# PRIVATE LTD., BOMBAY v. ITS WORKMEN & ANOTHER - **Citation:** [1959] Supp. 2 S.C.R. 1002 - **Court:** Supreme Court of India - **Decided:** 1956-10-06 - **Bench:** S. R. Das, N. H. Bragwati, s. K. DAS, P. B. Gajendragadkar, K. N. V\Tanohoo - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/private-ltd-bombay-v-its-workmen-another-1692 - **Pages:** 10 ## Headnote Industrial Dispute-Bonus-Full Bench formullt, if can be disregarded-Rehabilitation, claim for-Average life, calculation of -Method of Weighted Average-Exhmtsted Assets-Whether can be taken into account. The workmen claimed bonus for the years r952-53 and r953-54. The employers contended that on a proper working ./ ( (2) S.C.R. SUPREME COURT REPORTS 1003 out of the Full Bench formula there was no available surplus x959 and so no bonus was payable. The Tribunal held that the formula was not binding on it and on genuine considerations of The Indian Oxygen social justice it rejected the claim of the employers for rehabili- & Acetylene Co., tation and awarded bonus at the rate of t and r/3 annual basic Priuate Lid., wages for 1952-53 and 1953-54 respectively. Alternatively, the Bombay Tribunal found that in case the claim for rehabilitation had to v. be allowed there would be no available surplus in either of the Its Workmen relevant years. & Another Held that, the Tribunal was bound to give effect to the Full Bench formula and to allow the employer's claim for rehabilitation. A.C.C. Ltd., Bombay v. Their Workmen, [1959] .S.C.R. 925, followed. In the calculations made by the Tribunal on its alternative finding it had acted on correct principles. It had rightly taken into account the price level prevailing in 1956 and not merely that prevailing in the two bonus years. The amount of rehabilitation allowed in previous years had to be brought into account if it had not been used up but it was not shown that had not been in the present case. In calculating the average life of the buildings, machinery, etc., the method of weighted average was scientifically more accurate and gave a more accurate and realistic result. The rehabilitation costs of those assets which had spent their lives and were exhausted was also admissible in making calculations under the weightage method if in the relevant year such assets were in existence and use. Ci:vrL APPELLATE JURISDICTION: Civil Appeal No. 753 of 1957. Appeal by Special Leave from the Judgment and Order dated the 6th October, 1956, of the Industrial Tribunal, Bombay, in Reference (I. T.) Nos. 40 & 44 of 1956. C. K. Daphtary, Solicitor-General of India, N. A. Palkhivala, J. B. Dadachanji and S. N. Andley, for the appellant. D. H. Buch and 1. N. Shroff, for respondent No. I. 0. L. Dudhia and 1. N. Shroff, for respondent No. 2. Janardhan Sharma and B. P. Maheshwari, for the Intervener. 1959. May 5. The Judgment of the Court was delivered by 1004 SUPREME COURT REPORTS [1959] Supp. r959 GAJENDRAGADKAR, J.-This appeal by special leave Th 1 d-.- 0 arises from a bonus dispute between the Indian Oxy- &' A;,,;1;,., "g'.,n gen & Acetylene Co., Private Ltd., (hereafter call~d l'dvate Ltd, the appellant) and its workmen, the relevant years Bombay for the bonus claim being 1952-53 and 1953-54. This v. claim was made separately by the workmen exeluding 1~ ~~:~;;:n the members of the clerical staff as well as by the clerical staff and the two claims thus made were referred Gajendragadkar J. by the Bombay Government to the Industrial Tribunal for its adjudication. The cl1joim raised by the workmen excluding clerical staff was numbered as Hef. (I. T.) No. 40of1956, while that made by the clerical staff was numbered as Hef. (I. T.) No. 44 of 1956. Both categories of workmen will hereafter be described as the respondents in this judgment. The appellant is a private limited company incorporated in 1935 and it has its head office at Calcutta. Its business is to manufacture and sell oxygen and acetylene. It is a subsidiary of the British Oxygen Co. Ltd. It sells its products to the hospitals and nursing homes and in large quantities to industrial concerns for welding, cutting and blasting operations. It voluntarily paid bonus equal to two months' basic wages for both the years in dispute; but the respondents were not satisfied with the said payment and they made a claim for 1/3 of their total earnings for the two resp ## Text 1002 SUPREME COURT REPORTS [1959] Supp. I959 think, with due respect, that the High Court should M/s. sarupchand have, on a correct appraisal of the legal situation, Hukamchand & Co. ordered this relief, and we accordingly, after explain- . v. . ing the law applicable .to the case, order the approunion ;~India priate Income-tax Officer to hear and determine this & ' "' matter i.n the light of our observations. Hidayatullah J. We may set down here that the two partners of the firm to whom relief has been given by way of refund after the Appellate Assistant Commissioner's order undertook unconditionally to refund the amounts, before the matter is considered by the Income-tax Officer. We order that the two partners shall return the amounts in the manner to be ordered by the Income-tax Officer, before action is taken to determine the matter. I959 May 5. In the result, the appeal is allowed with costs throughout to be paid by respondents 2 and 3. The Union of India shall, however, bear its own costs. It may be noted that no separate costs were incurred by it either in this Court or in the Court below. It joined respondents 2 and 3 in the statement of the case filed in this Court and also appeared through the same counsel in both the Courts. Appeal allowed. THE INDIAN OXYGEN & ACETYLENE CO., PRIVATE LTD., BOMBAY v. ITS WORKMEN & ANOTHER (S. R. DAS, c. J., N. H. BRAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. V\TANOHOO, JJ.) Industrial Dispute-Bonus-Full Bench formullt, if can be disregarded-Rehabilitation, claim for-Average life, calculation of -Method of Weighted Average-Exhmtsted Assets-Whether can be taken into account. The workmen claimed bonus for the years r952-53 and r953-54. The employers contended that on a proper working ./ ( (2) S.C.R. SUPREME COURT REPORTS 1003 out of the Full Bench formula there was no available surplus x959 and so no bonus was payable. The Tribunal held that the formula was not binding on it and on genuine considerations of The Indian Oxygen social justice it rejected the claim of the employers for rehabili- & Acetylene Co., tation and awarded bonus at the rate of t and r/3 annual basic Priuate Lid., wages for 1952-53 and 1953-54 respectively. Alternatively, the Bombay Tribunal found that in case the claim for rehabilitation had to v. be allowed there would be no available surplus in either of the Its Workmen relevant years. & Another Held that, the Tribunal was bound to give effect to the Full Bench formula and to allow the employer's claim for rehabilitation. A.C.C. Ltd., Bombay v. Their Workmen, [1959] .S.C.R. 925, followed. In the calculations made by the Tribunal on its alternative finding it had acted on correct principles. It had rightly taken into account the price level prevailing in 1956 and not merely that prevailing in the two bonus years. The amount of rehabilitation allowed in previous years had to be brought into account if it had not been used up but it was not shown that had not been in the present case. In calculating the average life of the buildings, machinery, etc., the method of weighted average was scientifically more accurate and gave a more accurate and realistic result. The rehabilitation costs of those assets which had spent their lives and were exhausted was also admissible in making calculations under the weightage method if in the relevant year such assets were in existence and use. Ci:vrL APPELLATE JURISDICTION: Civil Appeal No. 753 of 1957. Appeal by Special Leave from the Judgment and Order dated the 6th October, 1956, of the Industrial Tribunal, Bombay, in Reference (I. T.) Nos. 40 & 44 of 1956. C. K. Daphtary, Solicitor-General of India, N. A. Palkhivala, J. B. Dadachanji and S. N. Andley, for the appellant. D. H. Buch and 1. N. Shroff, for respondent No. I. 0. L. Dudhia and 1. N. Shroff, for respondent No. 2. Janardhan Sharma and B. P. Maheshwari, for the Intervener. 1959. May 5. The Judgment of the Court was delivered by 1004 SUPREME COURT REPORTS [1959] Supp. r959 GAJENDRAGADKAR, J.-This appeal by special leave Th 1 d-.- 0 arises from a bonus dispute between the Indian Oxy- &' A;,,;1;,., "g'.,n gen & Acetylene Co., Private Ltd., (hereafter call~d l'dvate Ltd, the appellant) and its workmen, the relevant years Bombay for the bonus claim being 1952-53 and 1953-54. This v. claim was made separately by the workmen exeluding 1~ ~~:~;;:n the members of the clerical staff as well as by the clerical staff and the two claims thus made were referred Gajendragadkar J. by the Bombay Government to the Industrial Tribunal for its adjudication. The cl1joim raised by the workmen excluding clerical staff was numbered as Hef. (I. T.) No. 40of1956, while that made by the clerical staff was numbered as Hef. (I. T.) No. 44 of 1956. Both categories of workmen will hereafter be described as the respondents in this judgment. The appellant is a private limited company incorporated in 1935 and it has its head office at Calcutta. Its business is to manufacture and sell oxygen and acetylene. It is a subsidiary of the British Oxygen Co. Ltd. It sells its products to the hospitals and nursing homes and in large quantities to industrial concerns for welding, cutting and blasting operations. It voluntarily paid bonus equal to two months' basic wages for both the years in dispute; but the respondents were not satisfied with the said payment and they made a claim for 1/3 of their total earnings for the two respective years. That is bow the dispute arose between the parties. It appears in evidence that all the shares of the appellant (excepting two or three held by nominee share-holders) are held by the British Oxygen Co. Ltd. Evidence also shows that the appellant has been prospering and has been expanding at a rapid rate. In has capitalised its reserves in 1940, 1941, 1942, 1945, 1946, 1947 and 1949 with the result that the major portion of its capital is made up or'bonus shares. It bas made good profits for the year ending September 30, 1953, as well as for the year ending September 30, 1954. There is also no doubt that a large gap exists between the actual wages paid by it to its workmen and the living wage. It is on these allegations that the respondents made a claim for bonus of 1/3 of tqeir total earnings. (2) S.C.R. SUPREME COURT REPORTS 1005 The appellant pleaded that it was paying good z959 wages to the respondents and that under the formula - 0 h d . l . dd" Thelndian xygen t e respon ents were not entitled to c aim any a ic;;. Acetylene co., tional bonus for the relevant years. In fact, accordPrivate Ltd., ing to the appellant, if the formula was properly Bombay worked the bonus already v'oluntarily paid by it to v. the respondents could not have been claimed by them. Its Workmen & Another The tribunal has, however, rejected the appellant's _ case and has directed it to pay to the respondents Gajeiidragadkar J. bonus at the rate of 1/4 of the annual basic wages for 1952-53 and 1/3 of the said wages for 1953-54 (less the bonus already paid for these years). It has also directed that in calculating the amount of bonus overtime and dearness and other allowances should be excluded. This award has been made subject to the two conditions specified by it. It is the correctness of this award that is challenged by the appellant before us. The first point which the appellant has urged is against the finding of the tribunal that it was not bound to give effect to the Full Bench formula. In determining the available surplus the Tribunal has taken the view that the formula was not binding on it and that on considerations of social justice to which it has referred it was open to it to reject the claim of the appellant for rehabilitation. This question has been considered by us at length in the case of A. G. G. Ltd., Bombay v. Their Workmen (1) and we have held that in dealing with claims for bonus industrial tribunals must give effect to the formula. We have also indicated. how the calculations under the formula should be made in such disputes. In view of the saiu decision we must hold that the Tribunal was in error is not granting to the appellant its claim for rehabilitation. According to the calculations made by the Tribunal, without providing for any rehabilitation (Ex. TA) it has reached the conclusion that the available surplus for the years 1952-53 and 1953-54 respectively would be Rs. 6,14,830/- and Rs. 12,16,120/-. It is on the basis of this available surplus that the Tribunal has made its award. However, the Tribunal has found (r) [1959] S.C.R. 925. 1006 SUPREME COURT REPORTS [1959] Supp. '959 alternatively that in case the claim for rehabilitation Th I d-. - 0 made by the appellant has to be awarded, then there B n ian xygen Id . bl .;;. Acetylene co., wou be no ava1la e surplus for both the relevant 1'1ivate Ltd., years. This is shown by the calculations made by it Bombay under Ex. TB. Thus it would be clear that on the v. alternative finding made· by the Tribunal the appel11' Wo•kmrn !ant would be entitled to succeed and the award & Another under appeal would have to be set aside. Gojendrngadkar .J. It is, however, urged before us by the respondents that the calculations made by the Tribunal on its alternative finding are not correct. In other words, the respondents seek to support the final award passed by the Tribunal on.the ground that some of the conclusions reached by the Tribunal in making its calculations on the alternative basis are erroneous. The first point which has been urged by the respondents in this behalf is that the Tribunal was wrong in taking into account the price level prevailing in 1956. The argument is that the price level prevailing in the two bonus years alone should have been taken into account. We have considered this point in A. C. C.'s case (1) and we have held that it is inexpedient to confine the relevant decision of the Tribnnal solely to the price level prevailing in the bonns years. Therefore the objection that the Tribunal has committed an error in this matter must be rejected. Then it is urged that in making its calculations the tribunal has not applied its mind to the fact that, though the appellant bas been allowed substantial amounts by way of rehabilitation in previous awards, those amounts are not brought into account in considering its claims for rehabilitation. It appears that the tribunal was inclined to take the view that once an allowance is made to the employer by way of rehabilitation of plant and machinery, it is not open to the tribunal to enquire what he had done with the said amount. In the A. C. C.'s case (1) we have held that if an amount for rehabilitation is allowed to an employer and it appears that during the relevant year the said amount was available to him then in subsequent years the said amount will have to be taken into account unless it is shown that in the meanwhile (1) [1959] S.C.R. 925. (2) S.C.R. SUPREME COURT REPORTS 1007 it had been used for the purpose of rehabilitation. So we I959 would accept the respondents' contention that the aph r a-· - 0 pellant is bound to take into consideration the amount T&e A;et;l:ne xb!.en previously allowed to it by way of rehabilitation. Private Ltd., ' There is, however, one point which must be borne Bombay in mind in considering this plea. In· the previous v. awards to which our attention was drawn by the resIts Workmen & Another pondents, 20% of the net profits appear to have been _ awarded to the appellant on a rough and ready basis Gajendragadkar J. by way of provision for rehabilitation as well as expansion. It is significant that the award of the said amount expressly refers to repairs, replacement, modernisation and reasonable expansion. It is now well settled that the employer is not entitled to claim a prior charge under the formula for any item of expansion but the awards previously passed between the appellant and its workmen seem to have allowed for a claim for expansion as a prior charge, and that fact cannot be ignored in dealing with the respondents' present contention. But apart from this aspect of the matter, it is clear that the appellant has brought into account one-half of its general reserve as on September 30, 1953, and September 30, 1954, respectively, and these amounts are Rs. 5,51,363 and Rs. 3,95,376. In view of this fact it is difficult to accept the argument that the amounts allowed to the appellant by way of rehabilitation in the previous years had not been brought into account. We would like to add that this point had not been taken before the tribunal, and may be .. could not be taken before it, because the tribunal has held that the employer could not be called upon to bring into account the said amount. Then it is urged that in working out the figures of rehabilitation the tribunal \}'as in error in accepting the appellant's claim. The award shows that the tribunal was very favourably impressed by the evi- ~ dence given by Mr. Saigal and Mr. Basak on behalf of the appellant. It appears that in arriving at the average life of the buildings, machinery, etc., Mr. Basak has adopted the method of weighted average. " This method is a development of the concept of the 1008 SUPREME COURT REPORTS [1959] Supp. '959 ordinary arithmetic mean" (1). Under this method, "in Th I d-. - 0 general terms, a set of quantities 'X' is given, to each 6 n ian xygen f h" h · tt h d · h 'W' d h ' h d & Acetylene co .. o w IC 1s a ac e a we1g t , an t e weig te Private Ltd., arithmetic mean is obtained as the summation of ' W ' Bombay · x 'X' divided by the summation of' W '". There is v. no doubt that this method is scientifically more accuIts wo,kmen rate and gives a more accurate and reRlistic result in & Another determining the average life of the assets. Let us Gajend.agadkar J. illustrate this method by taking an example given by the tribunal itself: Gast of Asset. Rs. 5 8 300 313 Life. 1 year 2 years 10 years ----- 13 years Annual replacement cost required. Rs. 5 4 30 39 The average life calculated by Mr. Basak according to the weighted average metho.d is 1'rr'if- = 8·02 years, while the arithmetical average of the figures in column two is JI