-If can be awarded in addition to prodi;ction bonus-Available surplus-Deduction for rehabilitation, how
calculated.
In 1949 the appellant framed a scheme called" Tonnage Production Bonus Scheme" whereunder the workmen were to get 13
days' basic wages by way of bonus on a production of 30,000 tons
and thereafter an additional one day's basic wage for every 460
tons produced upto a maximum of 36,000. The scheme was
accepted by the workmen. In 1953 the workmen raised industrial disputes claiming profit bonus for the years 1950-51 and
1951-52 in addition to the production bonus and asked for revi-
·sion of the production bonus scheme. The Industrial Tribunal,
to which the disputes were referred, rejected both the claims.
On appeal, the Appellate Tribunal awarded profit bonus equal to
one month's basic wage for 1951-52 but dismissed the claim for
1950-51 as having been made too late. It revised the production
bonus scheme by providing for rt day's basic wage for each
increase of 460 tons over 30,000 tons upto 36,000 tons and for 2
days• basic wage for each increase of 460 tons in excess of 36,000
tons. The appellant contended (i) that the Tribunal had no
jurisdiction to vary the production bonus scheme; (ii) that such
a scheme could only be varied by agreement ; (iii) that no proper
grounds had been made out for varying the scheme; (iv) that
prolit bonus could not be awarded in addition to production
bonus; (v) that the production bonus in this case was really profit bonus; and (vi) that there was no available surplus out of
which profit bonus could be paid.
Held, that the Tribunal had jurisdiction to revise the production bonus scheme.
Payment of production bonus was
payment of further emoluments depending not upon extra
profits, but, upon extra production, as an incentive to the
workmen to put in more than the standard performance.
Though it was discretionary with the appellants to intro1'
duce the scheme, once the scheme was introduced and put
into operation, it became a term of employment of the workmen
and any dispute with respect to such term of employment was
an industrial dispute which could properly be referred to a
Tribunal. The power of the Tribunal in considering the scheme
(2) S.C.R.
SUPREME COURT REPORTS
1013
was not confined to the question of mala fides etc. of the employer's action but it had power to vary the terms of the scheme
if circumstances justified it.
There was no justification for interfering with the scheme upto a production of 36,000 tons in view of the agreement between
the parties. But the scheme did not provide for production
above 36,000 tons and as such there was no agreement with respect to this, and as the production bad gone up beyond 36,000
tons it was necessary to provide for production bonus beyond
this quantity. There were two reasons for increase in the rates
of payment of production bonus, viz., (i) the intensification of the
efforts of the workmen in increasing production, and (ii) the
progressive going down of the labour cost of production per ton
as production increased. The rates had to be increased progressively with production. Consequently, for each 460 tons increase
• in production the proper rates for payment of production bonus
would be ri, I~, If and 2 days' basic wages respectJvely for production between 36,000 and 42,000 tons, 42,000 and 48,000
tons, 48,000 and 54,000 tons and 54,000 and 60,000 tons.
The "Tonnage Production Bonus Scheme" introduced by
the appellant was in fact also a production bonus scheme and not
a profit bonus scheme. The fact that one of the terms of the
scheme empowered the directors to cancel or reduce the payment
of production bonus in case the gross profit was not sufficient to
meet fixed dividends, interest, depreciation charges, taxation
and 10% dividend to ordinary shareholders did not make it a
profit bonus scheme as the circumstances mel)tioned are not the
same that have to be taken into account in arriving at the available surplus according to the Full Bench formula.
Nor was the
position altered by the clause in the scheme which empowered"
the appellant to cancel or modify the scheme in case Government enforced by legislation any scheme for bonus or profit
sharing as this did not mean that the scheme itself was for profit sharing or profit bonus. The other clauses of the scheme
clearly indicated that it was for production bonus. If there was
an available surplus of profits according to the Full Bench Formula the workmen were entitled to get profit bonus in addition
to the production bonus.
Mathuradas Kanji v. Labour Appellate Tribunal, A.LR. [1958)
S.C. 899, distinguished.
Held further, that there was available surplus of profits and
the profit bonus equal to one month's basic wages was properly
awarded by the Appellate Tribunal for 1951-52. The claim for
deduction for rehabilitation was made on a wrong basis by the
appellant. In order to arrive at a realistic figure for rehabilitation the total block should be divided into three heads: (i) land,
(ii) buildings, railway sidings and things of that nature which
had a much longer life and where no imports were needed, and
(iii) machinery. In the case of land no replacement was necessary and no provision need be made for rehabilitation. In the
I959
MI s. Titaghur
Paper Mills
Co., Ltd.
v.
Its Workmen
I959
Mjs. Titaghur
Paper /Wills
Co., Ltd.
v.
Its fVorkmen
1014 SUPREME COURT REPORTS [1959] Supp.
case of buildings etc. the multiplier would be smaller while the
divisor would be larger.
Machinery had again to be sub-divided
according to when it was purchased so as to arrive at correct
multipliers and divisors.
As machinery purchased before the
last war stood on one footing there would be a pre-1939 block.
The second block may be of machinery purchased during the
war and the third of that purchased after the war.
The
last two \Vere not rigid divisions.
In the circumstances of
the present case, the proper multipliers for these three blc cks
would be 4, 2 and r respectively. As both Tribunals had accepted ro as the divisor that may be accepted as the divisor for the
three blocks. Calculating on that basis the rehabilitation costs
did not wipe out the entire gross profits as claimed by the appellants and there was an available surplus out of which profit
bonus could be paid.
The clerical staff, budli workers and temporary workers
\Vere not entitled to claim attendance bonus as they \Vere different from other workmen.
CIVIL
APPELLATE JURISDICTION:
Civil Appeals
Nos. 450 & 451 of 1957.
Appeals by special leave from the judgment and
order dated July 31, 1956, of the Labour Appellate
Tribunal of India, Calcutta, in Appeals Nos. Cal. 282/55
and 6/56.
C. K. Daphtary, Solicitor.General of India, H. N.
Sanyal, Additional Solicitor-General of India, D. N.
Mukherjee and B. N. Ghose, for the Appellant (In C.A.
No. 450/57).
A. Roy Mukherjee and H. N. Hingorani, for the
respondent (In C. A. No. 450/57.)
M. C. Setalvad, Attorney-General for India, C. K.
Daphtary, Solicitor-General for India and H. N. Sanyal,
Additional Solicitor-General of India, D. N. Mukherjee
and B. N. Ghose, for the appellants (In C. A. No.
450/57).
Sadhan Chandra Gupta, J anardhan Sharma and
M. K. Ramamurthi, for the respondents (In C. A. No.
451/57).
Sadhan Chandra Gupta, Janardhan Sharma and
M. K. Ramamurthi, for the appellant (In C. A. No.
451/57).
•
(2) S.C.R.
SUPREME COURT REPORTS
1015
M. 0. Setalvad, Attorney-General for India, H. N.
Sanyal, Additional Solicitor-General of India, D. N.
Mukherjee and B. N. Ghose, for the respondent (In
C. A. No. 514/57).
G. D. Ambukar for the Secretary, for the Intervener
No. 1.
Sadhan Chandra Gupta and Janardhan Sharma, for
Intervener No. 2.
1959. May 5.
The Judgment of the Court was
delivered by
• WAN CHOO, J .-These are three appeals by special
leave from the same decision of the Labour Appellate
Tribunal of India and will be dealt with together.
The first two appeals (Nos. 450 & 451) are by Messrs.
Titaghur Paper Mills Co. Ltd., and the third (No. 514)
by its workmen.
Titaghur Paper Mills Co., Ltd. (hereinafter called
company) own two paper mills one at Titaghur (hereinafter called Mill No. 1) and the other at Kankinarah
(hereinafter called Mill No. 2). It appears that there
had been a dispute between the company and its
workmen in 1948, which was referred to the adjudication of a tribunal. That was disposed of by the tribunal on November 5, 1949. Among the matters then
referred was the question of profit bonus for the years
1945-46 and. 1946-47. When that matter was under
the consideration of the tribunal, the company put
forward a scheme of production bonus on the basis of
a minimum production of 30,000 tons of paper in a
year in the two mills together. The basis of the
scheme was that the workmen would get 13 days'
basic wage (this being equivalent to half of one month's
basic wage) by way of bonus on a production of30,000
tons for both mills. Thereafter the workmen were to
get an additional one day's basic wage for e\rery 460
tons produced upto a maximum of 36,000 tons when
the production bonus would . come up to 26 days' basic
wage (which would be equivalent to one month's basic
wage including weekly holidays).
The company in
putting forward the scheme said that "as an admittedly rough basis for such a scheme something on the
1959
;\J /s
Titaghur
Paper Mills
Co., Ltd.
v.
Its Workmen
Wanchoo ].
'959
M/s. Titagltur
Paper Mills
Co., Ltd.
v.
Its Work1nen
Wanchoo ].
1016 SUPREME COURT REPORTS [1959] Supp.
following lines might, we think, be equitable". It
then gave the scheme mentioned above. The tribunal
dealing with the question of profit bonus for the years
1945-46 and 1946-47 observed that the scheme of production bonus put forward by the company had been
accepted by the union as satisfactory and for the purpose of that proceeding it accepted the scheme as a
measure for awarding profit bonus for the years 194546 and 1946-47. The actual bonus worked out to 17
days' basic wage for 1945:46 and 19 days' basic wage
for 1946-47; (see award of Sri M. 0. Banerji, in the
publication of Government of West Bengal, Labour
Department, 'Awards made by the Tribunals for the
quarter ending December, 1949 '', pp. 130-150). It
further appears that the detailed scheme was later
communicated to the union in July 1950 and as the
principle had already been accepted by the union
before Sri Banerji the scheme was put in operation
from April 1, 1949, and production bonus 1ias all along
been paid in accordance with it after that date.
Disputes, however, arose between the company and
its workmen in 1953. The workmen of Mill No. 2 were
the first to raise a dispute in August 1953, in which
inter alia they demanded profit bonus for the years
1950-51 and 1951-52 and also prayed for certain
changes in the production bonus scheme. The workmen of Mill No. 1 also raised a dispute ?'l.1d presented
a charter of demands to the company in October 1953.
They also c;lemanded profit bonus for the two years
mentioned above and revision of the production bonus
scheme.
These disputes were referred by the Government of West Bengal to the Fi.fth Industrial Tribunal,
West Bengal. There were two references, one relating
to each mill.
They were heard separately by the
Industrial Tribunal which gave two separate awards
rejecting all the demands made by the workmen.
Consequently, two appeals were preferred by the workmen before the Labour Appellate Tribunal. There
the two appeals were heard together at the request of
the parties and disposed of by the Tribunal by the
same judgment on July 31, 1956.
.
The Fifth Industrial Tribunal rejected the claim of
·~
\
'
(2) S.C.R.
SUPREME COURT REPORTS
1017
the workmen for revision of the production bonus
scheme and for grant of profit bonus for the years
195'0~51 and 1951-52. It was of opinion that the claim
for profit bonus for the two years was not maintainable as the workmen had been given production bonus
and that met the profit bonus claim of the workmen for
the two years and all claims for profit bonus for these
two years must be taken to have been fully satisfied.
The question of delay in making the profit bonus
claim was also raised; but the Fifth Industrial Tribunal was of the view that the profit bonus claim could
not be defeated merely on the ground of delay. As to
the revision of production bonus scheme, it held that
that scheme had been accepted by the union and no
reason had been shown why the rate of one day's
basic wage as production bonus for every increase of
460 tons over 30,000 tons should be disturbed. It was
also of the view that increased production was not due
to increased efforts on the part of the workmen but
waf3 due mainly to increase in labour strength as well
as installation of new machinery.
On appeal the Labour Appellate Tribunal rejected
the claim for profit bonus for the year 1950-51 on the
ground that it was made too late. It, however, disagreed with the view of the Fifth Industrial Tribunal
that the production bonus scheme fully satisfied the
claim of 'the workmen for profit bonus and therefore
no profit bonus should be given even for the year
1951-52, with regard to which it was of opinion that
the claim was not belated. It, therefore, went into
the figures of profits and arrived at the available surplus in accordance with the formula known as the
Full Bench Formula evolved in The Mill-Owners'
As11ociation, Bombay v. The Rashtriya Mill Mazdoor
Sangh, Bombay (1).
Having arrived at the available
surplus it granted one month's profit bonus in addition
to what the workmen were entitled to under the production bonus scheme as revised by it. As to the
production bonus scheme, it was of the view that
there were reasons for revising it and therefore revised
\1) l1950) L.L.J. 1247.
128
r959
M fs. 7itaghur
Paper Mills
Co., Ltd.
v.
Its Workmen
Wanchoo ].
.I959
M fs. Titaghur
Paper Mills
Co, Ltd.
v.
Its J.Vorktnen
Wanchoo ).
1018 SUPREME COURT REPORTS [1959] Supp.
it, providing for 1 i days~ basic wage for each increase
of 460 tons over 30,000 tons up to the limit of 36,000
tons and two days' basic wage for each"increase o.f 460
tons in excess of 36,000 'tons. It may be mentioned,
however, that the change in the production bonus
scheme was not made retrospective and would therefore come into force from after the judgment of the
Labour Appellate Tribunal. The appeals of the work-
·men were therefore allowed in these two respects,
which have led to the two appeals by the company
before us. "The workmen through their union have
also filed an appeal against those portions of the decision of the Labour ~ppellate Tribunal which rejected
their demands.
In the two appeals by the company two matters relating to (i) productiot) bonus and (ii) profit bonus have
been raised before us.
We shall first take up these
two matters and then come to the appeal by the
workmen.
The main contentions on behalf of the company with
respect to the production bonus scheme are three-fold,
namely,
(1) The Industrial Tribunal has no jurisdiction
to go into the question of production bonus scheme at
all, for such a scheme by its very nature can only be a
matter of agreement between the employer and the
employees and cannot be imposed by a tribur1al;
·(2) Even where a production bonus scheme is in
force, its terms cannot be varied by a tribunal and
any variation can only be the outcome of an agreement between the employer and the employees, because initiation or introduction of such a scheme is
what may be called a 'management function'; and
(3)
Even if an industrial tribunal has the power
to vary the production bonus scheme, no material was
placed on the record in this case on the basis of which
the tribunal could order a variation in the scheme .in
force in the company.
As to the award of profit bonus for the year 1951-52
the attack was two-fold, namely,
(4) It was not open to a tribunal to award both
production bonus and profit bonus and in any case it
(2) S.O.R.
SUPREME COURT REPORTS
1019
could not be done in the present case as the production
bonus here was nothing more than profit bonus; and
(5)
Even if both production bonus and profit
bonus could be awarded, there was no available surplus in this case out of which profit bonus for that
yea,r could be paid.
Re. (J).
. Before we go into the question of jurisdiction of a
tribunal under the Industrial Disputes Act, 1947,
(hereinafter called the Act}, we should like to consider
what production bonus essentially is.
The payment
of production bonus depends upon production and it>
in addition to wages.
In effect, it is an incentive to
higher production and is in the nature of an incentive
wage.
There are various plans prevalent in other
countries for this purpose known as Incentive Wage
Plans worked out on various bases, for example, Halsey Premium Plan, Bedaux Point Premium Plan,
Haynes Manit System and Emerson Efficiency Bonus
Plan; (see Labour Law by Smith, Second Edition,
p. 723).
The simplest of such plans is the straight
piece-rate plan where payment is made according to
.each piece produced, subject in some cases to a gua-
. ranteed minimum wage for so many hours' work. But
'the straight piece-rate system cannot work where the
finishe,d product is the result of the co-operative effort
of a large nqmber of workers each doing a small part
which contnbutes to the result. In such cases, production bonus by tonnage produced, as in this case, is
given.
There is a base or standard above which
extra payment is made for extra production in addition to the baf\ic wage.
Such a pian typically guarantees time wage up to the time represented by standard performance and gives workers a share in the
savings represented by superior performance. But
whatever may be the nature of the plan the payment in
..,
effect is an extra em·olument for extra effort put in by
workmen over the standard that may be fixed.
That
is the reason why all these plans are known as Incentive Wage Plans and generally speaking have little to
do with profits. The extra payment depends not on
1959
M /s. Titaghur
Paper Mills
Co., Ltd.
v
Its Workmen
Wanchoo ] .
•
- , --
•
1020' SUPRE111E COURT REPORTS. [1959] Supp.
1959
extra profits but on extra production. This extra pay.
ment calculated on the basis ofextra production is in a
fl.Ifs. Titaghur
Pap" Mills
case like the present where the payment is made after
co .• Ltd.
the annual production is known, in the nature of emol~-
v.
__ men ts paid at the end of the year. Therefore generally
Its Workmen
speaking, payment of production bonus is nothing
more nor less than a payment of further emoJ.uments
ivanckoo ].
d
d
epen ing upon production as an incentive to the
workmen to put in more than the standard performance. -Production bonus in this case also is of this
-nature and is nothing more than additional emolument
paid as an incentive for higher production.
\Ve shall
later consider the argument whether in this case the
production bonus is anything other than profit bonus.
It is enough to say at this stage that the bonus under
the scheme in this case also depends essentially on
production and therefore is in the natllre- of incenth'e
wage.
Let us now turn to the question of jurisdiction of the
tribunal under the Act to consider a production bonus
scheme at all. The argument is that the introduction
·of a production _bonus scheme is purely discretionary
with the employer and no tribunal can impose such a
scheme. Whetber there should be increased production
in a particular concern is a matter to be determined
entirely by the employer and depends upon a consideration of so many complex· factors, namely, the state
of. the market, the demand for the product, -the range
of prices, and so on. It is, therefore, entirely for the
efuployer to introduce a _production bonus scheme or
not. There is good deal of force in the argument up to
this point; but the argument goes further and it is
said that even after the scheme is introduced, it is for
the same reasons in the discretion of the employer
whether to continue it or not. Therefore, it is urged
that the tribunal cannot have jurisdiction to consider
a production bonus scheme at all, for the tribunal
would then be doing something which the employer
can set at naught by withdrawing the scheme or by
- nullifying the effect of the tribunal's order by so
arranging that the production does not reach the level
at which production bonus __ becomes payable, for
•
•
;
...
(2) S.C.R.
SUPREME COURT REPORTS
1021
example, by not providing enough raw material for
the purpose. It is further urged that if it is entirely
in the discretion of the employer to introduce or not
to introduce a production bonus scheme, the fact that
the employer introduces a scheme will not give jurisdiction to the tribunal to interfere with it in any way,
for otherwise the tribunal would be compelling the
employer in the guise of a revision of the scheme to
do something which the tribunal could not initially
do.
Our attention in this connection was drawn to
Shalimar Rope Works Mazdoor Union, Howrah v.
Messrs. Shalimar Rope Works Ltd., Shalimar, Howrah (1),
where it was observed that though a production bonus
scheme may be desirable in the interest of harmonious
relationship between the employer and employees,
there is no obligation on the part of the management
to give production bonus and no decision had been
brought to the notice of the Labour Appellate Tribunal holding that a scheme of production bonus was
obligatory on the part of the company ; (see p. 504).
We are, however, not called upon to decide in this
case whether a demand for the introduction of a
production bonus scheme where there was none before
can be made a subject-matter of industrial dispute as
defined in s. 2 (k) of the Act or whether a scheme of
·p.rnduction bonus can for the first time be imposed on
the.employer by a tribunal under the Act. The problem tha\is before us is whether the tribunal under
the Act w1H have jurisdiction to deal with a production bonus scheme in a concern where it has been
introduced. The answer to this question depends upon
the terms of the Act and not on the consideration
whether the _scheme can be initiated only by the employer in the first instance. In order that the tribunal may have jurisdiction all that is necessary is that
an industrial dispute within the meaning of s. 2 (k) of
the Act should exist or be apprehended and there
should be a reference of such dispute by the appropriate government to the tribunal under s. 10.
Now
' industrial dispute ' has been defined in very wide
terms in B. 2 (k) and for our purpose it means any
(1) (r957) L.A.C. 496.
I959
Mjs. litaghur
l'apcr Mills
Co., Ltd.
v.
Its Workmen
Wanchoo J.
r959
Jl.J/s. Titoghur
Papev Mills
Cf'4, Ltd.
v.
Its IVorknien
JVanchoo }.
1022 SUPREME COURT REPORTS [1959) Supp.
dispute or difference between the employers and
workmen which is connected with the employment or
non-employment or the terms of employment or with
the conditions of labour, of any person.
\"! e have
already held that the production bonus scheme in this
case is an incentive wage plan and what is paid under
the scheme over and above the basic wage is supplementary emolument depending upon annual production.
A dispute arising about such an emolument
clearly comes within the words " terms of em ployment ". As soon therefore as an employer introduces
a production bonus· scheme and the same is put in
operation and the workmen accept it, it becomes. a
term of employment of the workmen working under
him and any dispute with respect to such a term of
employment is an industrial dispute and if it is referred to a tribunal under s. 10, as has been done in this
case, it has jurisdiction under s. 15 to "deal with it. The
argument therefore on this head must be rejected and
it must be held that the tribunal had jurisdiction under
the Act to deal with the scheme of production bonus
which had been introduced in this company and was
in force at all material times.
Re. (2).
This brings us to the second question, namely,
where a scheme of this kind is in force and there is a
dispute with regard to it.s terms, what is the extent of
the powers of a tribunal to deal with it . .JThe argument is put in this way.
The introduction and continuance of a prClduction bonus scheme is one of tho
functions of management. Therefore, when a question
of revision of such a scheme comes up before a tribunal, all that the tribunal "should look into is whether
this matter is an exclusive managlnnent 'function? If
it comes to the conclusion that it is an exclusive
management function, it should not interfere with the
details of the scheme, unless it also comes to the conclusJon that the employer is guilty of mala fides,
victimization, fraud or unfair labour practice through
the introduction or continuance of the scheme. It is said
that even though the tribunal may have jurisdiction
to consider such a scheme, it should refuse to interfere
Ill
•
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•
• '
'••''
. .
•
(2) S.C.R. SUPREME COURT Rb:t ~~TS
.
;-.'.~
.. '
1023
with it as soon as it comes-to the conclusion that it is
an exclusive management function and there is no
question of mala.fides, etc.
'
\Ve think it unnecessary for present purposes to
embark on a discussion of what is and what is not an
exclusive management function. Basically, everything
connecte,!l with the management of an industrial
concern is a management function, except the internal
affairs of any union which may exist. The Act has .
made no distinction between what may be called
exclusive management functions and others. It is
also well settled that the tribunals under the Act have
power to interfere witli management functions falling
within their purview in the interest of industrial peace
and the Act was enacted with that object. Therefore,
once it is conceded, as is the case here, that the tribunal has jurisdiction to entertain such an industrial
dispute· which comes within the terms of s. 2(k) we see
no reason why the power of the tribunal to take into
consideration an incentive wage plan like a production bonus scheme already introduced should be limited merely to the consideration of the question whether
the employer's action is mala fide, etc. \Vhere a production bonus scheme is in force and has become a
term of employment, there is no reason why the tribunal should not have the power to vary its terms if
circumstances justify it. Nor can the power of revision be denied to the tribunal in respect of a scheme
actually introduced on the grouiid that the introduction of such a scheme was an exclusive management
function and therefore it should be immune from being
touched at all. Therefore, even assuming that the
initiation of a production bonus scheme is an exclusive
management function and the final decision with respect to its introduction rests initially with the management., the right of the tribunal to take into considera.
tion such an initiated scheme (which has become a
term of employment) and to revise it cannot for a
moment bo doubted under the Act. It is true that
the tribunal will not lightly interfere with a scheme.
introduced by the management and accepted by the
union. It is also true that the tribunal would only
1959
M fs. Tilaghur
Paper Mills
Co .• Ltd.
v.
Its lVorkmen
JVanchoo ].
I959
J,J/s. Titaghur
Puper lltJills
Co., Ltd.
v.
Its JV 01/lmen
-··
J"Vanchoo ].
• I
•
1024 SUPRElUE COURT REPORT~ [1959] Supp.
make a change in the rates for gciod and sufficient
reasons. There can be no doubt, h~wever, that the
tribunal . has jurisdiction under the .Act to take into
consideration a production bonus scheme which lias
been introduced and is in operation and in proper
cases to revise it, and if necessary to change the rates
and other conditions on which such bonus is .payable.
. Our attention in this connection was dro.\yn to Indian
Iron&: Steel Co. Ltd. v. Their Workmen('), where the
·limits of the power of a tribunal to interfere with an
order of dismissal were considered. That case is in
our opinion of no help to the appellant. It was laid
down there that undoubtedly the management of a concern had power to direct its own internal. administration and discipline ; but the power was not unlimited ·
and when a dispute arose, Industrial Tribunals had the
power to see whether the termination of services of a
workman was justified and to give appropriate relief.
It was further laid down under what conditions the
Industrial Tribunal will interfere with the order of
dismissal. On a parity of reasoning, the Industrial
Tribunal has the power under the Act to revise the
production bonus scheme once it has been initiated. It
will do so only for good and cogent reasons, such as a
material change in method, product, tools, material,
design, or production conditions, or a saving in labour
cost and the like, .maintaining as far as possible the
established relationship between earnings and effort
and avoiding rates w.liich will ·give results out of all
proportion to· the basic wage. "Ve are therefore of
opinion that the argument under this head must also
be rejected .
. Re. (3).
.
The main contention under this head is that there
was no material before the Appellate Tribunal to ·
justify the increase in the rate which it ordered. We
have already pointed out that the scheme put forward
by the company. was to pay a production bonus of
13 days' basic wage on a minimum production of
30,000 tons. Thereafter one day's basic wage was to
(I) (1958] S.C.R 667.
'
. 1
•
•
f
(2) S.C.R. SUPREME COURT REPOitTS
1025
be paid for every 460 tons produced up to the ~axi
mum of 36,000 tons, the rated capacity of the mills
being then said to be over 36,000 tons.
The Appellate Tribunal has kept the minimum production at
30,000 tons with a bonus of 13 days' basic wage.
Between 30,000 and 36,000 tons it has raised the rate
to 1 i days' basic wage for each increase of 460 tons
over 30,000 tons to the limit of 36,000 tons, and thereafter to two days' basic wage for each increase of 460
tons in excess of 36,000 tons. It ga:ve two reasons in
support of this increase, namely, (i) that the great
increase in production since the introduction of the
scheme was attributable to a very considerable extent
to the increase of efforts on the part of labour and
therefore a reasonable proportion of the increased income on account of increased production should go to
labour, and (ii) that one day's wage only as bonus for
every 460 tons over 30,000 tons is not commensurate
with the actual increase of income on that increased
block of prod.uction. It is not clear to us what exactly
the Appellate Tribunal had in mind when it talked
of the increase of income as a reason for increase in
the rate. The question of increase in the rate has to
be considered in two stages, namely, (i) the increase
between 30,000 and 36,000 tons and (ii) the increase
when production goes beyond 36,000 tons. It appears
from what Mr. Banerji said in his award of 1949 that
the basic principle of the scheme, as it was put forward before him, was accepted by the union as satisfactory, meaning thereby that the union considered
that 13 days' basic wage for a minimum production
of 30,000 tons and one day's basic wage for every 460
tons beyond that upto 36,000 was· fair to labour. It
has been urged that there was no agreement between
the workmen and the company in connection with this
scheme. It does appear that all the terms, which
were incorporated in the scheme communicated to
labour in July 1950, were not initially evolved with
the agreement of the union ; but so far as the rate of
bonus was concerned that was accepted by the union
as satisfactory. In the company's appeals, we are
129
i959
M /s. Titaghur
Paper Mills
Co., Ltd.
v
Its Workmen
Wanchoo ].
I959
M/s. Titaghur
Paper Milts
Co,. Ltd.
v.
Its Workmen
Wanchoo ].
1026 SUPREME COURT REPORTS [1959] Supp.
;
concerned only with the rate. The question therefore
is whether the Appellate Tribunal was justified in
changing this rate which was agreed to as satisfactory
by the union up to a production of 36,000 tons. We
are of opinion that in view of the agreement between
the parties up to a production of 36,000 tons there
was no such material before the Appellate Tribunal as
would justify interference with the agreed rate.
The
intensification of labour must have been taken into
account when th,!l union agreed to the rate up to
36,000 tons, and there is nothing to show that since
then there has been any change in the conditions to
call for a change in the rate. The order of the Appellate Tribunal so far as it relates to production up to
36,000 tons cannot be sustained, as no material was
placed before it to warrant a change in that agreed
rate.
Then we come to the rate after 36,000 tons. There
the considerations in our view are different. The
scheme only provided _for a production o{ 36,000 tons.
It is true that thereafter the production bas gone up
beyond 36,000, and the company has been paying the
same flat rate of one day's basic wage for every 460
tons for the extra production and the workmen have
been accepting that payment. At the same time there
was no collective acceptance by the union on behalf
of the workmen of this rate being satisfactory or fair
for production above 36,000 tons.
Production went
beyond 36,000 tons for the first time in 1951-52 and a
dispute was raised in October 1953 by the workmen
of Mill No. 1 not very long after production for that
year was known. There was no dispute as to the
general revision of· the rate by the workmen of Mill
No. 2 ; but it was conceded on behalf of the company
that the two mills must be treated on the same footing in this matter. The company therefore cannot
say that the Appellate Tribunal should not have
interfered with the rate above 36,000 tons, because
there was a collective agreement by the union on behalf of the workmen and there was no material before
it to change the rate even beyond 36,000 tons. Two
reasons were given by the Appellate Tribunan for the
(2) S.C.R. SUPREME COURT REPORTS
1027
change it ordered. Of these the second is difficult to
understand as it is not clearly or happily expressed,
though the first reason, (namely, increased effort on
the part of labour) would certainly apply when we
consider production beyond 36,000 tons. It stands to
reason that where the labour force is more or less the
same, production beyond the original target of 36,000
tons would mean more intensification of effort by
labour, for it is not in dispute that the working hours
have remained the same. Other things being equal,
the greater the production by the same labour force
in the same space of time, there is bound to be more
intensification of labour to achieve this result.
This
is certainly a matter which the Appellate Tribunal
could take into account in considering whether the
rate after 36,000 tons should be raised. A comparison
of figures of production and labour force employed
between 1948 and 1952 (assuming other factors to be
the same) would show that there must have been
intensification of labour effort to get the increased production. In 1948, total labour force in the two mills
was 5,860 (Exs. F & H). In 1952, it went up to
6,213, an increase of just over 6 per cent.
Production
on the other hand was 28,244 tons in 1948-49 while it
was 37,738 tons in 1951-52, an increase of slightly
above 33 per cent. So it is obvious that the increase in
production is much more than the increase in labour
force. It is true that in 1950 a new paper-making
machine was substituted in one of the mills, and some
bamboo-crusli.ers and digesters were also added during
this period and other large amounts spent on machinery, and that fact certainly accounts for a part of
the increase. It is, h<;>wever, not possible to ascertain,
with anything like mathematical accuracy, as to how
much of the increase in production is attributable to
improved machinery and how much of it is referable
to intensification of labour of the workmen. It may
nevertheless be taken as fairly certain that the
increase in production is referable to a great extent to
intensification of the efforts of the workmen, for there
has been no appreciable increase in the labour force.
'Ve have not got the _figures of labour force in the
I959
M Js. Tita,ghur
Paper Mills
Co .• Ltd.
v.
Its Workmen
Wanchoo ].
I959
Jo.Ifs. Titaghur
Paper Mills
Co., Ltd.
v.
Its Workmen
Wanchoo ].
1028 SUPREME COURT REPORTS [1959] Supp.
later years, though production has gone on increasing,
till it is said it will reach 54,000 tons mark in 1958.59.
It is apparent, therefore, that there must have been
progressive intensification of labour as the production
rose beyond 36,000 tons, and in the premises that was
a circumstance which the Appellate Tribunal was
properly entitled to take into account when considering a change in the rate for production over 36,000
tons .
. The second ground given by the Appellate Tribunal,
as we have said :ibove, is not quite clear to us. Learned counsel for the workmen have, however, explained
that what the Tribunal means is that as the production increases more and more the labour cost per ton
goes down; and thus there is a saving in labour cost
to the company and the workmen are entitled to share
in this progressive saving of labour cost. The principle
which is inherent in this explanation is in fact the
basis of progressive increase in production bonus rates
as production increases. This will be clear• from an
illustration, which we shall give just now.
This illustration is based as nearly as possible on the conditions in these two mills with this difference that we
have taken round figures for facility of multiplication;
the result will be more or less the same if actual
figures are taken. For the parposes of this illustration, we shall assume that the labour force and other
relevant factors remain constant. Let us start with
a basic production of 30,000 tons with a labour force
of 6,000 and an average wage of all kinds at Rs. llO/-
per mensem (Ex. E).
The total labour cost on this
basis for 30,000 tons per year comes to 79·2 lacs, giving labour cost per ton as Rs. 264/-.
Now, when production increases to 36,000 tons and a production bonus
of Rs. 25/- per year (Ex. E) is added to the wage,
labour cost for the extra production of 6000 tons
comes to Rs. I ·5 lacs.
The total labour cost, therefore,
for 36,000 tons is 80·7 lacs, which works out to slightly above Rs. 224/- per ton. When production goes
up to 42,000 tons, the labour cost increases by 3 lacs,
giving a labour outlay of 82·2 lacs; this works out to
just below Rs. 196 per ton. When production increases
(2) S.C.R.
SUPREME COURT REPORTS
1029
to 48,000 tons, the extra labour cost is 4·5 lacs, making a total of 83·7 lacs for 48,000 tons; thus the cost
per ton is slightly above Rs. 174/-. When production
goes up to 54-,000 tons, labour cost increases by 6 lacs,
giving a total cost of 85·2 lacs for 54,000 tons, w bi ch
works out to just below Rs. 158/- per ton. When
production reaches 60,000 tons, which is double the
basic production, the additional sum paid to labour in
bonus is 7·5 lacs and the total cost 86·7 lacs for 60,000
tons which works out to R.s. 144·5 per ton.
This is on
the basis of the production bonus above 36,000 tons
being kept at the same rate at which it is provided in
the scheme in this case. It will be clear, therefore,
that as production increases (if other factors are the
same, namely, labour force and machinery), there is a
progressive increase in the saving of labour cost.