# r959 Shalimar W oYks Limited v. Their Workmen Wanchoo ], I9J9 2'day 8

- **Citation:** [1960] 1 S.C.R. 161
- **Court:** Supreme Court of India
- **Decided:** 1957-05-30
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r959-shalimar-w-oyks-limited-v-their-workmen-wanchoo-i9j9-2-day-8-1737
- **Pages:** 7

## Headnote

Industrial Dispute-Award by consent-Interim increment of
wages in lieu of fixation of wage structure-Such award, if open to
challenge-Wage structure of piece-rate worlmien-JVhether entitled
to annual increment-Machinery, land, building on lease-Rehabilitation charges, if allowable-Bonus-Calculation of available siirplus.
The appellant was the lessee under Praga Industries and
took on lease buildings and machinery for five years with option
of renewal. The subject matter of dispute for arljudication was
with regard to the questions about (1) the quantum of bonus
payable to the workmen for the year 1954, and (2) fixation of
scale of wages with graded annual increments for different
categories of workmen.
,
In view of the .fact that the· lease in its favour was due to
expire shortly, the appellant had suggested to the Tribunal that
the question of classifying the workmen into skilled and unskilled
workmen and providing for systematic grades of pay with increments may conveniently be deferred to a future date; the
21
r959
Shalimar W oYks
Limited.
v.
Their Workmen
Wanchoo ],
I9J9
2'day 8
162
SUPREME COURT REPORTS [1960(1))
z959
respondents agreed to this proposal and so both the parties
represented to the Tribunal that they wouid be satisfied if an
Tiu .l\Ja1iagc111ent interiln order was n1adc providint;" for the increment in the wages
of Praga Industries of the \vork111en. Accordingly, tl1e 'fribunal refrained from fixing
Li11litcd.
any wage structure, and as an interim measure, ordered increment
v.
of wages at 4 per cent. and directed the appellant to grant such
The lVor!1ers
an increment every year until the workmen \vere classified and
their pay scales \Vere introduced to reach a particular maximum.
Gajendragadkar ].
The above increment applied to the monthly, time and piece
rated workmen.
•
The appellant challenged the propriety of the course adopted
by the Tribunal and contended that the Tribunal was asked to
fix a wage structure, but instead it had passed merely·an interim
order \Vhich \Vas irregular.
The appellant also contended that the claim for the additional
bonus for the year 1954 by the workmen was not justified as the
financial position of the appellant was not satisfactory, and it was
in debts and had not even paid rent due to the lessor, and in fact,
had ploughed back the amount of rent due into the business as
working capital. The appellant also resisted the direction for
pay1ncnt of bonus on the ground that the award involved an
unfair distribution of the available surplus and claimed rehabilitation charges for the leased property an<l machinery and interest
on the amount of unpaid rent.
Held, that \vherc the parties the1nsclvcs represented to the
Tribunal that the question of classifying respondents into skilled
and unskilled \vorkrncn and providing for systematic grades of
pa:y \Vith incrcn1cnts may be conveniently deferred to a future
date and they \vould be satisfied 'vith a reasonable interim order
providing for increment in the \\'ages of the \vorkn1en, it \\·as not
open to the parties to challenge the a\Yard based on such representation at a later stage.
'l'hat although generally a \\'age structure \vith annual
incrc1ncnts '"·as not provided for piece rate \\·orkcrs, \vho are paid
for the \VOrk they do, the rate of \vages fixed for such \Yorkers
couhl ll'gitimatcly he revised on a proper case hcing 1nade out in
that behalf.
Held further, that \vhere an amount earmarked as due for
payn1cnt for so1nc other purpose was utilised as \\·orking capita],
it should carry interc:-t, even though sho,vn as liability in the
profit and loss ar:count and the san1c should be taken into
consideration for arriving at the surplus available for the purposes
of bonus.
'fhat no prior charges for rehabilitation could be allo\ved
\vherc land, machinery and building for business \vere taken on
lease.
\Vhere ne\v rnachinery \vas purchased tbe amount of
rehahilitation was covered by the depreciation allowerl.
C1v1L APPELLATE
JuRISI

## Text

S.C.R.
SUPREME COURT REPORTS
161
view of the company's willingness to take them back.
The appeal of the workmen on the question of reinstatment fails and is hereby dismissed.
We may,
however, make it clear that payment made pursuant.
to the order of this Court will not in any event be
refundable or adjustable towards the future wages
of those workmen who will be reinstated by the
company.
BGth the company and the workmen have raised
otqer points in their respective grounds of appeal;
but as they have not been pressed before us we· need
not say anything \vith respect to them. In these
circumstances we are of opinion that both the parties
will bear their own costs of this Court.
Appeal No. 317 allowed.
Appeal No. 318 dismissed.
THE MANAGEMENT OF PRAGA INDUSTRIES
LTD., COIMBATORE
v.
THE WORKERS
(B. P. SINHA, P. B. GAJENDRAGADKAR and
K. N. WANCHOO, JJ.)
Industrial Dispute-Award by consent-Interim increment of
wages in lieu of fixation of wage structure-Such award, if open to
challenge-Wage structure of piece-rate worlmien-JVhether entitled
to annual increment-Machinery, land, building on lease-Rehabilitation charges, if allowable-Bonus-Calculation of available siirplus.
The appellant was the lessee under Praga Industries and
took on lease buildings and machinery for five years with option
of renewal. The subject matter of dispute for arljudication was
with regard to the questions about (1) the quantum of bonus
payable to the workmen for the year 1954, and (2) fixation of
scale of wages with graded annual increments for different
categories of workmen.
,
In view of the .fact that the· lease in its favour was due to
expire shortly, the appellant had suggested to the Tribunal that
the question of classifying the workmen into skilled and unskilled
workmen and providing for systematic grades of pay with increments may conveniently be deferred to a future date; the
21
r959
Shalimar W oYks
Limited.
v.
Their Workmen
Wanchoo ],
I9J9
2'day 8
162
SUPREME COURT REPORTS [1960(1))
z959
respondents agreed to this proposal and so both the parties
represented to the Tribunal that they wouid be satisfied if an
Tiu .l\Ja1iagc111ent interiln order was n1adc providint;" for the increment in the wages
of Praga Industries of the \vork111en. Accordingly, tl1e 'fribunal refrained from fixing
Li11litcd.
any wage structure, and as an interim measure, ordered increment
v.
of wages at 4 per cent. and directed the appellant to grant such
The lVor!1ers
an increment every year until the workmen \vere classified and
their pay scales \Vere introduced to reach a particular maximum.
Gajendragadkar ].
The above increment applied to the monthly, time and piece
rated workmen.
•
The appellant challenged the propriety of the course adopted
by the Tribunal and contended that the Tribunal was asked to
fix a wage structure, but instead it had passed merely·an interim
order \Vhich \Vas irregular.
The appellant also contended that the claim for the additional
bonus for the year 1954 by the workmen was not justified as the
financial position of the appellant was not satisfactory, and it was
in debts and had not even paid rent due to the lessor, and in fact,
had ploughed back the amount of rent due into the business as
working capital. The appellant also resisted the direction for
pay1ncnt of bonus on the ground that the award involved an
unfair distribution of the available surplus and claimed rehabilitation charges for the leased property an<l machinery and interest
on the amount of unpaid rent.
Held, that \vherc the parties the1nsclvcs represented to the
Tribunal that the question of classifying respondents into skilled
and unskilled \vorkrncn and providing for systematic grades of
pa:y \Vith incrcn1cnts may be conveniently deferred to a future
date and they \vould be satisfied 'vith a reasonable interim order
providing for increment in the \\'ages of the \vorkn1en, it \\·as not
open to the parties to challenge the a\Yard based on such representation at a later stage.
'l'hat although generally a \\'age structure \vith annual
incrc1ncnts '"·as not provided for piece rate \\·orkcrs, \vho are paid
for the \VOrk they do, the rate of \vages fixed for such \Yorkers
couhl ll'gitimatcly he revised on a proper case hcing 1nade out in
that behalf.
Held further, that \vhere an amount earmarked as due for
payn1cnt for so1nc other purpose was utilised as \\·orking capita],
it should carry interc:-t, even though sho,vn as liability in the
profit and loss ar:count and the san1c should be taken into
consideration for arriving at the surplus available for the purposes
of bonus.
'fhat no prior charges for rehabilitation could be allo\ved
\vherc land, machinery and building for business \vere taken on
lease.
\Vhere ne\v rnachinery \vas purchased tbe amount of
rehahilitation was covered by the depreciation allowerl.
C1v1L APPELLATE
JuRISIHCTION: Civil
Appeal
.No. 226 of 1958,
S.C.R.
SUPREME COURT REPORTS
163
Appeal by special leave· from the award dated
May 30, 1957, of the Labour Court, Coimbatore, in
Industrial Dispute No. 89 of 1955.
r959
The Management
of Praga Industries
A. V. V·iswanatha 8a8tri and T. V. R. Tataclwri,
the appellants.
for
Limittd.
M. S. K. Sastn'., for the respondents.
1959.
Mav 8.
The Judgment of the Court was
delivered by·
v,
The II' orkers
GAJENI>RAGADKAR J.-'l'his appeal by special leave Gaimdragadkat ].
arises out of an industrial dispute between the l\Ianagc-
-
ment of Praga Industries (P) Ltd., (hereafter called the
appellant) and its workmen (hereafter called the rPs·
pondents). The dispute which was referred hy the
Government of Madras for adjudication to tlw fodnstrial Tribunal at Coimbatore covered four items. Two
of them were settled by compromise between the
parties and the remaining two were the subject-mat1t~r
of adjudication. They are the qtwstion about the quantum of bonus payable to the respondents for the year
1954 and the question of fixing scales of wages with
graded annual increments for different categories of
respondents. The tribunal has ordPred thP appellant
to pay to the respondents by way of bonus three
months' wages.
The appellant had alrnady paid one
month's bonus and so it had heen directed to pay
bonus for two months mor('. In regard to the fixation
of the wage structure the tribunal lrns r~frained from
fixing any wage strnctnre at present and as an interim
measure it has ordered the appellant to gmnt all its
workmen an increnwnt at the rate of 4'\, and to continue to gmnt such an iucrernent ever~· year until they
are classified and their pay scale is introduced to rPach
a particular maximum. It is these two directions in
the award which are challenged by the itppellant in
the present appeal.
The appellant is a. private limited company carrying
on the business of manufacturing nut and plastic buttons in Coimbatore as a lessee under Praga Industries,
Coimbatore, which is a partnership firm.
The appeallant took on lease from the said firm land, buildings
164
SUPREME COURT REPORTS [1960(1)]
'959
and machinery belonging to it under an indenture of
lease executed on January 15, 1954.
Under this deed
The Managemc~t a monthly rental of Rs. 5,000 has to be paid by the
of Pmga Indn.,fnes
]j
,,
fi
h 1
·
j
j
j
b
Limited.
appe ant iOr 1ve years; t e ease me uc es a c a use y
v.
which a right of renewal is given to the appellant for
The W or km
a period of three years.
The appellant's case was that its financial position
Gajendragadkar f. was not satisfactory ; that it had to borrow an overdraft from the Indian Bank Limited, Coimbatore,
under an overdraft acr.ount which left the appellant a
debtor to the said Bank to the extent of Rs. 48,414 in
1954. The appellant had also not paid the rent due to
the lessor for the said year and had in fact ploughed
back the said amount of rent of Rs. 60,000 into the
business of the appellant as working capital.
According to the appellant, under the ·Full Bench formula t.he
respondents' claim fur additional bonus was not
justified.
On the other hand the respondents urged that the
appellant was making large profits and their claim for
bonus was folly justified. The respondents also alleged that it was high time that a proper wage structure
was fixed by the tribunal guarnntoeing to the respondents the payment of fair wages wjth fair annual
increments with a view to reach specified maximums.
On behalf of the appellant Mr. Viswanatha Sastri
has challenged the propriety of the course adopted by
the tribunal in making an interim order about the
increment.'; in wr1ges of the appellant's employees. The
tribunal \Y:cs asked to fix a warre structure unrler issue
No. a.
lustoad it has come o~t with an interim order
\Yhieh is very· irregular, sap Mr. Sastri.
ln our
opinion this argument is wholly untenable. It is clear
from the award tlrnt the appellant itself suggested to
the tribunal that the lease in its favour was due to
expire within a year and a half and that the question
of classifying the respondents into skilled and unskilled workmen and providing for systematic grades of
pay with increments may be conveniently deferred to
a future date. The respondents agreed to this suggestion, and both parties represented to the tribunal that
they would be satisfied if a reasonable interim order
-
S.C.R.
SUPRE~IE COURT REPORTS
165
was made providing for increment in the wages of the
r959
respondents. That being so, it is not open to the
appellant now to contend that the tribunal should fnPie Man1agdem1ent
•
.
o
raga n us ries
have fixed a wage structure and not passed an mterun
Limited.
order.
v.
On the merits of the interim order the only objection
The tt'orkers
which has been raised by the appellant before us is in
. -
respect of the application of the said order.to piece-rate Ga;endragadkar f.
workers. It appears that on bctober 25, 1955, an
agreement had been reached between the appell11nt
and the respondents and by els. 5 and 6 of this agreement it was settled that an annual increment of 4% of
the basic pay for all the monthly-rated and time-rated
employees should be given, and that the revised wages
should come into force from November 1, 1955. That
being so, Mr. Sastri has not challenged the interim
order passed by the tribunal in respect of the monthlyrated and the daily-rated workmen.
His grievance is
that the tribunal was in error in making a similar
order in regard to the piece-rated workmen.
It is true that generally annual increments in the
wages of piece-rated workers are not provided. These
workers are paid by the work which they do though
the rates fixed for such payment may he legitimately
increased in proper cases; usually a wage structure
with annual increments is not provided for such piecerated workers. It is on thi'l aspect of the matter that
l\Ir. Sastri has laid considerable emphasis. On the
other hand, Mr. Joseph Nejedly who gave evidence for
the appellant frankly admitted that piece-rate wages
had been fixed in 1947 and though there were some
changes in them they were insignificant.
He also
cor.ceded that since 1947 the cost of living had gone
up in Coimbatore. These statements make it clear that
a case for revising the rates of wages payable to piecerated workers has been made out asmuch as in the
case of monthly-rated or daily.rated workmen. Therefore we think that the appellant cannot successfully
challenge the direction issued by the tribunal in regard
to the increment of 4% in the case of rates of wages
fixed for piece-rated workers. We would, however, like
to modify the interim order in regard to piece-rated
166
SUPREME COURT REPORTS [1960(1)]
'959
workers by directing that though their rates of wages
should be increased at the rate of 4% they should not
;Phe Management have the benefit of the annual increment at the said rate
o1
raga lnduslrzes
.
k
l
.
.
Limited.
until all the wor ers are are c ass1fie<l and their pay
v.
scales are introduced. In other words, we confirm this
The Workm
part of the award with the only modification that
.. -
.
future annual increment at the rate of4% should not
Ga;endrngad•ar J. be granted to the piece-rated workers.
The mixt contention 1raised by Mr. Sastri is in regard
to the order made by the award directing the appellant
to pay two months' additional bonus to the respondents.
It is now well settled that the claim for bonus must
be decided by the application of the :Full Bench formula.
In the application of the formula there are only two
items which have given rise to a controversy in the
present proceedings. The appellant claimed that he
should be
allowed
4%
interest on Rs. 60,000
either on the basis that this interest would be payable
to the lessor since default had been commited in the
payment of rent due to him; or on the basis that the
said amount had been utilised as working capital and
so should carry 4% interest. In our opinion the latter
claim is well founded and must be upheld.
There is
no doubt that the monthly rent of Rs. 5,000 payable to
the lessor, though shown as a liability in the profit and
loss account, has in fact not been paid to the lessor ;
and it is. also clear that the whole of this amount has
in fact been used as working capital by the appellant.
Therefore its claim to have interest at 4% on this
amount cannot be resisted by the respondents.
IT'he
tribunal was inclined to dissect this claim month by
month and to consider the question of return on the
amount month by month. \Ve do not think that it is
necessary to adopt such a course in the present case.
The other claim made by the appellant is in respect
of improvement and modernisation of its machinery.
The appellant claimed Rs. 20,000 under this head.
This claim has been rejected by the tribunil, and we
think rightly,. As we have already observed, the
appellant has taken the land, machinery and buildings
for its business as a lessee from the Praga Industries,
Coimbatore, and so the appellant cannot claim to
.___
S.C.R.
SUPREME COURT REPORTS
167
rehabilitate any of the said machinery and plant. If
z959
the appellant has purchased new machinery in ·1954
-
the amount of rehabilitation which the appellant can 1
Tphe Man1
agdem1enl
I .
.
f
h
'd
h'
·
.,
1954 . o
raga n us ries
c aim m respect o t e sa1
mac mery ior
IS
Limited.
covered by the depreciation allowed to the appellant.
v.
This position is not disputed by Mr. Sastri. Therefore - The Worliers
we are satisfied that the appellant is not entitled to
. -
claim Rs. 20,000 as a prior charge for rehabilitation. Ga;endragadkar f.
If the Full Bench formula is worked out in the light
of these findings there can be no doubt that the tribunal
was justified in directing the appellant to pay additional
bonus for two months.
It is common ground that,
taking the net profit at Rs. 42,726, if the depreciation
and the bonus paid for 1953 are added back, the figure
of gross profit would be Rs. 69,546.
From _this figure
if the notional normal depreciation, income-tax, return
at 6% on paid-up capital and return at 4% on working
capital of Rs. 60,000 are deducted, it still leaves a
balance of over Rs. 26,000. The three months' bonus,
including one month's bonus already paid by the
appellant, awarded by the tribunal is in the neighbourhood of Rs. 22,000 but in respect of this bonus the
appellant would be entitled to a rebate of income-tax
to the extent of Rs. 12,300.
That being so, it cannot
be said that the order passed by the tribunal involves
an unfair distribution of the available surplus.
In the result the appeal substantially fails and the
award passed by the tribunal is confirmed with the
modification as to the foture annual increments in
regard to piece-rated workers.
In the circumstances
of this case we direct that the parties should bear
their own costs.
Appeal substantially dismissed ;
award partially modified.