# SUPREME COURT REPORTS [1959] Supp. M/S. LIPTON LIMITED AND ANOTHER v. THEIR EMPLOYEES

- **Citation:** [1959] Supp. 2 S.C.R. 150
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeals Nos. 713 to 715 of 1957
- **Bench:** Syed Jafer Imam, S. K. Das, J. L. Kapur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-court-reports-1959-supp-m-s-lipton-limited-and-another-v-their-employees-1598
- **Pages:** 31

## Headnote

Industrial Dispute-Bonus-Fixation of grades and scales of
pay-Co1npany with head office in England and branch in IndiaEmployces in the Delhi Office-Claim to bonus on the basis of global
profits-Revision of wage str·ucture-Principle-Bonus and Wage,
distinction-Jurisdiction of the Tribunal to make an award in
respect of employees of Delhi office employed outside State of
Delhi.
,
The appellant company was incorporated in the United'
Kingdom, with its registered office in London and its business in
the United Kingdom consisted of stores and groceries, including
tea which represented only about ro% of its business there. Its
operations in India were carried on by a branch with its head
office in Calcutta, and the business there consisted mainly in the
sale of "packeted" tea throughout India. The Delhi office of its
Indian branch controlled the salesmen and other employees
employed in the Punjab, Delhi State, Rajasthan and. Uttar
Pradesh, but had no connexion with the export side of the business.
The Indian Branch had no subscribed capital nor any
reserves, and the capital used in India was money advanced from
the company's fund in England.
The dispute
between the
respondents who were the
employees of the Delhi office and the company related, inter
alia, to (1) fixation of grades and scales of pay; (2) whether
retrospective effect should be given to the new scales of pay ;
and (3) bonus for the year r95r. The respondents contended
that the total global profits of the appellant company should
form the ba3is for determining the claim to bonus on the ground
that it was an integrated industry which had trading activities in
various countries. The Tribunal found that the Indian workmen
did not in any way contribute to the profits which the appellant
•company derived from its ex-India business, that the Indian
branch rnaintain,ed separate accounts which had been audited and
accepted by the Income-tax authorities as showing the profit anil
loss of the Indian branch of the business, and"that though, at the
relevant time, the appellant company was one legal entity and
the capital of the Indian branch came from London, the Indian
branch was treated as a separate entity for all practical purposes.
The Tribunal also found that for 1951 there was no available surplus for distribution as bonus to the employees in India. In the
matter of fixation of grades and scales of pay, the Tribunal found
that the existing scale of wages of the Delhi employees was far
below the standard of a living wage, and for fixing the wage level
it took into consideration the company's global capacity to pay
and came to the conclusion that having regard to its global
(2) S.C.R. SUPREME COURT REPORTS
151
resources the company was financially able to bear a slightly
z959
higher wage structure.
Accordingly, the Tribunal revised the
grades by giving. an increase of 20% to all workers.
As to the
Lipton Ltd.
date from which the revised grades were to take effect, the
v.
Tribunal directed that they should have retrospective effect Their Employees
from January r, 1954, instead of January l, 1953, as claimed by
the Union.
The appellant contended that the Tribunal erred in taking
into consideration the global financial resources of the company
in support of an increase in wages while holding that the Indian
branch was a separate entity for the payment of bonus, that the
financial resources of the Indian branch did not show any capacity to pay higher wages, and that. in any case, there was no
reliable evidence to show that the existing wage structure required revision if it was compared to the wage structure in similar
industries in the Delhi region.
A question was also raised as to
whether the Industrial Tribunal, Delhi, had jurisdiction to make
an award in respect of employees of the Delhi office who were
employed outside the State of Delhi.
Held: (1) that on the finding that the Delhi office controlled
all its employees in the matter of appointment, leave, transfer,
supervisio

## Text

_Characters 0–39,843 of 68,428. This is a partial read: ask again with offset=39843 for what follows._

I959
February 2.
150
SUPREME COURT REPORTS [1959] Supp.
M/S. LIPTON LIMITED AND ANOTHER
v.
THEIR EMPLOYEES
(SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.)
Industrial Dispute-Bonus-Fixation of grades and scales of
pay-Co1npany with head office in England and branch in IndiaEmployces in the Delhi Office-Claim to bonus on the basis of global
profits-Revision of wage str·ucture-Principle-Bonus and Wage,
distinction-Jurisdiction of the Tribunal to make an award in
respect of employees of Delhi office employed outside State of
Delhi.
,
The appellant company was incorporated in the United'
Kingdom, with its registered office in London and its business in
the United Kingdom consisted of stores and groceries, including
tea which represented only about ro% of its business there. Its
operations in India were carried on by a branch with its head
office in Calcutta, and the business there consisted mainly in the
sale of "packeted" tea throughout India. The Delhi office of its
Indian branch controlled the salesmen and other employees
employed in the Punjab, Delhi State, Rajasthan and. Uttar
Pradesh, but had no connexion with the export side of the business.
The Indian Branch had no subscribed capital nor any
reserves, and the capital used in India was money advanced from
the company's fund in England.
The dispute
between the
respondents who were the
employees of the Delhi office and the company related, inter
alia, to (1) fixation of grades and scales of pay; (2) whether
retrospective effect should be given to the new scales of pay ;
and (3) bonus for the year r95r. The respondents contended
that the total global profits of the appellant company should
form the ba3is for determining the claim to bonus on the ground
that it was an integrated industry which had trading activities in
various countries. The Tribunal found that the Indian workmen
did not in any way contribute to the profits which the appellant
•company derived from its ex-India business, that the Indian
branch rnaintain,ed separate accounts which had been audited and
accepted by the Income-tax authorities as showing the profit anil
loss of the Indian branch of the business, and"that though, at the
relevant time, the appellant company was one legal entity and
the capital of the Indian branch came from London, the Indian
branch was treated as a separate entity for all practical purposes.
The Tribunal also found that for 1951 there was no available surplus for distribution as bonus to the employees in India. In the
matter of fixation of grades and scales of pay, the Tribunal found
that the existing scale of wages of the Delhi employees was far
below the standard of a living wage, and for fixing the wage level
it took into consideration the company's global capacity to pay
and came to the conclusion that having regard to its global
(2) S.C.R. SUPREME COURT REPORTS
151
resources the company was financially able to bear a slightly
z959
higher wage structure.
Accordingly, the Tribunal revised the
grades by giving. an increase of 20% to all workers.
As to the
Lipton Ltd.
date from which the revised grades were to take effect, the
v.
Tribunal directed that they should have retrospective effect Their Employees
from January r, 1954, instead of January l, 1953, as claimed by
the Union.
The appellant contended that the Tribunal erred in taking
into consideration the global financial resources of the company
in support of an increase in wages while holding that the Indian
branch was a separate entity for the payment of bonus, that the
financial resources of the Indian branch did not show any capacity to pay higher wages, and that. in any case, there was no
reliable evidence to show that the existing wage structure required revision if it was compared to the wage structure in similar
industries in the Delhi region.
A question was also raised as to
whether the Industrial Tribunal, Delhi, had jurisdiction to make
an award in respect of employees of the Delhi office who were
employed outside the State of Delhi.
Held: (1) that on the finding that the Delhi office controlled
all its employees in the matter of appointment, leave, transfer,
supervision, etc., whether employed in Delhi State or outside
it, the Industrial Tribunal, Delhi, had jurisdiction to adjudicate on the dispute between the appellant company and its
workmen of the Delhi office, as the Delhi State Government was
the appropriate Government within the meaning of s. 2 of the
Industrial Disp\ltes Act, 1947. and under s. 18 of the Act the
award made by the Tribunal was binding on all persons employed
in the Delhi office ;
(2) that in the circumstances in which the appellant company operated in India at the relevant time and on the finding
that no part of the profits made in India was diverted to England
and that the Indian business depended on . its own trading
results, the global profits of the company could not be made the
basis for awarding bonus to Indian workmen, and that the latter
can claim bonus only if there was an available surplus of profits
of the Indian business ;
.
Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur,
[1955] l S.C.R. 991, Ganesh Flour Mills Co. Ltd v. Employees of
Ganesh Flour Mills, A.LR. 1958 S.C. 382, Burn and Co., Calcutta
v. Their Employees, [1956] S.C.R. 781 and Barad~ Borough
Municipality v. Its workmen, [1957] S.C.R. 33, referred to.
(3) that in determining the question of a revision of the
wage scale, the relevant considerations were: (r) whether the
existing wage structure required revision by reason of its being
below the standard of living wage, and (2) whether the industry
could bear the additional burden of an increase in the wage scale
on the basis of industry-cum-region by reason bf its financial
resources in India; that judged by the considerations stated
I959
Lipton Ltd.
v.
Their Employees
152
SUPREME COURT REPORTS [1959] Supp.
above, it could not be said that the Tribunal erred in revising the
wage structure on the basis of the evidence adduced before it ;
and that the increase in the wages was not beyond the financial
resources of the company as disclosed by its trading results in
India.
There is a distinction between bonus and wage. Bonus
comes out of profits and is paid, if after meeting prior charges,
there is an available surplus.
Wages primarily rest on contract
and are determined on a long term basis and are not necessari1y
dependent on profits made in a particular year.
Crown Aluminium Works v. Their Workmen, [r958] S.C.R.
65r and Express Newspapers (Private) Ltd. v. The Union of
India, [r959] S.C.R. r2, 1"elied on.
(4) that the new scales of pay should· be brought into effect
from November r, r955, instead of January I, r954, as directed
by the Tribunal.
CIVIL APPELLATE JURISDICTION:
Civil Appeals
Nos. 713 to 715 of 1957.
Appeals by special leave from the judgment and
order dated May 25, 1956, of the Labour Appellate
Tribunal of India (Lucknow Bench) in Appeals Nos.
III-272, 282 and 327 of 1955, arising out of an
Award dated August 18, 1955, of the Additional
Industrial Tribunal, Delhi.
M. 0. Setalvad, Attorney-General for India, B. Sen
and S. N. Mukherjee, for the appellants.
A. V. Viswanatha Sastri and Janardan Sharma, for
the respondents.
1959. February 2.
The Judgment of the Court
was delivered by
s. J<. Das J.
S. K. DAS, J.-These are three appeals by special
leave. The appellant in' all the three appeals is a
company called Messrs. Lipton Ltd,., London, having
an office at Asaf Ali Road, New Delhi (hereinafter
referred to as the Lipton, Ltd.).
The respondents
are the employees of the Delhi office of the said
Lipton, Ltd. represented by the Lipton Employees
Union (hereinafter referred to as the Union) .. On April
14, 1958, a petition was filed on behalf of the appellant for an amendment of the cause title of the three
appeals, wherein it was stated that as a matter of
internal arrangement the Board of Directors of the
(2) S.C.R. · SUPREME COURT REPORTS
153
Lipton Ltd., London, decided to separate the export
side of its business from its internal trade in respect of
its branch in India and on April 4, 1957, a separate
sterling company called Lipton (India) Ltd., was
incorporated in the United Kingdom and this new
Company took over the internal side of the business in
India on and from January 5, 1958, but the export
side of the business continued to be a branch of the
Lipton Ltd., London. Pursuant to the aforesaid
arrangement, the employees of the Delhi office of the
Lipton, Ltd., were notified of the formation of the new
Company and on and from January 5, 1958, their
services were transferred to Lipton (India) Ltd., on
condition that their services would be treated as continuous, uninterrupted and on the same terms as
before. On •the aforesaid statements, the appellant
made a prayer that the cause title of the three appeals
should be amended by substituting Lipton (India) Ltd.
in place of Lipton, Ltd.
We directed that Lipton
(India) Ltd. be added as one of the appellants without
prejudice to either party on the merits of the case.
'l'wo of the appeals (Civil Appeals Nos. 713 and 714
of 1957) were consolidated by an order of this Court,
and they raise certain common questions with regard
to (1) fixation of grades and scales of pay of the
respondent-employees and (2) bonus for the year 1951.
The third appeal (Civil Appeal No. 715 of 1957) raises
a somewhat different question with regard to overtime
payment and is directed against an order of the Additional Industrial Tribunal, Delhi, dated October 15,
1955, by which the Tribunal made a modification in
its award dated August 18, 1955, in respect of overtime payment. It will be convenient if Civil Appeal
No. 715 of 1957 is dealt with separately from the
other two appeals.
It is necessary now to state very briefly some of the
facts which have given rise to these three appeals.
The Lipton, Ltd., is a company incorporated in
England having its registered office in London. Its
business in the United Kingdom consists of stores and
groceries, including tea which represents only about
20
I959
Lipton Ltd.
v.
Their Employees
S. K. Dfls J.
154
SUPRE¥E COURT REPORTS [1959] Supp.
I959
10% of its business there. Its operations in India are
carried on by a branch with its head office in Calcutta.
Lipton Ltd.
This branch, which may be conveniently called the
Their ;;,,ployees Indian branch, has been operating in this country for
more than 60 years. The company is principally
s. K. Das J.
interested in the sale of "packeted" tea throughout
India together with small sales of imported tinned
milk and also in the export of tea to all parts of the
world. The Lipton, Ltd., does not own any tea gardens
in India and has no financial interest in the producing
side of the industry. All the teas which are sold in
India or which are exported are purchased from
producers in India, either through public auctions in
Calcutta and Cochin or by private contract. It has
factories in Calcutta, Allahabad and Conoor in which
teas are blended and packed into retail packets for
sale throughout India. It sells tea direct to retail
dealers and, with relatively minor exceptions, does
not operate through wholesalers. Dealers are supplied
by the company's own salesmen each of whom has a
sales depot at which he maintains stocks of the company's products. The salesman sells these teas at the
company's wholesale prices to dealers for cash and
remits the cash through banking channels to Calcutta.
The sales organisation is controlled through six offices,
one of which is located at Delhi. The Delhi office
controls the salesmen and other employees employed
in the Punjab, Delhi State, Rajasthan and Uttar
Pradesh on its business; but the Delhi office has no
connexion with the export side of the business. So far
as the export business is concerned, it consists of two
different· types of trade activities. In some foreign
countries the Indian branch sells packet tea under the
Lipton label on which it is able to make a profit;
· these profits appear in the accounts of the Indian
branch, which are separately maintained and audited.
This type of trade activity is mostly confined to
Burma, Iraq, Iran and certain small Middle East
countries. The greater part of the export trade, however, consists of purchases made at the Calcutta auctions on behalf of overseas buyers, who utilise the
services of Lipton's expert tea tasting staff in Calcutta
(2) S.C.R. SUPREME COURT REPORTS
155
to buy tea on their account at the auctions and the
r959
Indian branch is remunerated for this service by the
Lipton Ltd.
payment of a commission of one per cent. The Indian
v.
branch has no subscribed capital nor any reserves. Their Employees
A. W. Samuel, Administrator, Lipton, Ltd., thus
explained the position with regard to the capital of
5· K. bas J.
the Indian branch in his evidence :-
" Our Company has no subscribed capital in India
nor any reserves. The capital used in India is money
advanced from the company's fund in England, and
the amount of this advance at the balance sheet date
is shown as the balance of the current account with
the Liptons Ltd., London. We have also to resort to
overdraft on the local banks to meet the working
capital demand in India".
It appears that an account is maintained which is
known as the London General Account and the capital
which enables the Indian branch to operate in India
is recorded as the balance of the current account in
the Indian books and to determine the amount of
capital employed in India a daily average of the
- current account has to· be taken and the working
capital of the Indian branch is the amount by which
the fixed current assets exceed the total liabilities.
The Delhi office of the Indian branch employs
peons, sweepers, van-workers, god.own workers, village
salesmen, drivers, junior clerks, godown keepers,
senior clerks, stenographers, divisional salesmen and
other categories of workers, details whereof need not
be set out in full at this stage. The case of the Union
was that a.s far back as June, 1951, the workers of the
Delhi office had made a representation for an increase
in pay; the representation was repeated in April,
1952.
As the management did not accede to their request a union of Lipton employees was formed in
September 1953. This Union framed a charter of
demands and submitted it in December, 1953. The
charter of demands consisted of a large number of
items and as the management con1;ended that it was
not in a position to meet the demands, certain conciliation proceedings followed.
They, however, came to
nothing and on October 1, 1954, the industrial dispute
•
1959
Lipton Ltd:
v.
Their Employees
S. K. Das].
•
156
SUPREME COURT REPORTS
[1959] Supp.
between the Lipton, Ltd., and the Union was referred
to the Additional Indus1rial Tribunal, Delhi, for adjudication.
The reference set forth in a sub-joined
schedule the matters upon which adjudication was
necessary, and the schedule contained twenty terms of
reference out of which the two items with which we
are now concerned related to (a) fixation of grades and
scales of pay including the question whether the new
scales should be given retrospective effect from January
1, 1953, and (b) bonus for each of the years 1951, 1952
and 1953.
After hearing the parties the Tribunal
made its award on August 18, 1955. It disallowed
the claim of bonus, but as to the fixation of grades and
scales of pay it allowed an increase of about 20 per
cent. to all workers over their present wages and proportionate increase in the dearness allowance, details
whereof we shall state at a later stage.
As to overtime payment which was item no. 8 of the terms of
reference the Tribunal said :-
"Since the company is allowed by law to take 48
hours work in a week from its employees, it is only
fair that if a worker puts in over-time work in any •
week within a total of 48 working hours, he should bEj.
only paid at the single rate for all over-time work that
he puts in between 39 and 48 hours in the week. If
the over-time work done by the worker brings his
total working hours during the week to more than 48
hours, any excess over-time work above 48 hours
should be paid at double the rate. I direct accordingly."
It may be stated here that there was a dis]'.lllte about
the working hours also and the Tribunal changed the
working hours from 9-30,a.m.~5 p.m. to 10 a.m.-
5 p.m.•on week-days with half an hour's interval for
lunch, and 10 a.m. to 1 p.m. on Saturdays-thus bringing the total to 36 hours in a week. The question of
over-time arose only if a workman was asked to work
in excess of the working hours fixed by the Tribunal.
On October 12, 1955, the Union made an application
in which it stated that the figure "39 " occurring in
paragraph 24 of the award relating to over-time payment was obviously a mistake for '.' 36 "; because the
(2) S.C.R.
SUPREME COURT REPORTS
157
learned Tribunal had fixed in paragraph 23 of the
1959
award that the working hours of a workman should
Lipton Ltd.
be 36 hours a week.
The learned Tribunal considered'
v.
this application without any notice to the present Their Employees
appellant and corrected the error by amending the
figure 39 to 36. The Tribunal proceeded on the footing
5· K. Das f.
that the mistake was a clerical error due to an accidental slip which could be corrected under r. 23 of the
Industrial Disputes (Central) Rules, 1947.
Against the award of the Industrial Tribunal three
appeals were taken to the Labour Appellate Tribunal
(Lucknow Bench). The two main appeals before the
Appellate Tribunal, namely, No. 272of1955 and No.
282 of 1955, were filed by the Lipton, Ltd., and the
Union respectively and related to the various items of
the terms of reference on which the Industrial Tribunal had given its decision. The third appeal, No. 327
of 1955, related'to the subsidiary matter of over-time
payment regarding which the Industrial Tribunal had
amended its award. So far as the two items with
which in Civil Appea;ls Nos. 713 and 714 of 1957 we
are now concerned, the Labour Appellate Tribunal in
its decision dated May 25, 1956, upheld the decision
of the Industrial Tribunal as respects fixation of grades and scales of pay comprised in the term of reference numbered 1 (a); it also upheld the decision of the
Industrial Tribunal to give retrospective effect to the
new scales of pay froJ? January 1, 1954, which was
covered by the term of reference numbered 1 (b).
As
to bonus, which was item 4 of the terms of reference,
the Appellate Tribunal upheld the decision of tht;l
Industrial Tribunal with regard to the years 1952 and
1953 but for 1951 it awarded an extra two months
salary as bonus for that year in addition to the bonus
of one month's salary which the Lipton, Ltd., had
already granted ex gratia to the workmen. As to the
subsidiary appeal relating to the over-time payment,~
the Appellate Tribunal agreed with the view of the
Industrial Tribunal that there was an error in computing the working hours and the error being of a clerical nature, it was open to the Tribunal to correct it.
From the decision of the Labour Appellate Tribunal
158
SUPREME COURT REPORTS [1959] Supp.
'959
in the three appeals in question, the appellant
Lipton Ltd.
obtained special leave to appeal to this Court on June
v.
27, 1956, and in pursuance of the order of this Court
Their Employees granting such special leave, the present appeals have
been preferred.
s. 1'· Dos J.
Civil Appeal No. 715 of 1957. It is now convenient to
dispose of Civil Appeal No. 715 of 1957.
We have no
doubt in our mind that the error in computing the
w_orking hours with regard to over-time payment was
due to an accidental slip in making the calculation; it
was nothing but a clerical error which the Industrial
Tribunal was entitled to correct even without notice
to the appellant. The learned Attorney-General who
appeared for the appellant in these three appeals has
not pressed Appeal No. 715 of 1957. This appeal
must accordingly be dismissed with costs.
Civil Appeals Nos. 713 and 714 of 19_57. We now turn
to the other two appeals, namely, Civil Appeals 713
and 714 of 1957.
We have already stated that the
. only points which survive for decision are those relating to items l(a), l(b) and 4 of the terms of reference.
These items relate to fixation of grades and scales of
pay, whether retrospective effect should be given to
the new scales of pay, and bonus for 1951. The other
items of the award relating to City compensatory
allowance, leave, holidays, etc., have not been challenged before us. · We are, therefore, saying nothing about
those items of the award, which must necessarily
stand. It may be made clear, however, at this stage
that one of the points taken before the Industrial Tribunal on behalf of the Lipton, Ltd., was that the Industrial Tribunal had no jurisdiction to make an
award in respect of employees of the Delhi office who
were employed outside the State of Delhi. This point
' of jurisdiction was decided against the appellant and
the Industrial Tribunal pointed out that all the work-
* men of the Delhi office, whether they worked in Delhi or
not, received their salaries from the Delhi office ; they
were controlled from the Delhi office in the matter of
leave, transfer, supervision, etc., and, therefore, the
Delhi State Government was the appropriate Government within the meaning of s. 2 of the Industrial
(2) S.C.R. SUPREME COURT REPORTS
159
Disputes Act, 1947, relating to the dispute which arose
between the Lipton, Ltd., and the Union and under
s. 18 of the said Act the award made by the Tribunal
was binding on all persons employed in the Delhi office.
The Appellate Tribunal upheld the decision of the Industrial Tribunal on this point and though this question of jurisdiction was raised in the appeals before us,
it was not seriously pressed by the learned AttorneyGeneral. We are of the view that the Industrial Tribunal had jurisdiction to adjudicate on the dispute
between the Lipton, Ltd., and its workmen of the
Delhi office.
Now, we go on to the two main points urged on
behalf of the appellant. We take up first the question of bonus. Item 4 of the terms ofreference related to bonus and the claim of the Union was made in
two parts. Item 4 reads thus:-
" Bonus: (a) Whether every workman be paid
bonus at the rate of 5 months' salary for each of the
years 1951, 1952 and 1953 and what other directions
are necessary in this respect ?
(b) Whether special bonus equivalent to three months salary should be paid to all workmen in honour
of the company's Diamond Jubilee celebration for the
year 1953? "
Before the Industrial Tribunal the claim of the Union was that the total global profits of the Lipton,
Ltd., should be the basis for determining the claim
to bonus ; the contention on behalf of the Lipton,
Ltd., was that the profits of the Indian business only
should be taken into account in assessing any available
surplus for the payment of bonus. The Industrial
Tribunal held that as both labour and capital contributed to the earnings of an industrial concern, labour
must have its legitimate share of the profits to which
it has contributed; since, however, the employees of
the Lipton, Ltd., in India do not by any stretch of
reasoning contribute to the profits which accrue to the
Lipton, Ltd., in respect of its trading activities outside
India, the employees in India cannot claim bonus on
account of any profits which the Lipton, Ltd., derive
from its ex-India business.
On this footing the
I959
Lipton Ltd.
v.
Their Employees
S. K. Das].
160
SUPREME COURT REPORTS [1959] Supp.
'959
Industrial Tribunal considered the question of bonus
Lipton Ltd.
and held that for 1951 there was no available surplus
v.
for distribution as bonus to the employees in India in
Their Employees accordance with the formula evolved by the Full Bench
of the Labour Appellate Tribunal in
Millowner's
5 · K. Das f.
Association, Bombay v.
Rashtriya
Mill Mazdoor
Sangh (1) generally though not completely approved
by this Court in Muir Mills Co. Ltd. v. Suti Mills
Mazdoor Union,· Kanpur ('). For 1952 and 1953 the
claim of the Union for bonus, the Industrfal Tribunal
held, was still weaker; because in those years there
was still less available surplus for distribution as
bonus to its workers, and so far as the second part of
the claim of the Union, namely, Diamond Jubilee
bonus, was concerned, the Industrial Tribunal rejected it outright.
The Labour Appellate Tribunal
substantially affirmed the decision of the Industrial
Tribunal and gave several reasons why the global
profits of the Lipton, Ltd., could not be taken into
account for the payment of bonus to its workers in
India. After having given those reasons, the Labour
Appellate Tribunal referred to the auditors' report
dated March 17, 1952, with regard to the profit and
loss account and balance-sheet of the Indian business
as on January 5, 1952. In that report which related
to the year 1951 it was stated that the value of the
stocks of tea held at the end of 1951 had been written
down below cost by Rs. 9,93,824-5-3.
The auditors'
report then said :-
"We estimate the net realisable value of the
total stocks of tea as on January 5, 1952, to be in
excess of their cost and, therefore, in our opinion, such
stocks have been undervalued to the extent of the
above reduction below cost."
Relying on this report the Labour Appellate Tribunal
added back Rs. 9,93,824 to the available surplus of
Rs. 9,66,654 which the profit and loss account of the
Indian business for the year 1951 showed.
Adding
the two figures the Labour Appellate Tribunal opined
that the available surplus at the end of 1951
was Rs. 19,60,478. After deducting therefrom the
(1) [1950) L.L.J. 1247.
(2) [1955) 1 S.C.R. 991.
(2) S.C.R. SUPREME COURT REPORTS
161
legitimate prior charges on account of (a) rehabilita:
tion, (b) a four per cent. return on capital and (c) one
month's bonus already paid to the workers, the Labour
Appellate Tribunal came to the conclusion that there
was a clear available surplus of Rs. 4,11,478 for
distribution of extra bonus over and above the bonus
of one month's salary which the Lipton, Ltd., had
already paid to its workers.
It has been contended before us, and rightly in .our
opinion, that the Labour Appellate Tribunal committed a manifest error· with regard to the sum of
Rs. 9,93,824 and odd. It is true that the auditors in
their report referred to the under-valuation of the
stock of tea available at the end of 1951 by a sum of
Rs. 9,93,824 and odd.
An explanation of such undervaluation was given in the written statement of the
Lipton, Ltd., dated February 8, 1955. It was stated
therein:-
" It is a well recollected fact and the Court will
·not need evidence in support of this that the tea market dropped rapidly and in a catastrophic fashion towards the end of 1951. As a result of this the Company apprehended seve:we losses on the stocks which it
was carrying and provision for this loss was made in
the 1951 accounts by an adjustment to the value of
stocks of tea on hand at the end of December, 1951.
The amount of this adjustment was Rs. 9,93,824. As
a result of this, the profits made during 1951 were
understated in the company's accounts and overstated
in the accounts for 1952. It should be noted that the
Income-tax Department insisted that these profits
were made in 1951 and not in 1952 and the Company
was taxed accordingly."
What is worthy of note is that when the Income-tax
Department insisted that the sum of Rs. 9,93,824
should be treated as the profits of 1951, the said
amount was added back in the summarised profit and
loss account of the Indian branch and the available
surplus of Rs. 9,66,654 was shown therein after having
taken into consideration the sum of Rs. 9,93,824. This
is clear from the summarised profit and loss account
2I
1959
Lipton Ltd.
v.
TheiY Employees
S. K. Das].
162
SUPREME COURT REPORTS (1959] Supp.
x959
of the Indian branch. It is clear, therefore, that the
1951 profit and loss account took into consideration
Lipton Lid.
the sum of Rs. 9,93,824 and after adding back that
Their .;;,,ployees sum to the profits of 1951, the available surplus of
Rs. 9,66,654 was arrived at. The Labour Appellate
s. K. Das J.
Tribunal was, therefore, manifestly in error in adding
back the sum of Rs. 9,93,824; because that amount
had already been added back in arriving at the available surplus of 1951. Thus, the main reason which
the Labour Appellate Tribunal gave for its decision to
award the payment of extra bonus for 1951 disappears,
and it is not disputed that if the available surplus for
1951 was only Rs. 9,66,654, then after making the
necessary deduction for prior charges, nothing would
be left for payment as extra bonus in 1951 to the
workers in India. So far as the other two years, 1952
and 1953, are concerned, it is unnecessary to consider
the profits of those two years, because there is no
appeal before us on behalf of the Union.
On behalf of the Union, however, it has been very
strongly contended that the bonus for 1951 as awarded by the Labour Appellate Tribunal can be justified
if the global profits of the Lipton, Ltd., are taken into
consideration, and it has been argued before us that
there is no reason why the Lipton, Ltd., should not be
treated as one integrated industry which has trading
activities in various countries and, for the purpose of
the payment of bonus, why the total global profits of
the Lipton·, Ltd., should not be taken into consideration.
We do not think that the Union is justified in asking for bonus for a particular year on the basis of the
world profits of the Lipton, Ltd. The true nature of
a claim for bonus has been the subject of many decisions in Labour Tribunals and Courts. It has been
judicially recognised that bonus is not deferred wage,
and the justification for a demand of bonus as an
"industrial claim" arises when wages fall short of the
living wage aud the industry makes sufficient profits
to which both labour and capital have contributed.
Substantially, the claim for bonus is a claim which is
paid out of the available surplus from the profits of an
(2) S.C.R.
SUPREME COURT REPORTS
163
industrial undertaking, to which both labour and capital have contributed. This aspect of bonus was considered in Muir Mills Co. Ltd. v. S1tti Mills Mazdoor
Union, Kanpur (1). It has also been said in some cases
that bonus is a temporary and partial filling-up of the
gap that exists between a living wage and the actual
wage paid: where the goal of living wage has been
attained, bonus is a mere cash incentive to greater
efficiency and production, but where an industry has
not the capacity to pay a living wage or its capacity
varies or is expected to vary from year to year so that
the industry cannot afford to pay a living wage, the
payment of bonus may be looked upon as a temporary
satisfaction, wholly or in part, of the needs of the
employees.
Learned counsel for the Union has
emphasised this latter aspect and has contended that
there is nothing unfair in considering the global profits of the Lipton, Ltd., in awarding a temporary satisfaction, in part, of the needs of its Indian employees.
We do not think that it is necessary or advisable to lay
down any inflexible, general rule as to the basis of a
claim for bonus by some of its employees in an industrial undertaking which carries on trade activities in
several countries or even in different parts of the same
country. So far as foreign countries are concerned,
many considerations such as restrictions on foreign
remittaI,lces and other trade restrictions may have to
be taken into account in determining the question, as
in Ganesh Flour Mills v. Employees of Ganesh Flour
Mills (2).
There are a number of decisions of Labour
Tribunals, most of which were noticed in Ganesh
Flour Mills Co. Ltd. v. Employees of Ganesh }!'lour
Mills (2), where a distinction has been made between a
parent concern and subsidiary concerns or even between different units of the same concern, and, speaking generally, the test laid down for the payment of
bonus in such cases is (1) if the different units are so
connected together or integrated that the payment of
bonus to one section of employees will violate the
principle that all workers should share in the prosperity to which they have jointly contributed, or (2) the
(1) [1955] 1 s.c.R. 991.
(2) A.I.R. 1958 S.C. 382.
I959
Lipton Ltd.
v.
Their Emplpyees
S. K. Das].
1959
Lipton Ltd.
v.
Their Employees
S. J(. Das].
164
SUPREME COURT REPORTS [1959) Supp.
different units are so separated or unconnected that
the trade activity of one and the contribution of
labour made in the profits thereof has no necessary
connexion with the trade activity and profits of the
other units. In the former case the undertaking has
been treated as a whole as in Burn and Go., Calcutta v.
Their Employees (1); and Baroda Borough Municipality v. Its.Workmen (2); in the latter, it has been
held that each unit must rest its claim for bonus
on the profits made by that unit. Whether a particular case comes under the former category or the latter
must depend on its own facts and circumstances, and
we may readily agree that the mere keeping of separate accounts may not in all cases be the proper criterion for determining whether the different units are
integrated or not.
For the purpose of these appeals it is sufficient, however, to state that in view of the findings arrived at by
the Tribunals below, it will be unfair and unjust to
grant bonus to the Indian workers on the global profits of the Lipton, Ltd. The Tribunals below have
clearly found that the Indian workmen do not in any
way contribute to the profits which the Lipton, Ltd.,
derive from its ex-India business. As a matter of fact,
even the nature of the trade activity is not quite the
same ; tea represents only about 10 per cent. of the
trading activities of the Lipton, Ltd., in the United
Kingdom, whereas tea. is the main commqdity of the
trading activity of the Indian branch. The Indian
branch maintains separate accounts which have been
andited and accepted by the Income-tax authorities as
showing the profit and loss of the Indian branch of the
business. The Labour Appellate Tribunal has very
clearly found that Lhough, at the relevant time, t}\e
Lipton, Ltd., was one legal entity and the capital of
the Indian branch came from London, the Indian
branch was treated as a separate entity for all practical purposes. It said:
" Lipton, London never interferes with the trading operations c:f Lipton, India, in India. Lipton,
India buys vast quantity of tea amounting to millions
(1) [1956] S.C.R. j>81.
(2) [1957] S.C.R. 33.
(2) S.C.R.
SUPREME COURT REPORTS
165
of tons at:' auctions in Indi~ and sells the same loose or
in packets at a profit in the markets of India. Profits
thus made go entirely to the credit of the Indian concern. No part of the profits is diverted to England.
Lipton, India also purchases tea for export ...... Trading results of Lipton, India must be regarded to be
restricted to the earning of commission on tea exported and returns on sale of tea-loose or in packets-in
the internal markets in India. Lipton, India has got
to pay income-tax to the Government of India on the
basis of its earnings on those two heads. Workmen
of the Indtan organisation have to work mainly for
purchase of tea at auctions in India, for sale of tea at
profit in Indian markets and for export of tea on commission to a lesser extent. Therefore, the returns on
these heads are the only things upon which the staff
of the Indian organisation may depend for bonus."
In the appeals before us the claim for bonus was
made really on the basis of an available surplus of
profits, and we agree with the Labour Appellate Tribunal that the Indian workers can claim bonus if
there is an available surplus of profits out of the
Indian business. In the circumstances in which the
Lipton, Ltd., operated in India at the relevant time, it
would be unjust to award bonus to the Indian workmen on the basis of the global profits of the Lipton,
Ltd. It is not disputed that the Lipton, Ltd., is a
very big organisation and has huge reserves which
were built up in previous years out of its world profits.
There is no evidence to show to what extent, if any,
the Indian business contributed to those profits. On
the finding of the Labour Appellate Trib~nal that no
part of the profits made in India is diverted to England and on the further finding that the Indian
business depends on its own trading results, we are of
the view that the Tribunals below correctly held that
the global profits of the Lipton, Ltd., could not be the
basis for awarding bonus to its Indian workmen.
There· was some argument before us as to whether
the 1 % commission w hi oh the Indian brainch earned
on the e;icport of tea correctly represented the proper
remuneration payable to the Indian business.
That,
I959
Lipton Ltd.
v.
Their Employees
S. K. Das].
166
SUPREME COURT REPORTS [1959] Supp.
'959
however, is a question which we do not think is open
to enquiry in the present appeals. The Income-tax
Lipton Ltd.
h
h
f h
v.
aut orities accepted as correct t e returns o t e
Their Employees Lipton, Ltd., as to their Indian business. It was not
suggested that anything more than 1 % was in fact
s. K. Das J.
taken as commission by the Indian branch, or that
the accounts were "cooked " in that respect. Whether the 1 % commission was the normal market rate
of commission for purchases on behalf of overseas
buyers was not investigated; on the contrary, the
accounts filed by the Lipton, Ltd., in this respect were
accepted as correct. That being the position, it is not
open to the respondent to contend that the available
surplus should be determined on mere speculation as
to what the Indian branch should have earned in the
export side of its business.
On a consideration of all the relevant factors, we
are of the view that the Labour Appellate Tribunal
was in error in awarding an extra two months' bonus
for 1951 and the decision of the Industrial Tribunal
was correct. Therefore, the award in so far as it
directs the payment of extra two months' bonus for
1951 must be set aside.
We now go to the more difficult question of fixation of grades and wages.
What the Union demanded in the matter of fixation
of grades and scales of pay wlII appear from the terms
of reference.
These terms were :-
"Fixation of grades and scales of pay: l(a) Whether the following pay scales should be adopted and
what directions are necessary in this respect:-
Peon, Sweeper, Vant
Mazdurs and God-
... Rs. 60-3-90-4-130-5-155.
own Mazdurs.
Village salesmen.
... Rs. 70-5-120-7i-195-10-245.
Drivers.
. .. Rs. 90-7i-150-10-250-15-325.
Junior Clerks, Typ-}
ists'. Salesmen and
... Rs. 90-7i-150-10-250-15-325.
Assistant
Godown
Keepers.
•
Godown Keepers.
. .. Rs. 120-10-200-12-320-20-460.
(2) S.C.R.
SUPREME COURT REPORTS
167
I959
graphers,
Compto-
... Rs. 150-10-250-15-400-20-500.
Lipton Ltd.
Senior Clerks, Steno-}
·
meter Operators and
v.
Div. Salesmen.
Their Employees
(b) Whether pay scales as stated in 'a' above
should come into effect retrospectively from 1-1-53
and what should be the method of adjustments while
fixing'the actual pay in the revised scale?"
The Industrial Tribunal gave an increase of 20% to
all workers and set out in tabular form the category
of workers, their present grades, and the revised
grades which the Tribunal was allowing on the basis
of a 20% increase. It is necessary to set out the
tabular form here :-
"CATEGORY
Peons, Sweepers, Van
Mazdoors and Godown
Mazdoors.
Village Salesman.
Drivers.
Junior Clerks and
Typists.
Salesman.
Godown Keepers Gr. 1
" 2
" 3
Senior Clerks and
PRESEN'r
GRADE
27-2-45
40-0-50
65-3-95
70-5-125
50-0-71>
70-5-130
125-8-200
195-10-235
Comptometer Operators.