# U.P. ELECTRICITY SUPPLY CO. LTD v. WORKMEN & ORS

- **Citation:** [1972] 1 S.C.R. 553
- **Court:** Supreme Court of India
- **Decided:** 1972
- **Bench:** G. K. Mitter, C. A. Vaidial!Ngam, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/u-p-electricity-supply-co-ltd-v-workmen-ors-5395
- **Pages:** 18

## Headnote

Industrial Dispute-Reference-Co111pulsory
acquisition of co1npany
pendinJ? reference-Dispu1e regarding past bonus-Duty of Tribunal to
co1nplete adjudication and 1nake A H'ard.
C
Industrial Dispute-Bonus-Available Surplus-Calculation of.
D
E
F
G
H
The State Government referred under s. 4K of the U.P.
Industrial
Disputes Act, 194 7, the question whether the appellants were to be required to pay bonus, to their workmen for the years 1960 to 1961 and if so
at what rate.
Pending the reference
the undertakings of the appellant
were compulsorily acquired.
The Tribunal hov.•ever, continued the proceedings and directed the employers to pay three months' basic wage as
bonus for the period. To the profits of the company as found by the
tribunal for warking out
the Labour
Appellate Tribunal
Full Bench
Formula, the tribunal added three claims made by the workmen, namely,
( 1) Excess debit to coal and fuel consumption; (2) estimated
revenue
for one month and (3) notional revenue on the basis of units produced
but not accounted for.
The T'ribunal allowed the expenses claimed by
employers as prior charge as also the notional normal depreciation.
The
Tribunal also allowed as
prior charge
5 per cent of the share capital
while the management claimed it at six per cent.
Jn appeal to this Court against the Award of he Tribunal the
appellants also raised a preliminary p<>int that after the appellants' undertaking was taken oyer the industrial dispute, if any, between it and its
workmen ceased to exist.
Allowing the appeal,
HELD : On the facts of the case, the Tiibunal went wrong in allowing any bonus to the workers.
( 1) The broad proposition that as soon as a particular industry ceases
to function any adjudication in respect of a dispute which had occurred
prior thereto becomes abortive, cannot be accepted.
If the dispute
is
one which relates to the past working of the industry and in particular
where the claim of the workmen is for benefits which according to their
view had accrued to them in the past, it can hardly be said that the adjudication is without any purpose.
Where the dispute, as in the present
case, is over a claim of benefits by way of bonus for work done in the
past it would be the duty of the Tribunal to complete the adjudication
and make its award.
No doubt the main object of the Act is to ensure
industrial peace but equally important is the purpose behind the Act that
the workmen should not be deprived of their legitimate share of profil.9
made hy the industry. [556 C, 562 CJ
Pipraich Sugar Mills Ltd. v Pipraich Sugar Mills Mazdoor
Unlon,
[1956]! S.C.R. 872, M/s. Burn & Co. Ltd. v. Their Workmen,
[1956]
S.C.R. 781, The A.C.C. Ltd. v. Us Workmen, [1959] S.C.R. 925 at 955,
554
SUPREME COURT REPORTS
( 1972] l s.c.R.
Banaras Ice Faciory Ltd. v. /ts Worknien, [l 957) S.C.R. 143 aod Automobile Products of India Ltd, v. Rukmaji Bala, [1955] 1 S.C.R. 1'241, referred to.
Hariprasad Shivshankar Shukla v. A. D. Divikar, (1957] S.C.R. 121
and U.P. Electric Supply Co, Ltd. v. R. K. Shukla & Anr.,
~1970]
1
S.C.R. 507, held inapplicable'.
A
"-....,'
( 2) ThE; Tribunal went wrong in adding back the three amounts to
B
the gross profits.
·
(a) Merely because a figure is to be found in the ~dited balancesheet of the company, the industrial tribunal is not bound to accept the
said figure, if challenged.
But when, the, figures
for~ expenses incurred
in connection with fuel giv,e(l in the balanq;:-sheet are also deposed to by
a witness the Tribunal should not have ·disca,,rded
the evidence of
the
\Vitness on this point.
The figure as sho\Vn in the .balance-sheet should
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have been accCpt~d by the Tribunal~ anQ. there should have b'een no deduction on 1u:count of .excess debit to cog}"- an.Q_ fuel •consumption. f564
A,d
-
(b) The non-inclusion· df one month's
revenue in resoect of bulk
supplies etc. Was bona fide caused by switching over to a different basis
of accounting which the employer could lawfully
have done and
the
Tribunal was not justified i

## Text

_Characters 0–39,987 of 50,987. This is a partial read: ask again with offset=39987 for what follows._

553
A
U.P. ELECTRICITY SUPPLY CO. LTD.
v.
WORKMEN & ORS.
September I, 1971
B
[G. K. MITTER, C. A. VAIDIAL!NGAM AND P. JAGANMOHAN
REDDY, JJ.]
Industrial Dispute-Reference-Co111pulsory
acquisition of co1npany
pendinJ? reference-Dispu1e regarding past bonus-Duty of Tribunal to
co1nplete adjudication and 1nake A H'ard.
C
Industrial Dispute-Bonus-Available Surplus-Calculation of.
D
E
F
G
H
The State Government referred under s. 4K of the U.P.
Industrial
Disputes Act, 194 7, the question whether the appellants were to be required to pay bonus, to their workmen for the years 1960 to 1961 and if so
at what rate.
Pending the reference
the undertakings of the appellant
were compulsorily acquired.
The Tribunal hov.•ever, continued the proceedings and directed the employers to pay three months' basic wage as
bonus for the period. To the profits of the company as found by the
tribunal for warking out
the Labour
Appellate Tribunal
Full Bench
Formula, the tribunal added three claims made by the workmen, namely,
( 1) Excess debit to coal and fuel consumption; (2) estimated
revenue
for one month and (3) notional revenue on the basis of units produced
but not accounted for.
The T'ribunal allowed the expenses claimed by
employers as prior charge as also the notional normal depreciation.
The
Tribunal also allowed as
prior charge
5 per cent of the share capital
while the management claimed it at six per cent.
Jn appeal to this Court against the Award of he Tribunal the
appellants also raised a preliminary p<>int that after the appellants' undertaking was taken oyer the industrial dispute, if any, between it and its
workmen ceased to exist.
Allowing the appeal,
HELD : On the facts of the case, the Tiibunal went wrong in allowing any bonus to the workers.
( 1) The broad proposition that as soon as a particular industry ceases
to function any adjudication in respect of a dispute which had occurred
prior thereto becomes abortive, cannot be accepted.
If the dispute
is
one which relates to the past working of the industry and in particular
where the claim of the workmen is for benefits which according to their
view had accrued to them in the past, it can hardly be said that the adjudication is without any purpose.
Where the dispute, as in the present
case, is over a claim of benefits by way of bonus for work done in the
past it would be the duty of the Tribunal to complete the adjudication
and make its award.
No doubt the main object of the Act is to ensure
industrial peace but equally important is the purpose behind the Act that
the workmen should not be deprived of their legitimate share of profil.9
made hy the industry. [556 C, 562 CJ
Pipraich Sugar Mills Ltd. v Pipraich Sugar Mills Mazdoor
Unlon,
[1956]! S.C.R. 872, M/s. Burn & Co. Ltd. v. Their Workmen,
[1956]
S.C.R. 781, The A.C.C. Ltd. v. Us Workmen, [1959] S.C.R. 925 at 955,
554
SUPREME COURT REPORTS
( 1972] l s.c.R.
Banaras Ice Faciory Ltd. v. /ts Worknien, [l 957) S.C.R. 143 aod Automobile Products of India Ltd, v. Rukmaji Bala, [1955] 1 S.C.R. 1'241, referred to.
Hariprasad Shivshankar Shukla v. A. D. Divikar, (1957] S.C.R. 121
and U.P. Electric Supply Co, Ltd. v. R. K. Shukla & Anr.,
~1970]
1
S.C.R. 507, held inapplicable'.
A
"-....,'
( 2) ThE; Tribunal went wrong in adding back the three amounts to
B
the gross profits.
·
(a) Merely because a figure is to be found in the ~dited balancesheet of the company, the industrial tribunal is not bound to accept the
said figure, if challenged.
But when, the, figures
for~ expenses incurred
in connection with fuel giv,e(l in the balanq;:-sheet are also deposed to by
a witness the Tribunal should not have ·disca,,rded
the evidence of
the
\Vitness on this point.
The figure as sho\Vn in the .balance-sheet should
C
have been accCpt~d by the Tribunal~ anQ. there should have b'een no deduction on 1u:count of .excess debit to cog}"- an.Q_ fuel •consumption. f564
A,d
-
(b) The non-inclusion· df one month's
revenue in resoect of bulk
supplies etc. Was bona fide caused by switching over to a different basis
of accounting which the employer could lawfully
have done and
the
Tribunal was not justified in adding back the amount to the profits as it
had done. [566 BJ·
(c) In applying the Full Bench Formula the employers cannot
be
charged \Vith any notional profits which they should have made, although
the formula itself is -notional.
lt has never been held by this Court that
if through the inefficiency in the working of the industry or by reason of
use of defective machinery of apparatus full profits are not received \vith
the result that notionally labour is deprived of a share thereof, the Tribunal
adjudicating on the question of bonus payable to labour for a particular
year should add back to ·the gross profits as shown in the balance-sheet
the an1ount of profit lost through th~ inefficiency
or negligence Of the
employers. [568 G]
The A.C.C. Ltd. v. Its Workmen, [!19?9J S.C.R. 925 at 955 and 'Mis.
J. K. Cotton Manufacturers Ltd. Kanpur v. Their Work111en, 1954 L.A.C.
716 at 745, referred to.
(3) This C.Ourt has he~d that
a return of six
P.er cent is ordinarily
considered to be a fair return on the capital invested in the case of paid
up capital and also that in a particular
industry where the risk in
the
business was great there_ would be a good_ Cause for.providing for six: per
cent.
Deducting the amounts allowed b}r the Tribunal _as prior charge
as also the notional normal depreciation ;ind allowing a return on
the
capital at six per cent the available surplus \vould ·not be enough to meet
the provisions for Statutory Contingency Reserve and Statutory Develop~
rnent Reserve.
While it is true that these amounts, cannot be considered
as prior charges for the purpose of finding available surplus they have to
be taken into
consideration
when the question of distribution
to
the
workers out uf the aVailable surplus arises. rs69 (:'>DJ
M/s. Burn & Co. Ltd. v. Their Workmen. [1956].S.C.R. 781,
M/s.
Pierce Leslie &. Co. Lrd .. Kozhikode v. Workme~. f,1960] 3 S.C.R. 194,
National Enr;:ineerine Industries Ltd. v. Its JVorkn1en,
[1968] I S.C.R.
779. M /s. Bareil/y Electricity Supply Co. Ltd. v. The Workmen. [1972] 2
S.C.R. 241 and Mathura Prasad Srivastava v. Saugor Electric ,SUP.ply Co.
Ltd, [19661. 2 L.L.J. 307, referred to.
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U.P. ELECTY. SUPPLY co. v. WORKMEN (Mitter, J.)
555
CIVIL APPELLATE JURISDICTION : Civil Appeals No' 1255
and 1256 of 1966.
Appeals by special leave from the Award dated November 16,
1965 of the Industrial Tnbunal (III), Allahabad m Ad.1ud1cat1on
Cases Nos. 9 and 12 of 1962.
R
G. B. Pai, Harish Chandra, H. K. Pun' and B. Ramrakhiani,
for the appellant (in both the appeals).
J. P. Goyal, for respondent No. 1 (in C.A.
No.
1255
o.f
1966).
J. P. Goyal and M. V. Goswami, for respondent no. 1 (in
c
C.A. No. 1256 of 1966).
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P. N. Tiwari, Secretary, INTUC, U.P. in person, for respondent-No. 3 (ir11 both the appeals).
L. M. Singhvi, and 0. P. Rana, for responden: No. 4 (in both
the appeals).
The Judgment of the Court was delivered by
Mitter, J.
These two appeals by special leave arise out of an
award of the Industrial Tribunal Allahabad . .following two references dated 24th January, 1962 by the State c.f U.P. under s. 4-K
of the U.P. Industrial Disputes Act, 1947. The subject matter of
both the references was, whether the employers (the appellants
before this Court) should be required to pay bonus to their workmen for the year 1960-61, and if so, at what rate.
The U.P. Electric Supply Co., Ltd. (the appellants herein)
had two eletcricity undertaki;ngs, one at Allahabad and the other
at Lucknow.
It carried on the business of generation and distribution of electricity under two lice.nces one for Allahabad and the
other for Lucknow within the areas specified therein.
In pursuance o.f the provisions of paragraph 12 of the said licences the
U.P. Electricity Board compulsorily acquiFed the said u,ndertakings
of the company including the business of generation and distribution of e!ectricity in the areas covered by the lice;nces with effect
from 16th September, 1964.
The Tribunal had however entered
on the reference on 29th January 1962· and its proceedings contmued down to 16th November, 1965 when a common award was
made directing the employers to pay three months' basic wages
as bonus to all the workmen entitled thereto for the year 1960-61.
These appeals are against the said award.
On behalf of the appellant, a preliminary point was raised, viz.,
that after the appellants' undertaking was taken over in September, 1964 the industrial dispute, if any, between it and its workmen ceased lo exist.
The reasoning behind the argument was
556
SUPREME COURT REPORTS
[1972] 1 s.c.R.
that if the industry itself disappeared any adjudication with regard
to a dispute which had arisen in the past would be a fruitless
erra;nd and any award made on the reference thereafter would be
ineffective.
Our attention was drawn to certain decisions of this
Court in support of the above reasoning.
Before we proceed to
do so, we 'thi;rtk it will b~ proper to examine the question as if it
were res-integra.
In our view, the broad proposition put forward by counsel for
the appellant that as soon as a particular ind11stry ceases to function a:ny adjudication in respect of a dispute which had occurred
prior thereto becomes abortive cannot be accepted.
It may be
that an adjudication which concerns only the future working of the
industry becomes redundant when the industry itself comes to an
end. If the dispute is cine which relates to the past working of the
industry and in particular where the claim of the workmen is for
benefits which according to their view had accrued to them in the
past, it can hardly be said that the adjudication is without any
purpose. If the workmen ask fbr better service conditions like the
revision of wage scales, dearness allowance, medical and other
facilities, gratuity etc. it would be useless for the Tribunal to complete the adjudication and award how the service conditions etc.
ought to be bettered or revised where as industry is non-est. Where
however the dispute, as in this case, is over a claim to benefits by
way of bonus for work done in the past, it would be the duty of the
Tribunal to complete the adjudication and make its award. 1f the
Tribunal finds that because of the service rendered by the workers
i1n the past an industry reaped profits whereof a portion should
go to the workmen it should not lie in the mouth of the employers
to say that inasmuch as they have ceased to carry on business their
obligation to pay for service rendered in the past should be wiped
out.
There is no logic in the submission made on behalf of the
appellants that the ascertainment of the liabiilty even with regard
to the working of the industry in the past can take place only
duripg the subsistence of the relationship of master and servant
between the employers and the employed,
Counsel for the appellant referred to certain provisions in
Chapter V-A o.f the Industrial Disputes Act, 1947 as illustrative
of his argument that in cases where legislature felt it necessary to
provide for relief to workers even after the closure or transfer of
an industry it made express provisions therefor.
In particular,
reliance was made to s. 25-FF and 25-FFF to show that by" the
first of the above provisions the legislature had provided for
compensation to certain workmen where the ownership or management of an undertaking was transferred, whether voluntarily or by
operation of law.
Similarly compensation had been provided for
in s. 25-FFF for workmen i;n cases where on the closing down of
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U.P. ELECTY. SUPPLY co. v. WORKMEN (Mitter, J.)
557
an undertaking for any reason whatever workmen were to be
treated as having bet;n retrenched thus giving them the benefit of
retrenchment compensation.
Reference was also made to s. 33-C
of the Act under which a workman could approach the appropriate
Government for recovery of moneys due to him under a settlement
or an award under the provisions of Ch. V-A of the Act.
In our
view, by these provisions the legislature sought to give redress to
workmen in the contingencies mentioned in the said sections which
are of common occurrence. These sections Jo not lay down that
on the closure or transfer o.f a:n undertaking the employers were
to be relieved of all other obligations to or claims of the workers.
The preamble to the Industrial Disputes Act which expressly aims
at preventing strikes and lockouts is in pari materia to the U.P.
Industrial Disputes Act i.e. "to make provision for the investigation and settlement of industrial disputes, and for certain other
purposes" cannot be read down to mean that the statute was being
enacted only for- the purpose of.,securing industrial peace so far
as the future working of the industry was concer,ned.
No doubt
the main object of the Act is to ensure industrial peace but equally
important is the purpose behind the Act that the workmen shoμld
not be deprived of their legitimate share of profits made by the
industry.
The central object of the Act is to preserve industrial
harmony which would be meaningless if the workers of a particular
industry were to be deprived of benefits of services rendered i:n the
past.
The first decision of this Court which bears on this point is the
case of Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor
Union(').
The facts in that case were shortly as follows. Owing
to continued losses suffered by the appellant its manag_ement asked
the State Governmt;nt either to increase its quota of sugarcane or
to permit it to sell the mills.
In pursuance of the Government's
permission to sell, the mills were sold to a Madras party.
As the
crushing season was on at that time the appellaint obtained from
the purchaser a lease of the mills for the then current season
agreeing to deliver possession of the mills on the termi,riation of
the lease. There were negotiations between the appellant and the
Madras party for the former dismantl~ng the machinery and erecting it at Madras for a lump consideration expecting to perform
th~ contract through its own workmen.
On coming to know of
this the workmen assumed a hostile attitude to the whole transaction and gave a notice of strike.
There were negotiations between
the parties thereafter which averted the strike and the crushing
went on till the season came to an end.
Thereafter the workmen
refused to help in the dismantling of the mills. The Government
however declined to interifere with the sale of the machinery and
(1) [1956] S.C.R. 872.
558
SUPREME COURT REPORTS
[1972] l S.C.R.
the management discharged the workers. In view of the inability
of the appellant to take up the contract, the purchaser entered
into direct negotiations with the workmen and concluded an
agreement with them for dismantling the machinery.
The net
result was that the appellant lost the contract, on which as admitted
by the respondent, it would have earned a profit of at least Rs. 2
lakhs.
The workers having taken the benefit of a direct contract
with the purchaser for dismantling the machinery, next tur:ned their
attention to the appellant, and on the basis of certain earlier letters
sent a notice to it on 19th April, 1951 asking for distributio:n
among the workers of the 25 % labour-share of the profits on sale
of machinery.
The State Governm~nt referred to an Industrial
Tribunal the dispute :
"Whether the services of workmen, if so how many,
were terminated by the concern without settlem(lnt of
their due claims and improperly; and if so, to what relief
are the workmen concerned entitled ?"
The Tribunal held the closure of the business and the sale of tge
machinery to be bona fide, that the co,nduct of the ·workmen had
been throughout unfair and such as to disentitle them to compensation but that the promise contained in certain letters of the company
to pay 25 per cent profits realised by the sale of the mills was
binding on the management.
It was held that Rs. 45,000/- was
thus payable to the workmen.
The· appeal of the ma,nagement to
the Labour Appellate Tribunal being rejected, the matter came to
this Court by special leave.
One of the points urged on behalf o.f
the appellants was that it was a condition precedent to the exercise
by the State of its power under s. 3 of the U.P. Industrial Disputes
Act that there could be no industrial dispute unless there was a
subsisting relationship of an employer and an employee; and inasmuch as the appe!Iant had sold its mills and discharged the workmen
on 21st March 1951 no question of any relationship of employer
and employee surviving thereaiter could arise and the notification
under s. 3 of the Act on November 16, 1951 was incompetent.
It was pointed out by this Court that the entire scheme of the
Act assumed that there was in existence a dispute and "the provisions of the Act relating to lock-out, strike, lay off, retrenchment,
conciliation and adjudication proceedings the period during which
the awards are to be in force have meaning only if they refer to an
industry which is running and not one which is closed." Reference
was made to Messrs Burn & Co. Ltd. v. Their Workmen(1) and
the observation of this Court that the object of all labour legislation
was firstly to ensure fair terms to the workmen, and seco,nd!y to
(I) [1956] S.C.R. 781.
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U.P. ELECTY. SUPPLY co. V. WORKME:-1 (Mitter, J.)
559
prevent disputes between employers and employees, so that production might not be adversely affected and the l:Jrger interests of the
public might not suffer.
Both these objects can have their fulfilment only in an existing industry and not a dead industry.
The
Court observed that if the contention of the workmen that the
managemeμ.t by their letters dated January 3, 1951 and January
10, 1951 had agreed to make payments to them was well founded,
the dispute related to a claim which arose while the industry was in
existence and between persons who stood in the relationship ol
employer and employees, and that would clearly be an industrial
dispute as defined in the Act.
It was further remarked that section
3 "only requires, apart from other conditions, with which we
are not concerned, that there should be an industrial dispute
before there can be a reference, and we have held that it would be
an industrial dispute if it arises out of an existi~g industry. If that
condition is satisfied, the competence of the State for taking action
under that section is complete, and the fact that the industry has
since been closed can have no effect on it." It is pertinent to note
the Court's observation that "if the contention of the appellant was
correct there was nothing to prevent an employer who intended for
good and commercial reasons to close his business from indulging
on a large-scale any unfair Jabour practices in victimisation and in
wrongful dismissals and escaping the consequences
thereof by
closing down the Industry". The Court finally held that :
" .... on a true construction of s. 3, the power of the
State to make a reference under that section must be
determined with reference not to the date on which it is
made but to the date on which the right which is the
subject-matter of the dispute arises, and that the machinery provided under the Act would be available for working out the rights which had accrued prior to the dissolution of the business."
On the merits however this Court held against the agreement put
forward by the workmen and allowed the appeal setting aside the
award of compensation made by the Tribunal.
Turning to Burn & Company's case (supra) which was decided
by the same Bench of Judges it may be noted that one of the disputes which led to the reference by the State Government was
regarding bonus claimed by the workers. With regard to this the
Court observed that the reasons for the grant of bonus was that
the workers should share in the prosperity to which they have
contributed. In The Associated Cement Companies Ltd. v. Its
Workmen(!) it was said that grant of bonus to workmen was
based on a two-fold consideration i.e. ( 1) Jabour was entitled to
(1) [1959] S.C.R. 925 at 955.
560
SUPREME COURT REPORTS
[1972] 1 s.c.R.
a share of the profits because it had partially contributed to the
same and (2) it was entitled to claim that the gap between actual
wage and living wage shall within reasonable limits be filled up.
Banaras Ice Factory Ltd. v. Its Workmen(') referred to by the
learned counsel for the appellant is clearly distinguishable. There
the question arose as to the applicability of ss. 22 and 23 Oif the
Industrial Disputes (Appellate Tribunal) Act, 1950 and referring
to the Case of The Automobile Products of India Ltd. v. Rukmaji
Bala(') it was pointed out that the object of s. 22 of the said Act
was "to protect the workmen concerned in disputes which formed
the subject-matter of pending proceedings against victimisation"
and to ensure that proceedings in connection with industrial disputes already pending should be brought JO a termination in a
peaceful atmosphere and that no employer should during the
pendency of these proceedings take any action of the kind me1ntioned in the sections which may give rise to fresh disputes likely
to forther exacerbate the already strai:ned relations between the
emp!oyer and the workmen.
Clearly these objects_ were capable
of fulfilment in a running or continui:ng industry only and not
in a dead industry.
In our view the decision of this Court i:n Hariprasad Slzivshankar Shukla v. A. D. Divikar(') does not support the appellant's contention.
The facts in one of the appeals which was the
subject matter of that decision were that the Barsi Light Railway
Company served a notice on its workmen on November 11, 1953
intimating that as a result of the Government of India's decision
to terminate the contract of the railway company and take over
the railway from January l, 1954 the services of all the workmen
of the railway company would be terminated with effect from the
afternoon of December 31, 1953.
The notice further showed
that the Government of India intended to employ such of the staff
of the company as would be willing to serve the railway on terms
and conditions which would be notified later. These were actually
intimated by the Railway Board on December 15, 1953. In substance the new terms and conditiO!US as embodied in the letter and
three specified forms stated that the service of the staff employed
by Government would be treated as continuous for certain specific
purposes only, such as contributicm to provident fund,
leave,.
passes and privilege ticket orders, educational and medical facilities etc.
But it was made clear that previous service under the
ra.ilway company would not count tor the purpose of seniority.
Soon thereafter the President of the Railwaymens' Union filed a
large number of application on behalf of the erstwhile workmen
(1) [1957J S.CR. 143.
(2) [1955] I S.C.R. 1241.
(3) [1957] S.C.R. 121.
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U.P. ELECTY. SUPPLY co. v. WORKMEN (Mitter, J.)
561
of the railway company under s. 15 of the Payment of Wages Act,
1936 for payment of retrenchment comp~sation to the said work·
men under cl. (b) of s. 25F of the Industrial Disputes Act, 1947.
The applications were made to the Civil Judge of. Madha, the
authority under the Payment of Wages Act. The issues framed by
the Civil Judge were-( 1) Whether the authority under the Pay·
ment of Wages Act, 1936, had jurisdictiein to deal with and adju·
dicate on the claim of retrenchment compensation; (2) whether
the erstwhile workmen were entitled to claim compensation under
cl. ( b) of s. 25F of the Act; a;nd ( 3) whether they had been retrenched by their former employer.
The Civil Judge found
against the workmen on issue No. 1 but in their favour on the
other two issues. In writ petitiqn before the High Court of
Bombay the parties agreed that the matter should be decided on
merits and 1not on the question of jurisdiction. The High Court
held that the work'11en were entitled to claim compensation under
s. 25-F(b) of the Act and the railway company wa5 liable to pay
such compensation.
The main argument turned on the question
as to whether the definition clause regarding retrenchment i.e.
s. 2 ( oo) of the Act, covered the cases of closure of business when
the closure was real a1nd bona fide. It was in rhcse circumstances
that the court observed that ( p. 135) :
" ...... except perhaps
s.
25FF
(inserted in
1956 ...... ) which can be said to bring a closed or
dead industry within the purview of the Act the provisions of the Act, almost in their entirely, deal with an
existing or continuing
industry.
All the
provisions
relating to lay off in ss. 25A to 25E are also inappropriate in a dead business."
On the question as to whether on the death of an employer or on
the reconstructio,n of a company the former business carried on
by the heirs or by the reconstructed company the workmen would
be entitled to retrenchment compensation though they continued
in service as before, this Court observed that there must be compelling reasons in the words of the statute before it could be held
that such was the i,ntention of the legislature.
In our view neither the observation in this case nor in U.P.
Electric Supply Co. Ltd. v. R. K. Shukla and An.other(1) have any
application to the facts in the case before us. Retrenchment has
been specially provided for by the le~islature and the questions of
closure of an industry and the transfer of an ~ndustry have been
expressly provided for in the Industrial Disputes Act.
A'though
the main purpose of the Act is to p·ovide fur collective settlement
of_ disputes and maintenance of industrial peace we cannot hold
(1) [1970]-I S.C.R. 507.
2-L3Sup.Ci/72
562
SUPREME COURT REPORTS
[1972] l S.C.R.
that a tribunal which is called upon to adjudicate on a dispute
relating to a share of the profits earned by the company in the past
on behalf of the workmen becomes fUjllctus ojficio or that the
dispute becomes incapable of detennination :under the Act when
the industry is closed.
The claim, as already pointed out is for
services rendered in the past and the dispute was a live one at the
time when the reference was made by the State Government and
indeed continued so for more than three years thereafter.
It was
O!Iliy because of the protracted proceedings of the tribunal that
the award came to be made as late as November 1965. The
closure o.f the business '1ong after the rendering of the services by
the workmen and the reference of the dispu!e to the tribunal
cannot wipe out the claim of the workmen or annul the adjudication in reipect thereof.
This brings us to the merits of the case.
The profits of the
company for working out the Labour Appellate Tribunal Full
Bench formula as found by the TribUjllal for the relevant year was
Rs. 23,42,352/ -.
The tribunal however added
back thereto
three claims made by the workmen, namely, ( 1) excess debit to
coal and fuel consumption.Rs. 67,817; (2) estimated revenue for
one month Rs. 1,85,519 and (3) notional revenue on the lYasis
o.f units produced but not accounted for Rs. 2,50,000/-, which
would raise the figure of profits to Rs. 28,54,803.
We find ourselves unable to accept any of the above additions made by the
tribunal referred to above.
The workmen submitted a number of interrogatories for reply
by the company and one of these reFated to the break up of
Rs. 59,67A_66 shown as coal and fuel in the revenue and profit
aind ·loss account of the company.
In their reply the company
gave the following figures :-
T.
(a) Contractors bill for carting, stacking and
putting coal into hoppers
Rs. 6,67,477-68
(b) Contractors bill for crushing coal
18,986-39
(c) Miscellaneous charges (being charges
for
insurance, rent of land for stacking coal etc.)
(d) Proportionate wages to staff
(e) Price of coa1 consumed
8,001-50
9'°63-24
7,03,528-81
52,63,938-85
59,67,467-66
The Company's witness M. Ghosh gave evidence on this and other
subjects before the tribunal.
It appears that his eJCamination went
on from 27th October 1964 to 10th August 1965. In his examination-in-chief Ghosh referred to various account~ prepared from
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U.P. ELECTY. SUPPLY co. v. WORKMEN (Mitter, J.)
563
the books of accolljllt and. records of. the company and audited by
a firm of well known chartered accountants.
He gave the figures
of coal consumed both at Allahabad and Lucknow and the average
price per metric ton : these were 69,432.02 metric to.ns
in
Lucknow at Rs. 45-28 per ton ex-hopper and 60,673-03 metric
tons at Allahabad at Rs. 45-42 per ton ex-hopper.
He also said
that the cost of fuel oil was Rs. 67,950-02 for the two units.
He
was closely cross-examined with regard to the statements produced
by him aind the revenue ledgers disclosed by the company.
He
said in his cross-examination under date 21st January 1965 that
the figure of Rs. 59,67,467-66 shown at page 6 of the profit and
loss account included not only Rs. 52,63,938-85 mentioned in the
interrogatories but also the other following items :-
A. Contractors bill for carting stacking and putting coal into
hoppers (including cost of fuel amounting to Rs, 67 ,950-01) Rs.6,67477-68
B. Contractors bill for crushing coal
18,986-39
C.
Miscellaneous charges {being charges for insurar.ce,
rent of land for stacking coal etc.)
8,001-50
D. proportionate wage~ to staff
9,063-24
He was closely examined with regard to the accounts and with
respect to many figures when he said that without looking into
the journals he could not say what was included n the sundry's
account.
There can be .Jittle doubt that the compa,ny was using a
diesel engine for the generation of electricity the hire of which
alone cost the company Rs. 2,00,000 in the releva.nt year and
mention is made of the use of the diesel engine in the Directors'
report dated 28th August, 1961.
This fa also borne out by the
a,nswer to interrogatory No. 4 submitted by the workmen to the
employers. In his cross-examination Ghosh said that the figure
of Rs. 59,67,46:7-66 had been taken from the revenue ledger of
the head office, and without reference to the revenue
accou,nt
statements he could not say whether the value shown against coal
and fuel was in respect of the coal co,nsumed or was the amount
spent for purchase of coal during the month.
According to him
coal was purchased both at the units and through the head office.
The tribunal wrongly observed that it was for the first time in his
cross-examination that Ghosh had stated that the contractors' bill
of Rs. 6,67,477-68 included the cost of fuel amounting to
Rs. 67,952-02.
As already noted, Ghosh in his exami,nation-inchief had mentioned the cost of fuel oil at Rs. 67,950-02.
The
Tribunal also observed that the company had not produced any
record and whatever they had stated in reply to the interrogatories
or in reply to the workmens' comments, after inspection, did not
corroborate the statement of Ghosh that out of the contractors' bill
for Rs. 6,67,477-68 a sum of Rs. 67,952-02 was i.n respect of the
cost o{ fuel oil.
The tribunal went by the two certificates Exs.
E-2 and E-3 issued by the chartered accountants both dated 22nd
December 1961 giving the figures of coal consumed at the two
564
SUPREME COURT REPORTS
· [1972] I S.C.R.
generati,ng stations and their average price per metric ton and on
that basis reached the conclusion that the company had spent
Rs. 58,99,650-90 on fuel for the relevant year and. contrasting this
figure with Rs. 59,67,467-66 concluded that there was an excess
expenditure on this item in the sum of Rs. 67,817.
In our view the Tribunal's conclusion cannot be accepted. It
was the same 1irm of chartered accountants who issued Exs. E-2
and E-3 who were responsible for preparation of the balance she~t
and profit and loss account of the company which were accepted
by the income-tax department.
While it is true that merely
because a figure is to be found in the audited balance sheet of the
company an industrial tribunal is not bound to accept the said
figure if challenged. It must be said that when, the figures for
expenses incurred .in connection with foe! given in the balance
sheet are also deposed to by a witness who gives the break-up
thereof and says even in his examination-in-chief that the cost of
fuel oil was Rs. 67,950-02 which is repeated in cross-examination
and the witness is not asked in particular as to how this figure was
arrived at, although the witness was examined for nearly 10
months, the trib~mal should not have discarded his evidence on
this point.
The break-up of the figure Rs. 59,67,467-66 was disclosed 'l,S early as 25th August 1962 of which Rs. 7,03,528-81
accounted for (I} contractors bills for carting, stacking and putting coal into hoppers, (2) contractors bill for crushing coal, (3)
miscellaneous charges ( 4) proportionate wages to staff and ( 5)
price of coal consumed and the books of account and records of
the company were made available for inspection to the workers.
In these circumstances the different figures of the break-up should
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not have been disregarded by the tribunal : more so, because the
chartered accountants were giving certificates oqly in respect to
the expenses for coal delivered into the hoppers in the accounting · F
year.
It being undisputed that the company was using a diesel
plant for generating electricity it would be surprising if no expenses
were incurred for purchasing the diesel oil to run it with.
It may
be that in the different accounts of the company cost of fuel oil was
·not separately recorded but was put under the general head of raw
material for running and working the turbines namely, coal. Not
one of the several witnesses examined on behalf of the workmen
'had made any statement that fuel oil was not required by the
company for the relevant year of account. In our view, the figure
of Rs. 59,67,467-66 as shown in the balance sheet should have
been accepted by the tribunal from which there should have been
no deduction of the figure Rs. 67,817.
The Tribunal added back a sum of Rs. l,85,519/-
to the
figure of profits on the ground that the company had included
only the revenue of 11 months and not Otf 12 months as it should
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U.P. ELECTY. SUPPLY CQ. v. WORKMEN (Miller, !.)
565
have done foc the working out -0f the Full Bench formula.
The
preliminary objection of the wCll'kmen before the examination of
the witnesses was that the revtlJ!lue on account of light and power
shown in the revenue acoount was much less than the real revenue
as it did not take into account various items of revenue.
After
inspection of the accounts, the workmen filed a specific objectioill
that one month's revenue amounting to Rs. 1,85,519-14 had not
been accounted for and the profits had been reduced to the said
extent.
According to the appellant this discrepancy is accounted
for by the fact that it changed its system of accounting in February
1962 which was given effect to from the month of January 1962.
One of the witnesses for the workmen A. P. Saxena who was an
old account clerk of the company gave evidence to the effect that
it was his duty to prepare bills of all bulk supply consumers,
temporary connections and sundry sales and that it was also his
duty to maintain bulk supply consumer ledgers and prepare its
summary every month. He added that :
"In the disputed year through office order No. 12
dated 23-2-61 the revenue on account of all bulk supply
came to be entered in the month subsequent to the
month in which it had accrued.
This practice is still
continuing. This change came about in -January 1961.
Prior to January 1961, the rev~nue was entered in the
month in which it accrued. The result of this change
was that the
revenue for Ma.rch 1961 amounting to
Rs. 1,85,519-14 was taken as the revenue of the succeeding year and in the disputed year revenue from bulk
supply consumers was shown for only 11 months.
In
the bulk supply ledger the income from bulk supply
consumers for January 1961 is shown as· blank.
In the
consumer ledger summary for January 1961 also the
entry against bulk supply consumers is blank."
In his cross-examination he admitted that the bill on account of
· bulk supply consumed in January 1961 was sent in February
1961.
This is also borne out by two office orders dated 15th
February 1961 and 23rd February 1961.
According to the first,
the revenue statistics for the month of March was to be sent by the
latest by 3rd of April.
This was also emphasised on by the
document dated 23rd February 1961 that bills for bulk supply
and cinema and other categories of consumers should be completed by the third week of March 1961 and in order that this may
be facilitated the nleter readings taken in the month of March or
February should be debited in the months of March or February
notwif!1standing that such meter reading might relate to the consumption for the month of January. It is not as if the company
was depriving the workmen of the benefit of one month's revenue
566
SUPREME COURT REPORTS
( 1972]1 S.C.R.
as regards the bonus due to them.
What really happened was
that for the year ending March 1961 only 11 months' revenue was
taken into account and the bill for the month of March for bulk
supplies etc. was sent in April 1961. · Whatever income the company h_11d for such supply in the month of March was taken into
account in the succeeding year. The non-inclusion of one month's
revenue in respect of bulk supplies etc. was bonafid.e caused by
the switching over to a different basis of accounting which the
employer could lawfully have done and the tribunal was not
justified in adding back the sum of. Rs. 1,85,519-14 to the profits
as it had done.
With regard to the third item of Rs. 2,50,000/- added back
to the balance of profit and loss account by the tribunal, it must
be noted that the original claim of the workmen was that the
employers had failed to account for units of electricity generated
of the value of Rs. 28,20,306-50 in the relevant year of account.
After inspection of the records by the company the workmen
stated that no less than 2,25,62,452 units of energy had not been
accounted for at Allahabad and Lucknow and the minimum value
of these units at 12 p. per unit came to Rs. 28,20,306-50 and the
same should be added back.
The reply of the company was that
the unaccounted for units represented the loss
in transmission,
distribution and also loss of units due to errors in meters and
leakage in Jines and this was a normal and u;navoidable feature in
electricity supply undertakings.
The workme.n filed statements
Exs. W-1 and W-2 showing the total number of units generated and
purchased by the employers from others as well as the total number
of units sold to consumers or otherwise used in power stations and
auxiliaries besides the number of units unaccounted for.
They
also filed a statement Ex; W-3 showing the revenue earned during
the year.
The tribunal fou;nd that Exs. W-1 and W-2 were in
fact copies of some of the items contained in Ex. W-31.
Ex. W-1
·is a chart showing ( l) units generated at Allahabad and Lucknow;
(2) units purchased at Allahabad and Lucknow; (3) units used
on power station and auxiliaries at Allahabad and Lucknow; ( 4)
units sold at Allahabad arid Lucknow; and ( 5) ].lnits unaccounted
for at Allahabad and Lucknow. All the figures are for the period
April 1960 to March 1961.
It is worthy of note that both at
AUahabad and at Lucknow the figures for units unaccounted for
were very high.
At Allahabad the highest figure was for the
month of January 1961 viz., 2868847 units and at Lucknow the
highest figure was reached in July 1960, viz.;ol 739855 units. The
lowest figure of units unaccounted for at Allahabad was reached
in February 1961 viz., 138705 while that for Lucknow was also
reached in the same month 151764.