# WORKMEN H.M.T v. PRESIDING OFFICER (Vaidialingam, J.) 85'1

- **Citation:** [1973] 3 S.C.R. 850
- **Court:** Supreme Court of India
- **Decided:** 1973-04-03
- **Case number:** Civil Appeal No. 389 of 1970
- **Bench:** A. Alagiriswami, I. D. Dua, C. A. Vaidialingam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-h-m-t-v-presiding-officer-vaidialingam-j-85-1-5959
- **Pages:** 17

## Headnote

Paynient of Bonus Act, 1964-Payment of minimum bonus
under
s, 10 whether subject to provisions of .r. 16--Where s.
16(1)
applies
minimun1 bonus under s. 10 not
payable-Different establishments of
H.M.T. treated separately each having a separate balance.sheet and profit
and Loss account-Exe111ption under ~· 16(1) must be allowed.
Unit No. IV of the Hindustan Machine Tools, a public sector undertaking, was started at Kalamassery, in Kerala in 1963.
Production and
sale at this Unit started in 1965-66.
In an industrial dispute referred to
the National Tribunal at Calcutta the.workmen.of Unit No. IV claimed
bo"us for the years 1963-64 to 1966-67 at the same rate as was paid in
Units Nos. I and II aod the Watch Factory of the H.M.T. at Bangalore.
It was contended by the workmen of Unit No. IV that bonus was payable
on the ba•is of the consolidated accounts o'f all the Units of the H.M.T.
The National Tribunal held that bonus for the year 1963-64 was payable tc the workQ1en of Unit No. IV at the same rate as in Units No5. I
and Il and the Watch Factory at Bangalore, but no bonus were payable
to them for the years 1964-65 1966-67. In
appeal
to this Court by
special leave it was contended on behalf of the workmen of Unit No .. IV
(appelbnts) (i) that minimum bonus was payable to the appellants for
the years 1964"65 to 1966.-67, under s. 10 of the Payment of Bonus Act,
1964 anJ in applying s. 10 the provisions of s. 16 could not be taken into
consideration; (ii) that the H.M.T. ··had in fact maintained a consolidated
account for all its Units and the claim of the management that separate
profit and loss accounts \Vere maintained was falsely made to defeat the
rights o'f the workmen.
The management, by leave of the Court challenged the finding of the Tribunal that bonus was payable to the appellants
for the year 1963-64.
HELD : (i) The Tribunal was right in holding that the appellants werec
not entitled to any bonus for the year 1964-65 to 1966-67.
(a) Though section IO has not been made subject to section 16 the·
two provisions will have to be read hafmonious1y so as to give effect tothe purpose of the Act.
Section I 0 will apply to all those unlts, which
are otherv.·ise bound to pay boius, irrespective of the fact whether
the
units make profit or Jog<-;.
Section 16 has to be read as an exception to
section 10.
Section 16( 1) gives a total exemption to the estabHshments in
the
circumstances n1enHo.rred therein from payment of bonus which includes
the minin1um bonus also.
When the section says that an employee of
the establishment referred to in section 16 shall be entitled "to be paid
bonus tinder this Act" only if the conditions mentioned therein are satisfied, it is idle to contend thr.t, notwithstanding the
exemption
granted
under section 16. the establishment referred to therein is sill bound to pay
minimum bonus.
If section 16(1) opplies, section 10 will not entitlo an employee to get
even the· minimum bonus under section 10.
Therefore the contention of
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidialingam, J.) 85'1
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the appellants that in any event, the minimum bonus under section 10
ought to have been awarded, could not be accepted.
1861 E-HJ
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Alloy Steel Project v. -The Workmen, 1971 3 S.C.R. 629, referred to.
(b) In this case Units I and II alone have always been treated together
'for the computation of bonus.
All the other three Units and the Watch
Factory at Bangalore hav0 each
been treated
separately and each of
them has been having a separate balance~sheet and profit and Joss account.
Thi• is the evidence on record which has been accepted by the Tribunal.
There was no reason to differ from this finding.
As Unit No. IV is
a
different establishment coming under the proviso and not falling under·
the exception to the proviso to section 3, the main part of section 3 will
not assist the appellants. Therefore the exemption claimed under section
16(1) by the management for 1964-65 to 1966-67 in respect of Unit No.
IV

## Text

_Characters 0–39,929 of 42,555. This is a partial read: ask again with offset=39929 for what follows._

850
THE WORKMEN OF H.M.T. & ANR.
V,
THE PRESIDING OFFICER, NATIONAL
TRIBUNAL, CALCUTTA & OTHERS
April 3, 1973
(A. ALAGIRISWAMI, I. D. DUA AND C. A. VAIDIALINGAM, JJ.]
Paynient of Bonus Act, 1964-Payment of minimum bonus
under
s, 10 whether subject to provisions of .r. 16--Where s.
16(1)
applies
minimun1 bonus under s. 10 not
payable-Different establishments of
H.M.T. treated separately each having a separate balance.sheet and profit
and Loss account-Exe111ption under ~· 16(1) must be allowed.
Unit No. IV of the Hindustan Machine Tools, a public sector undertaking, was started at Kalamassery, in Kerala in 1963.
Production and
sale at this Unit started in 1965-66.
In an industrial dispute referred to
the National Tribunal at Calcutta the.workmen.of Unit No. IV claimed
bo"us for the years 1963-64 to 1966-67 at the same rate as was paid in
Units Nos. I and II aod the Watch Factory of the H.M.T. at Bangalore.
It was contended by the workmen of Unit No. IV that bonus was payable
on the ba•is of the consolidated accounts o'f all the Units of the H.M.T.
The National Tribunal held that bonus for the year 1963-64 was payable tc the workQ1en of Unit No. IV at the same rate as in Units No5. I
and Il and the Watch Factory at Bangalore, but no bonus were payable
to them for the years 1964-65 1966-67. In
appeal
to this Court by
special leave it was contended on behalf of the workmen of Unit No .. IV
(appelbnts) (i) that minimum bonus was payable to the appellants for
the years 1964"65 to 1966.-67, under s. 10 of the Payment of Bonus Act,
1964 anJ in applying s. 10 the provisions of s. 16 could not be taken into
consideration; (ii) that the H.M.T. ··had in fact maintained a consolidated
account for all its Units and the claim of the management that separate
profit and loss accounts \Vere maintained was falsely made to defeat the
rights o'f the workmen.
The management, by leave of the Court challenged the finding of the Tribunal that bonus was payable to the appellants
for the year 1963-64.
HELD : (i) The Tribunal was right in holding that the appellants werec
not entitled to any bonus for the year 1964-65 to 1966-67.
(a) Though section IO has not been made subject to section 16 the·
two provisions will have to be read hafmonious1y so as to give effect tothe purpose of the Act.
Section I 0 will apply to all those unlts, which
are otherv.·ise bound to pay boius, irrespective of the fact whether
the
units make profit or Jog<-;.
Section 16 has to be read as an exception to
section 10.
Section 16( 1) gives a total exemption to the estabHshments in
the
circumstances n1enHo.rred therein from payment of bonus which includes
the minin1um bonus also.
When the section says that an employee of
the establishment referred to in section 16 shall be entitled "to be paid
bonus tinder this Act" only if the conditions mentioned therein are satisfied, it is idle to contend thr.t, notwithstanding the
exemption
granted
under section 16. the establishment referred to therein is sill bound to pay
minimum bonus.
If section 16(1) opplies, section 10 will not entitlo an employee to get
even the· minimum bonus under section 10.
Therefore the contention of
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidialingam, J.) 85'1
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the appellants that in any event, the minimum bonus under section 10
ought to have been awarded, could not be accepted.
1861 E-HJ
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Alloy Steel Project v. -The Workmen, 1971 3 S.C.R. 629, referred to.
(b) In this case Units I and II alone have always been treated together
'for the computation of bonus.
All the other three Units and the Watch
Factory at Bangalore hav0 each
been treated
separately and each of
them has been having a separate balance~sheet and profit and Joss account.
Thi• is the evidence on record which has been accepted by the Tribunal.
There was no reason to differ from this finding.
As Unit No. IV is
a
different establishment coming under the proviso and not falling under·
the exception to the proviso to section 3, the main part of section 3 will
not assist the appellants. Therefore the exemption claimed under section
16(1) by the management for 1964-65 to 1966-67 in respect of Unit No.
IV, has been correctly acceptedly the Tribunal, [863E-G]
Delhi Cloth & General Mills Co. Ltd. v. Workmen, [1972] 1 S.C.R.
594, referred to.
(ii) The Triburial missed certain items of evidence and proceeded on
the wrong assumption that profit bonus for the year 1963-64 was paid
to the workmen of the Units on the basis of the Full Bench Formula.
Hence the direction of the Tribunal that profit bonus was to be paid to ·
Unit No. IV as was paid to the Units at Bangalore was clearly erroneous.
Even otherwise the finding of the Tribunal that all the Units were treated
as part of one establishment for purposes of bonus for the year 1963·64.
was also erroneous.
For the above reason, the direction of the Tribunal
for payment of bonus for the year 1963-64 to Unit No. IV must be set.
aside.
[865EJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 389 of
1970.
Appeal by special leave from the award dated April, 16, 1969 ·
of the National Tribunal, Calcutta in Ref. No. NIT-6 of 1967'
published in !he Gazette of India dated May 1 Q, 1969.
F
N. Sreekantan Nair, appellant No. 1 in person.
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Urmila Kapoor and K. Bansal for appellant No. 2.
G. B. Pai, P. P. Bopanna, K. N. Bhatt and M. M. Ksh11triya,.
for respondents Nos. 2 to 7.
Ambrish Kumar and M. V. Goswami, for respontlent No. 1.
The Judgment of the Court was delivered by
VAIDIALINGAM, J. This appeal by special leave by the workmen of the Hindustan Machine Tools, Unit, IV, Kalamassery, is
directed against the award dated April 16, 1969, of the National
Tribunal at Calcutta in Reference No. NIT 6 of 1967, holding
that the appellants are not entitled to any bonus for the years
1964-65 to 1966-67.
·
852
SUPREME COURT REPORTS
[1973] 3 S.C,R.
By order dated October 17, 1967, the Central Government
made a reference for adjudication of the disputes to the National
Tribunal in the following manner :
"Whereas the Central Government is of opinion that
an industrial dispute exists between the employers
in
respect of the establishments specified in Schedule I
and their workmen in respect of the matters specified
in Schedule II hereto annexed and that the said dispute is of such a nature that industrial establishments
situated in more than one State are likely to be interested in, or affected by, such dispute;
And, whereas the Central Government is of opinion
that the dispute should be. adjudicated by a National
Tribunal;
And, whereas the Central Government is of opinion
that the said dispute is of such a nature that the Hindu~
stan Machine Tools it Pinjore and the Hindustan
Machine Tools at Hyderabad are likely to be interested
in, or affected by, such disputes.
Now, therefore, in exercise of the powers conferred
by section 7B, and sub-section (IA) and 5 of section
10, of the Industrial Disputes Act, 1947 (14 of 1947),
the Central Government hereby constitutes a National
Tribunal of Calcutta, of which Shri S. K. Sen shall be
the Presiding Officer, and refers the said disputes to
the said National Tribunal for adjudication and includes in that reference, the Hindustan Machine Tools
at Pin'jore and the Hindustan Machine Tools at Hyderabad.
SCHEDULE l
(I} Hindustan Machine Tools, I, Bangalore.
, (2) Hindustan Machine Tools II, Bangalore.
(3) Hindustan Machine Tools IV, Kalamassery, Kerala.
SCHEDULE II
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( 1 ) Whether the demand of the workmen in the
Hindustan Machine Tools I and II at Bangalore
for payment of bonus at the rate of 20 per cent
of their salary for the year 1966-67 is justified?
If not, to what quantum of bonus are they enti~?
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(2) Whether the workmen of the
Hindustan
Machine Tools at Kalamassery, Pinjode and
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidialingam, J.) 853
Hyderabad are entitled to any bonus and if so,
what should be the quantum of such bonus ?
( 3) Whether the demand of the workmen of the
Hindustan Machine Tools I and II of Bangalore and of the Hindustan Machine Tools 1V
at Kalamassery that the bonus should be cal·
culated on the basis of a consolidated Profit and
Loss Account for all the units and all activities
and not on the basis of Profit and Loss Account of the separate units and separate activities is justified ?"
Although in Schedule I of the order of re~erence only the
Units at Bangalore and Kalarnassery were referred to,
nevertheless, copies of the reference were sent by the Central Gov··
ernment to the labour unions of the Hindustan Machine Tools
Limited, Unit No. III at Pinjore (Haryana State) and Unit No. V
at Hyderabpd as also to the H.M.T. Watch Factory at Bangalore.
The unions representing the workmen of the five Units as well as
the Watch Factory had filed statements before the National Tribunal. The managements of these different Units had also filed.
statements opposing the claims of the unions.
Before the proceedings commenced, the National
Triburtal
appears to have felt certain difficulties regarding the scope of the·
reference. In respect of item 1 of Schedule II, the Tribunal felt
II
a doubt whether it should also consider the question of bonus=for
any other year in respect of Units I and II at Bangalore.. Similarly the Tribunal fei't a doubt as to what was the particular
year for which the claim. for bonus is to be considered · under
item 2 of Schedule II. This doubt arose because no year had
been mentioned in the reference under this item. For the pur··
pose of getting clarification, the Tribunal invited the views of all
the unions as well as the management. All parties agreed that
when the reference was ambiguous or doubtful, the scope of the
reference can be gathered from the pleadings of the parties. Accepting the agreement of the parties, the Tribunal found from
the pleadings that the workmen of the Hindustan Machine Tools,
Units l and II at Bangalore, had been paid bonus at the rate of
20 per cent for the years 1964-65 and 1965-66. Therefore, it
held that the claim of these two Units under item 1 of Schedule
II has to be considered only for the year 1966-67. Similarly in
respect of item 2 of Schedule II of the reference, the Tribunal
found that the workmen of Unit No. III at Pinjore claimed bonus
for the years 1963-64 and 1964-65 according to the Full Bench
Fcrmula and for the years 1965-66 and 1966-67 under the provisions of the Payment of Bonus Act, 1965 (hereinafter to be
referred to as the Act). Similarly the workmen of Unit No. IV
854
SUPREME COURT REPORTS
[1973] 3 S.C.R.
at Kalamassery claimed bonus from tbe year · 1963-64 onwards
A
on the basis of bonus paid and payable to the Bangalore workmen.
The workmen of Unit No. Vat Hyderabad claimed bonus
at 20 per cent for each of the years, 1965-66 and 1966-67. The
workmen of the Watch Factory, who were getting bonus at the
maximum rate of 20 per cent, did not require any further bonus
to be paid. But that Unit took up the position that the contenB
tion of the various unions who were claiming annual bonus· on
the basis of the consolidated balance sheets and profit and loss
accounts, should be rejected.
Having crystallised the actual scope of the reference in the
manner indicated above, the Tribunal proceeded to consider tbe
questions tbat arose for consideration. At this stage it may be
stated that the workmen of Unit No. IV at Kalamassery, the
appellant before us, claimed bonus for the year 1963-64 and
onwards on the basis of bonus paid and payable to the Bangalore
workmen. It must also be stated that the claim of the appellants,
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as well as that of the workmen of Units Nos. I and II at Bangalore was for payment of bonus on the consolidated profit and
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loss account of all the units of the Hindustan Machine Tools
Limited situated in Bangalore, Pinjore, Kalamassery and Hyderabad as well as of the Watch Factory.
In respect of item 1 of Schedule II, the Tribunal held that
·the workmen of Units Nos. 1 and II at Bangalore are entitled
E
only to the minimum bonus at 4 per cent under the Act and that
their claim for payment at 20 per cent of their salary for the year
1966-67 has to be rejected. The Tribunal answered items Nos. 2
and 3 of Schedule II as follows :-
My answer to item No. (2) is:
The workmen of the Hindustan Machine Tools at
F
Klilamassery and Pinjore are entitled to the same rate
of bonus as is paid to the Watch Factory and. HMT I
& II workmen during the year .1963-64. The factory
at Hyderabad not having been started by March 31,
1964, becomes disentitled to the provisions of preBonus Act.
Since during the Bonus Act period by
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virtue of the maintenance of separate accounts
no
branch or undertaking.becomes entitled to tbe prosperity
of the company, the Hyderabad is not entitled to any
bonus at all under the provisions of the Payment of
Bonus Act.
My answer to item No. (3) is :
H
The demand of the workmen of the
Hindustan
1'/achine Tools Ltd. I & II at Bangalore and of the
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WORK..>dEN H.M.T. v. PRESIDING OFF!CFR (Vaidia/ingani, J.) 855
Hindustan Machine Tools Ltd. No. IV at Kalamassery
that bonus should be calculated on the basis of consolidated profit and loss accounts for all the units and for
all the activities and not 'on the basis of the profit and
loss accounts of the separate units and separate activities is justified, for the year 1963-64 only and not for
the years 1964-65, 1965-66 and 1966-67."
It may be stated that none of the workmen aggrieved by one or
other or all the findings of the Tribunal on items 1, 2 and 3, excepting the workmen of Unit No. IV at Kalamassery, have come
up ·in appeal. The net result of the above finding so far as Unit
No. IV at Kalamassery, which is the appellant, is that its workmen are eligible for bonus for the year 1963-64 at the same. rate
of bonus that has been paid to the workmen of the Watch Factory ·
and Units Nos. I and II at Bangalore for the said year. The
workmen of Unit No. IV are not entitled to claim bonus for the
years 1964-65 to 1966-67 on the basis of the consolidated profit and loss accounts of all the Units of the Hindpstan Machine
Tools but only on the basis of the separate profit and loss account
maintained for Unit No. IV. After a consideration of the evidence, oral and documentary, the Tribunal held that the said
Unit was not entitled to any bonus at all for these three years.
The workmen of Unit No. IV challenged the disallowance of
bonus for the year 1964-65 to 1966-67. At the time of granting
special leave, the counsel for the management, respondents 2 to
7 hereill, appears, to have represented that there are certain findings recorded ill the award which are challenged by the management. In· view of this representation, this Court passed an order
on February 24, 1970, permitting the management to bring to
the notice of the learned Judges hearing the appeal the various
findings which the management proposes to challenge provided
notice has been given to the workmen concerned by puttillg them
in the statement of case. Accordingly the management has raised
in its statement of case. by. way of cross-objections, its grounds of
attack on certain findings. Mainly two matters have been referred, namely-
(! ) the finding of the Tribunal that there was functional intcgrality of all the units for the period
1963-64 and the award in consequence of bonus
to all the units at the rate that has been paid to
Units Nos. I and II, .and
(2) the statement made by the Tribunal in paragraph 25 of the award abOut payment of bonus
to the Watch Factory employees.
8 56
SUPREME COURT REPORTS
[1973] 3 S.C.R.
These points have been pressed before us by the learned counsel
for the management.
We will first take up the point regarding the disallowance of
bonus for the years 1964-65 to 1966-67 arising in the union's
appeal. Mr. N. Sreekantan Nair, the President of the Employees
Federation, Appellant No. l, has argued the case in person on
behalf of the appellants. It must be stated to his credit that he
has .placed the case before us as .lucidly and candidly as possible.
According to Mr. Nair the finding of the Tribunal that the
various units of the Hindustan Machine Tools Limited located
in the different regions, are different 'establishments and that the
management has been having separate profit and loss accounts
for each of these Units and that it is only on that basis that bonus
will have to be calculated, is erroneous.
According to Mr. Nair
the management, with a view to defeat the legitimate rights of the
workmen, have made it appear that there are separate profit and
loss accounts maintained for each of the Units, while in reality it
is not so.
According to him it is only a camoufiage adopted by
the management to circumvent the provisions of tbe Act.
Even
assuming that separate balance sheets and profit and loss
accounts are maintained for each of the Units, he contended that in
law the workmen of Unit No. IV at Kalamassery are entitled to
the minimum bonus for these years under section 10 of the Act.
The reliance placed on section 16 by the Tribunal for disallowing such a claim is erroneous.
Mr. G. B. Pai, learned counsel for the management, on the
other hand, has referred to the material provisions of the Act and
also to the evidence on record in support of his contention "lbat
the five Units in the different regions and the Watch Factory are
all different entities having their own profit and loss accounts and
balance sheets. The management, according to the counsel, has
not done any thing to defeat the provisions of the Act. The
counsel urged that the view of the Tribunal that Unit No. IV is
exempt from payment of bonus for the years 1964-65 to 1966-67
based upon section 16, is correct. Section 10 also, the counsel
pointed out, will not help the appellants.
The history of the Hindustan Machine Tools Limited and the
establishment of the five Units at Bangalore, Pinjore, Kalamassery
and Hyderabad as well as of the Watch Factory has been very
elaborately dealt with by the Tribunal in the award. Nobody has
raised any dispute regarding the various matters referred to by
the Tribunal. Therefore, we do not propose to cover the grqund
over again. From the evidence, the following facts are also
clear:-
The H.M.T. was incorporated in 1953.
Th~ Unit I
in Bangalore was started in 1953, but production and
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidialingam, J.) 857
sale began in 1956-57. No. II Unit of Bangalore was
started in April, 1960. Production and sale from that
Unit started in May, 1961. The third Unit at .Pinjore
in Haryana was started in May, 1962. Production and
sale at that Unit started in the year 1964-65. The 4th
Unit at Kalamassery was started in July 1963.
Production and sale started at that Unit from
1965-66.
The 5th Unit of the H.M.T. at Hyderabad was started
in May, 1964 and production and sale at that Unit
started in 1966-67. The Watch Factory at Bangalore
was started in September, 1961 and indigenous
production of watches started in 1963.
From what is stated above, it will be seen that Unit No. 4 at
Kalamassery, with which we are concerned, was started in July,
1963. But that Unit commenced production and sale of its
articles only from 1965-66. This aspect will have considerable
bearing when we consider the impact of section 16. It is now
necessary to refer to the material provisions of the Act. The Act
by virtue of section 1 ( 4) applies to a factory or department in
respect of the accounting year commencing on any day in the
year 1964 and in respect of every subsequent accounting year.
Therefore, there can be no controversy that the periods with
which we are concerned, namely, 1964-65 to 1966-67, are gov ..
erned by the Act.
The terms 'employees', 'employer', 'establishment in private sector' and 'establishment in public sector' arc
defined in clauses 13, 14, 15 and 16 respectively of section 2.
Section 3 dealing with establishments, so as to include departments, undertakings and branches, is as foUows :-
Establishments to include
departments,
undertakings
and
branches
3. "Where an establishment consists of different departments or undertakings or has branches,
whether
situated in the same place or in different places, aU such
departments or undertakings or branches shaU be
treated as parts of the same establishment for the purpose of computation of bonus under this Act :
Provided that where for any accounting year a separate balance-sheet and profit and loss account are pre··
pared and maintained in respect of any such department
or undertaking or branch,. then, such department or
undertaking or branch shaU be treated as a separate
establishment for the purpose of computation cf bonus
under this Act for that year, unless such department or
undertaking or branch was, immediately before
the
commencement of that accounting year treated as part
7-L797 S.,p. Cl/73
858
SUPREME COURT REPORTS
[1973] 3 S.C.R.
of the establishm~nt for the purpose of computation of
bonus."
Section 8 dealing with the eligibility for bonus is as follows
Eligibility for bonus
8. "Every employee shall be entitled to be paid by
his employer in. an accounting year, bonus, in accordance with the provisions of this Act, provided he has
worked in the establishment for not less than thirty
working days in that year."
Section 13 relating to proportionate reduction in bonus in certain
cases is as follows :-
Proportionate reduction in bonus in certain cases
13. "Where an employee has not worked for all the
working days in any accgunting year, the minimum
bonus of forty rupees or, as the case may be, of twenty
five rupees, if such bonus is higher than four per cent,
of his salary or wage for the days he has worked r. in
that accounting year, shall be proportionately reduced."
Section I 0 dealing with payment of minimum bonus runs
as
follows :-
Payment of minimum bonus
JO. "Subject to the provisions of sections 8 and 13.
every employer shall be bound to pay to every employee
in an accounting year a minimum bonus which shall be
four per cent of the salary or wage earned by the employee during the accounting year or forty
rupees,
whichever is higher, whether there are profits in the accounting year or pot;
Provided that where such employee has not completed fifteen years of age at the beginning of the accounting year, the provisions of this section shall have
effect in relation to such employee as if for the words
"forty rupees", the words "twenty-five
rupees"
were
substituted."
We have earlier referred to sections 3 and 13 as section I 0 is subject to those two sections.
Section 11 provides for payment of
the maximum bonus of 20 per cent of the salary or wages in the
circumstances mentioned therein.
Section 16, which
contains
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WORKMEN H.M;T, v. PRESIDING OFFICER (Vaidiali.~gam, J.) 859
special provisions with respect to certain establishments, is
as
follows :-
·
Special provisions with respect to certain establishments
16 ( 1) "Where an establishment is newly set up,
whether before or after the commencement of this Act,
the employees of such establishment shall be entitled to
be paid bonus under this Act only-
( a) from the accounting year in which
the employer derives profit from such establishment;
or
(b) from the sixth accounting year following
the·
accounting year in which the employer sells the
goods produced or manufactured by him
or
renders services, as the case may be, from such
establishment,
whichever is earlier :
Provided that in the case of any such establishment the employees thereof shall not, save
as otherwise provided in section 33, be entitled
to be paid bonus under this Act in respect of
any accounting year prior to the
accounting
year commencing on any day in the year 1964.
Explanation 1 :-For the purpose of this section.
an establishment shall not be deemed t'b be newly set
up merely by reason of a change in its location,
management, name or ownership.
Explanation II-For the purpose of clause (a:), an
employer shall not be deemed to have derived profit
in any accounting year unless-
(a) he has made provision for that year's depreciation to which
he is
entitled
under
the
Income-tax Act, or as the case may be, under
the agricultural income-tax law; and
( b) the arrears of such depreciation and losses incurred by him in respect of the establishment
for the previous accounting years have been
fully set off against his profits.
Explanation 111.-For the purpose of clause (b),
sale of the goods produced or manufactured during the
course of the trial run of any factory or of the prospecting stage of any mine or an oil-field shall not be
taken into consideration and where any question arises
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[1973.J 3 S.C.K.
with regard to such production or manufacture, the
decision of the appropriate Government, made after
giving the parties a reasonable opportunity of representing the case, shall be final and shall not be called in
question by any court or o~er authority.
( 2) The provisions of sub-section (I) shall, so far
as may be, apply to new departments or undertakings
01 branches set up by existing es.tablishments :
Provided that if an employer in relation to an existing establishment consisting of different departments or
undertakings or branches (whether or not in the same
industry) set up at different periods has,
before the
29th May, 1965, been paying bonus to the employees
of all such departments or undertakings or branches
irrespective of the date on which such departments or
undertakings or branches were set up, on the basis of
the consolidated profits computed in respect of all such
departments or undertakings or branches, then, such
employer shall be liable to pay bonus in accordance
with the provisions of this Act to the employees of all
such departments or undertakings or branches (whether
. set up before or after that date) on the basis of the consolidated profits computed as aforesaid."
The only other section, which requires to be noted, is section 20,
which makes the Act applicable to establishments in public sector
in certain cases. The Hindustan Machine Tools Ltd. is an establishment in public sector and there is no controversy that by
virtue of section 20, the Act applies and it will be liable to pay
bonus, if circumstances justify the same.
We•will now consider the contention of Mr. Nair that under
section 10 the Unit No. IV is bound to pay the minimum bonus
of 4 per cent for the years in question without reference to any
other circumstance.
According to him
the
only provisions,
which have to be considered for applying section 10, are, as mentioned therein, the two provisions, namely, sections 8 and 13.
The contention of Mr. Nair is that the workmen of Unit No. IV
satisfy the requirements of sections 8 and 13 and, therefore, they
are, as of right, entitled to get the minimum bonus.
Mr. Nair
further urged that a reference to section 16 is absolutely immaterial for the purpose of considering the applicability of section 10. Section 16, according to him, will come into play only
when the workmen claim bonus at .a rate higher than the minimum of 4 per cent provided under section Ht. This. aspect,
according to him, has not been at all considered by this Court,
when dealing with section 16 of the Act.
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidialingam, !.) 861
A reading of section 10, isolated from the other provisions
of the Act, may appear to lend support to the contention of Mr.
Nair that an employee, if he satisfies the requirements of sections
8 and 13; will be entitled to get the minjmum bonus. No doubt,
Mr. G. B. Pai, learned counsel, has pointed out that the employees of Unit No. IV do not even satisfy the requirements of
sections 8 and 13. That apart, though section 10 has not been
made subject to section 16, in our opinion, the two provisions
will have to be read harmoniously so as to give effect to the purpose of the Act. Section 10 will apply to all those units, which
are otherwise bound to pay bonus,
irrespective of the fact
whether the units make profit or incur loss.
Section 16, in our
opinion, has to be read as an; exception to section 10. In particular, it will be noted that section 16 (1), after referring to an
establishment newly set up, whether before or after the commencement of the Act, states that ">the employees of s_uch establishment shall be entitled to be paid _bonus under this Act
only .... " It cannot be controverted that payment of even the
minimum bonus under section 10 or bonus upto the maximum of
20 per cent, as per section 11, will both be "payment of bonus
under this Act", as contemplated by
section
16.
Similarly,
eligibility for bonus under section 8 "in accordance with the provisions of this Act", can be related only to tl_tose cases where the
bonus is payable either under section 10 or under section 11.
Section 16 ( 1) gives a total exemption to the establishments in the
circumstances mentioned therein from payment of bonus which
include the minimum bonus also. When the section says that an
employee of the establishment referred to in section 16 shall be
entitfed "to be paid bonus under this Act" only if the conditions
mentioned therein are satisfied, it is idle to contend that, notwithstanding the. exemption granted under section 16, the establishment referred to therein is still bound to pay a minimu,m bonus.
No doubt that liability to pay the minimum bonus, at any rate,
will certainly attach itself to the particular establishment, if one
or other of the conditions mentioned in sub-clauses (a) or (b)
of section 16(1) come into play. Under such circumstances, it
will be open to an employee to claim not only the minimum
bonus but also bonus at a higher rate upto the maximum of 20
per cent, if circumstances permit. Mr. Nair is no doubt right in
his contention that section 10 has not been referred to by this
Court, when dealing with section 16.
The reason for such nonconsideration is because no such argument, as is now placed before us, appears to have been raised before this Court. Now that
S!lch a contention has been raised, we have dealt with it. According to us, if section 16 (1) applies, however, hard the result
may be, section 10 will not entitle an employee to get even the
minimum bonus under section 10. Therefore, the contention of
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SUPREME COURT REPORTS
(1973J 3 S.C.R.
Mr. Nair that in any event the minimum bonus under section 10
should have been awarded, cannot be accepted.
In this connection we may also refer to the decision of this
Court in Alloy Steel Project v. The Workmen(').
The question
was whether the Alloy 'Steel Project, which was started in 1961
and went into production in 1964-65 and did not earn profits
uptc 1967-68, was liable to pay bonus at the minimum rate
under the Act for the year 1965-66. On behalf of the Alloy
Steel Project, exemption from payment of bonus was
claimed
under section 16 (I) of the Act on the ground that it was a new
establishment and had not made profits.
This Court held that
the said Unit was not liable to pay even the minimum bonus, as
claimed by the workmen, in view of the provisions of section
16 ( 1) of the Act. It is no doubt true that there is no reference
in this decision to section 10. That is why we have stated earlier
that a contention, similar to that advanced by Mr. Nair, was not
raised before this Court.
The next question that arises for consideration is whether the
Tribunal was justified in rejecting the claim for bonus for the
years 1964-65 to 1966-67. We have already referred to the fact
that Unit No. IV was started in July 1963, but production and
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sale started only from 1965-66.
Therefore, the question is
whether it is liable to be treated as part of the establishment of
H.M.T. under section 3 or whether it is entitled to exemption
from payment of bonus under section 16. We have already extracted section 3.
It is to be noted that the principal part of E
section 3 lays down that different departments or undertakings or
branches of an establishment are to be treated as parts of the
same establishment for the purpose of computation of bonus under
the Act.
From the main provision an exception is carved out
by the proviso and there is a further exception to the proviso itself.
The sum and substance of section 3 is that an establishment initially takes in all establishments, undertakings and branches for
the purpose of computation of bonus. But if, in respect of any
department, undertaking or branch separate balance sheet and
profit and loss account are prepared and maintained fOr any accounting year, then for that particular year; computation of bonus
shqll be by treating it as a separate establishment. But this will
be subject to a further exception that immediately before
the
commencement of that accounting year, namely, the accounting
year in which a separate balance sheet and profit and loss account is prepared and maintained, such a department or undertaking or branch has not been treated as part of the establishmeii.t for the purpose of computation of bonus.
In this case
Units I and II alone have been always treated together for the
purpose of computation of bonus. All the other three Units and
. (!) [1971] 35. C. R. 629
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WORKMEN H.M.T. v. PRESIDING OFFICER (Vaidia/ingam, !.) 863
the Watch Factory at Bangalore have each been treated separately and each of them has been having a separate balance sheet
and profit and loss account.
This is the evidence on record,
which has been accepted by the Tribunal. We see no reason to
differ from this finding.
The Controller of Finance of the management, MW 1, has
given in detail the various dates when these several units were
started and production and sales began.
He has deposed that
H.M.T. Units Nos. I and II at Bangalore were alone treated as
one for the purpose of maintenance of accounts and that H.M.T.
Units Nos. III, IV and V and the Watch Factory were all having
separate and independent profit and loss accounts and balance
sheets. This practice has been followed from the inception of the
different Units. A consolidated balance sheet and profit and loss
account was only being prepared for the purpose of the Companies Act. There is no evide,nce 1hat any of the units or undertakings fell within the exception to the proviso in section 3 and
that in such branches, immediately before the commencement of
the accounting year 1964-65, separate balance sheets and profit
and loss accounts for purposes of computation of bonus were
prepared and maintained.
If that was the case, it may well be
stated that the appellant-unit was treated as part of the establishment, in this case the H.M.T., for purposes of computation of
bonus. In fact the evidence of MW 1 is that no pront bonus was
ever paid to any of the employees of even H.M.T. Units Nos. I
and II prior to 1964:65. What was paid was only production
bonus on the basis of individual performance. Section 3 is the
key to the Act, as it fixes the property whkh is to provide the
allocable surplus for the distribution of bonus in terms of the Act.
As the different Units in this case had been treated separately kt
the purpose of computation of bonus and separate balance sheets
and profit and loss accounts had been prepared in respect thereof,
the Units will not lose their separate identity as
establishments
because of the main provision of section 3 (see Delhi Cloth &
General Mills Co. Ltd. v. Workmen('). As Unit No. IV is a
different establishment coming under the proviso and not falling
under the exception to the proviso to section 3, the main part of
section 3 will not assist the appellants.
Then the question is regarding the applicability of section 16.
The evidence of MW 1, which has been accepted by the Tribunal,
is to the effect that Unit No. IV was started in July 1963 and
production and sale commenced only from 1965-66.
Section
16 ( 1 ) grants exemption from payment of bonus to establishments
newly set up for a period of six years following the accounting
(!) [1972] (1) S. C. R. 594.
864
SUPREME COURT REPORTS
[1973] 3 s.c.R.
year in which the goods produced or manufactured are sold for
the first time and, in th~ alternative, upto the year when the new
establishment results in profit, whichever is earlier. Unit No. IV
is to be treated as an establishment newly set up, as contemplated
under section 16 (I). If so,, the exemption claimed would be
fully justified because the contingency contemplated under subclause (a) or ( b) of section 16 (I ) has not happened during the
relevant years, 1964-65 to 1966-67. Even if Unit No. IV is considered to be a new department, undertaking or branch set up by
the existing establishment, namely, the Hindustan Machine Tools
Ltd., section 16 (2) makes the provisions of sub-section
( 1)
apply to such units. The proviso to sub-section (2) of section 16
does not stand in the way of the management's claim for exemption because there is no evidence that for any year, after Unit
No. IV was set up, bonus was paid to the employees of all the
Units on the basis of consolidated profits of all such Units. In
fact the evidence, as we have already stated, is contra.
No doubt
it is in evidence that the· employees of the Head Office have been
treated at par with the employees of Units I and II at Bangalore.
In the case of the Head Office, calculation of bonus on the basis
of consolidated accounts is justified; but that ooes not affect the
principle to be applied to the separate units for which separate
accounts, separate balance sheets and separate profit and loss accounts are maintained. The proviso to sub-section (2).of section
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16 will come in tire way of the management only if bonus is paid"
in any year to the employees of all the Units on the basis of the . E
consolidated accounts.
That is not the evidence in this
case.
We may also state that the evidence in this regard has been very
elaborately considered by the Tribunal and we agree with the conclusions arrived at by it. Therefore, the exemption claimed under
section 16 (I) by the management for the years 1964-65 to 196667 in respect of Unit No. IV, the appellant, has been correctly
accepted by the Tribunal. This disposes of the points raised by
the appellant in the appeal.
We have already referred to the permission granted by this
Court by its order dated February 24, 1970, to the respondents
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to. attack certain findings.
Accordingly the respondents have
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attacked two of the findings recorded by the Tribunal which we
have set out earlier. For the accounting year 1963-64. which is
the pre-Bonus Act period, the direction of the Tribunal is that
Unit No. IV, the appellant, is to get bonus on the basis 0f 1he
consolidated profit and loss accounts of all the Units in the same
manner as was paid to the Watch Factory and H.M.T.
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Nos. I and II for the said year.
The Tribunal has recorded a
finding that during this period there was unity of ownership,
management and control and also functional
integrality and.
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WORKMEN H.M.T. V. PRESIDING OFFICER (Vaidialingam. I.) 865
therefore, all the Units as well as the Watch Factory have to be
termed as one establishment and bonus will have to be calculated
according to the Full Bench Formula on the consolidated p.tofit
and loss accounts of all the Units. This finding is attacked by
Mr. G. B. Pai, learned counsel for the respondents. But it is not
necessary for us to consider the correctness or otherwise of this
finding in view of the fact that we are accepting another contention of his relating to this year. According to the learned counsel the evidence that has been accepted by the • Tribunal itself,
clearly shows that there was no profit bonus paid prior to 1964·
65 to either H.M.T. Units I and II or the Watch Factory in
Bangalore. It was only from and after 1964-65 that bonus was
paid to those Units in accordance with the Act. Mr.