# WORKMEN OF ASSAM CO v. ASSAM CO. LTD

- **Citation:** [1959] 1 S.C.R. 327
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeal No. 34of1957
- **Bench:** Bhagwati, J. L. Kapur, A. K. Sarkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-assam-co-v-assam-co-ltd-1628
- **Pages:** 7

## Headnote

Industrial Dispute-Bonus-Formula applicable to tea industry
• -Deductions allowable for ret·urn on capital and on reserves-" Unit
Scheme" of payment of bonus, if siiitable .
The appellants claimed bonus for the years 1950, 1951 and
1952 at the rate of six months' wages per year. The Industrial
Tribunal to which the dispute was referred allowed, in calculating
the surplus available for payment of bonus, inter alia return on
paid up capital and on the reserves at 7% and 5% respectively and
accepted the "unit ~cheme" of payment of bonus which the
company had been following since 1926. Under this scheme units
were credited to each workman taking into consideration the
importance of the job he held, the wages he got and the
number of years he had been employed in that particular job,
and each workman was paid bonus in proportion to the units to
his credit. On appeal the Labour Appellate Tribunal modified the
award and raised the return on the reserves from 5% to 6%.:
Held, that the formula laid down in Sree Meenakshi Mills v.
Their workmen, ([1958] S.C.R. 878 at 884) for ascertaining the
surplus on the basis of which bonus becomes determinable and
distributable could be applied to the tea industry with suitable
adjustments.
The allowing of 7% return on capital as against 6% held
allowable under that formula was justified by the additional risk
factors in the tea industry. The allowing of 5% return on
reserves by the Industrial Tribunal as against 4% allowed by the
formula was not unreasonable, it being sufficient to safeguard the
interests of the company. But the increasing of this to 6% by
the Appellate Tribunal was insupportable in the absence of any
claim in the respondent's written statement for rehabilitation or
of any figures for determining this amount.
The "unit scheme" was suitable for the payment of bonus
and would result not only in the fair distribution of bonus but
would also lead to improvement in the quality and quantity of
work.
•

## Text

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S.C.R.
SUPREME COURT .REPORTS
327
WORKMEN OF ASSAM CO.
v.
ASSAM CO. LTD.
(BHAGWATI, J. L. KAPUR and A. K. SARKAR JJ.)
Industrial Dispute-Bonus-Formula applicable to tea industry
• -Deductions allowable for ret·urn on capital and on reserves-" Unit
Scheme" of payment of bonus, if siiitable .
The appellants claimed bonus for the years 1950, 1951 and
1952 at the rate of six months' wages per year. The Industrial
Tribunal to which the dispute was referred allowed, in calculating
the surplus available for payment of bonus, inter alia return on
paid up capital and on the reserves at 7% and 5% respectively and
accepted the "unit ~cheme" of payment of bonus which the
company had been following since 1926. Under this scheme units
were credited to each workman taking into consideration the
importance of the job he held, the wages he got and the
number of years he had been employed in that particular job,
and each workman was paid bonus in proportion to the units to
his credit. On appeal the Labour Appellate Tribunal modified the
award and raised the return on the reserves from 5% to 6%.:
Held, that the formula laid down in Sree Meenakshi Mills v.
Their workmen, ([1958] S.C.R. 878 at 884) for ascertaining the
surplus on the basis of which bonus becomes determinable and
distributable could be applied to the tea industry with suitable
adjustments.
The allowing of 7% return on capital as against 6% held
allowable under that formula was justified by the additional risk
factors in the tea industry. The allowing of 5% return on
reserves by the Industrial Tribunal as against 4% allowed by the
formula was not unreasonable, it being sufficient to safeguard the
interests of the company. But the increasing of this to 6% by
the Appellate Tribunal was insupportable in the absence of any
claim in the respondent's written statement for rehabilitation or
of any figures for determining this amount.
The "unit scheme" was suitable for the payment of bonus
and would result not only in the fair distribution of bonus but
would also lead to improvement in the quality and quantity of
work.
•
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
34of1957.
Appeal from the judgment and order dated August
31, 1955, of the Labour Appellate 'fribunal of India,
Calcutta in Appeal Nos. Cal-187 & Cal-188 of 1954,
arising out of the Award dated May 15, 1954, of the
•
•
March JI.
•
•
Workmen of
Assam Co.
328
SUPREME COURT REPORTS
[1959]
Industrial Tribunal, Assam in Reference No. 20 of
1953 published in the Assam Gazette dated June 16,
1954.
v.
C. B. Aggarwala and K. P. Gupta, for the appelAssam Co. Ltd.
alltS.
Kapur J.
P. K. Goswami, S. N. Mukher.iee and B. N. Ghosh,
for the respondent.
1958. March 31.
The Judgn:ent of the Court was
,.
delivered by
KAPUR J.-In this appeal brought by special leave
against the order of the Labour Appellate Tribunal,
Calcutta dated August 31, 1955, the controversy
between the parties is confined to the question of
bonus. The appellants are the workmen including
members of the Indian staff and artisans employed by
the respondent, the Assam Co. Ltd., a company in-
· corporated in the United Kingdom and engaged in tea
industry in the State of Assam. The appellants claimed bonus for the years 1950, 1951 and 1952 at the rate
of 6 months' wages per year. The respondent offered
to the Indian staff excluding the artisans Rs. 51,061
as bonus for 1950, Rs. 48,140 for 1951 and Rs. 15,493
for 1952 which works out at 2·3% of the net profit for
the year 1950, 3·1 % for the year 1951 and 3·9% for the
year 1952.
This dispute was referred to the Ind us trial
Tribunal by a notification of the Assam Government
dated August 27, 1953.
The Industrial Tribunal allowed depreciation as
given in the company's balance sheets for the three
yea.rs and allowed as return on the paid up capital and
on the reserve 7% and 5% respectively and held the
artisans also to be entitled to bonus.
:E'or the purpose
of mode of payment the Industrial Tribunal accepted
the "unit schl\me" under which the company had
been paying bonus since the year 1926. It was of the
opinion that the scheme was fair and rational and
gave incentive to industrial efficiency and to production.
Both the appellants and the respondent appealed
against this order, the former as to the correctness of
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S.C.R.
SUPH.EME COURT REPOH.TS
329
the accounts, the amount of the return on capital and
reserves and the " unit scheme " and again claimed six
months' wages per year as bonus.
The latter appealed against the percentages allowed on the capital and
the reserves and claimed 10% and 8% respectively as a
fair return. It objected to the inclusion of the artisans
amongst the workmen eligible for bonus and also to
the application of what is known as the Bombay
formula to Tea industry.
.
The Labour Appella"te Tribunal varied the Tribunal's
award and allowed depreciation at the rate allowable
under the Indian Income Tax Act, confirmed 7 % on
the paid up capital but raised the return on the
reserves from 5% to 6% in order to meet the claim of
the company for rehabilitation which though not
claimed before the Industrial Tribunal, was put
forw!rd before it as a basis for increase in return on
reserves. In this Court the appellants again repeated
their objection to the amount of depreciation, the
return on capital and on reserves and to the "unit
scheme " but were prepared to confine their claim to
two months' wages as bonus. Counsel for the respondent objected to the applicability of the formula to an
industry like the tea industry,. his contention bei»g
that· circumstances and considerations applicable to
the textile industry cannot apply to Tea industry
which, being connected with agriculture, is affected by
various factors which must be taken into consideration
in the matter of depreciation, return on capital and
return on reserves.
The principles on which the ascertainment of the
surplus on the basis of which bonus becomes determinable and distributable have been laid down by this
Court in Sree Meenakshi .Mills v. 'l'heir Workmen (1~.
• The formula there laid down is :
" Distributable surplus has to be ascertained after
providing from the gross profits for (I) depreciation,
(2) rehabilitation, (3) return at 6 per cent. on the paid
up capital (4) return on the working capital at a lesser
but reusonable rate, and (5) for an ·estimated amount
in respect of the payment of income-tax."
(r) [1958J S.C.]3.. 878.
42
•
•
Workmen of
Assam Co.
v.
Assam Co. Ltd.
I<apur .J.
•
•
TVorkmen of
Assam Co.
v.
Assam Co. Ltd.
Kapttr ].
330
SUPREME COURT REPORTS
[1959]
Under this formula the depreciation allowable in cases
arising under the Industrial Disputes Act is the normal
depreciation including shift depreciation.
We did not
understand counsel for the respondent to contend that
there was anything in the formula which was wrong
in principle but that it had to be adjusted to suit the
circumstances of the Tea industry. No circumstances,
were however, given by him which would make it
unfair to apply the formula nor were any figures or
particulars furnished for varying it in regard to
depreciation.
The Industrial Tribunal allowed 7% return on
capital as against 6% held allowable under the
formula. Its reasons for this increase were :
"That the tea industry here may have often to
face various adverse circumstances-more adverse
than those that may come upon other industrie~ and
may have more risks than other industries. It may
however be noted that the company in the instant
case-is more than a Century old one fairing well all
through and has thus been so far a prosperous one and
on a sound footing and as such it is expected to have
built up a substantial reserve."
•The Labour Appellate 1'ribunal maintained this
higher rate of return on capital on the ground " of its
being exposed to greater risks than any other industry
.............................. namely weather, pests in the
plants and gradual deterioration of the soil over which
no man has any control".
These additional risk
factors are no doubt present in an industry connected
with agriculture like the tea industry and in our
opinion they justify the giving of a higher rate of
return on ca pita!.
Instead of 4% allowed by the formula the industrial
Tribunal fixed the return on reserves at 5% on the
ground of its " being sufficient to guard the interests
of the company" but the Labour Appellate Tribunal
increased it to 6% to meet repla:cements and rehabilitation charges since the "usual method of· calculating
these charges is not possible in the present case " and
"we are to see that the industry does not suffer for
want of replacement and rehabilitation·funds and must
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s.e.R.
SUPREME COURT REPORTS
331
provide such funds in some other way, namely, by
allowing a return on the working capital at higher
rates". In the absence of any claim in the respondent's Written Statement for rehabilitation or any
figures for determining this amount, this extra one
per cent. is insupportable. It is not a case where a
claim could not be made or figures could not have been
given at the proper stage. The additional one per cent.
cannot therefore be allowed.
In our opinion the
reasons given by th~ Industrial Tribunal sufficiently
support the giving of 5% on the reserves as being fair
.considering the risks of the tea industry which is
exposed· to various ad verse circumstances and elements.
The Industrial Tribunal has not acted unreasonably
nor in disregard of any accepted principles in qalculating the return on reserves at 5% and we see no cogent
reason for varying this rate.
The respondent has, since 1926, been paying bonus to
its employees according to a scheme called the " unit
scheme" which according to the Industrial Tribunal
has the merit of being more rational and gives incentive to industrious habits and efficiency leading to more
production. The Labour Appellate Tribunal did not
go into the merits of the scheme but ordered pay1mmt
according to it. Under this scheme unit.s are credited
to each workman, taking into consideration the import~
ance of the job he holds, the wages he gets ·and the
number of years he has been employed in that particular job. The value of units so awarded thus vary
commensurate with considerations of efficiency and
experience ... The establishment is divided into twelve
categories a,nd the medical staff into three each based
on the relative importance of the nature of work done
by a workman. Thus in the deiicending order of their
importance the jobs are classified as: J. Head Mohori;
2, Head Clerk ; 3. Divisional Mohori; 4.• Land Mohori;
Hazaria Mohori ; 5. Kamjari l\fohori; 6. Godown
Mohori; 7. 2nd Tea. House Mohori; 2nd Kerani;
2nd Hazaria Mohori ;
8.
2nd Godown
Mohori ;
9. <!:unti Mohori ;
10.
3rd Tea House Mohori ;
II. Monda!; 12. Apprentices.
Units would. thus be awarded to workmen m the
•
•
Workmen of
Assam Co.
v.
Assam Co. Ltd.
Kapur].
•
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1¥ orknien of
Assam Co.
v.
Assa1n Co. L.1d.
Kapur].
332
SUPREME COURT REPORTS
[1959]
particular category they are in and the more qualified
the worker the better his work and the higher his
wage, the higher the number of units he would be
entitled to. The amount available for distribution as
bonus is divided by the aggregate number of units
of all the workmen ·participating in the scheme and
each worker would be entitled to a multiple of the
amount payable on one unit and the units to his credit.
It appears to us that the estimate of the Industrial
Tribunal as to the suitability of"the scheme was fully
justified and payment of bonus in accordance with this
scheme will not only result in fair distribution of bonus
but would also lead to improvement in the quality and
quantity of work. This scheme is not to be confused
with production bonus though it has the merit of
combining the fair distribution of the surplus available and the maintenance of efficiency in• the
establishment.
Taking the figures on the basis of the award made
by the Industrial Tribunal we find that Rs. 7,64,608
would be the surplus for the year 1950, Rs, 77,823 for
1951 and a deficit of Rs. 10 lacs for the year 1952.
The total sum available for three years will be nil. On
the basis of the claim which counsel for the appellant
has made before us, i. e., two months' wages, we find
that the amount of bonus required for the members of
the staff for the year 1950 will be one sixth of
Rs. 4,63,095 and for the year 1951, one sixth of
Rs. 4,83,893 and for 1952 one sixth of Rs. 5,31,202
which works out to Rs. 77,182 for 1950, Rs. 80,647 for
1951 and Rs. 88,533 for 1952. The amounts required
for the artisans further increase these figures.
No
doubt on the calculations which have now been made
the appellant may justify the claim of two months'
bonus for the year 1950 but the same cannot be said
in regard to the claim for the years 1951 and 1952
because of the available surplus which is
only
Rs. 77,823 for 1951 and there· is a deficit of about
10 lacs of rupees for the year 1952.
Taking all these
figures into consideration, we are of the opinion' that
the amounts awarded by the Industrial Tribunal are
fair and proper. As the Labour Appellate Tribunal
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S.O.R.
SUPREME COURT REPORTS
333
allowed depreciation and rehabilitation on an erroneous
basis, we would set aside the order of the Labour
Appellate Tribunal and would restore that of the
Industrial Tribunal with this modification that the
Respondent shall make available the
additional
amount required for payment of the proportional bonus
to the artisans.
• The appeal is, therefore, allowed to this extent, the
order of the Labour Appellate Tribunal set aside and
the award of the Ind11strial Tribunal restored with this
modification that the respondent shall also provide an
additional amount for these three years for payment
to the artisans of proportionate bonus on the basis of
the "Unit System". As neither of the parties have
succeeded in their main contentions, the fair order in
regard to costs should be that the parties do bear their
respective costs throughout.
KANHAIYALAL
v.
Dr. D.R. BANAJI AND OTHERS
(B. P. SINHA, JAFER IMAM and SuBBA RAO JJ.)
R~venue Sale-Property in possession of Receiver appointed by
Court-Absence of leave of Court for sale-Notice to Receiver not
given-Whether sale illegal-Whether suit to set aside sale by civil
court barred-Berar Land Revenue Code, I928, ss. I55, IS6, Ij7, I92.
The appellant was the auction-purchaser of the property at
a revenue sale held under the provisions of the Berar Land
Revenue· Code, 1928, for recovery of land revenue due. The
property at the time of the attachment and sale was in the possession of a Receiver appointed under Or. 40, R. 1 of the Code of
Civil Procedure by the Jilombay High Court. Notice to the
Receiver, however, was not given of the attachment and sale of
the pi;operty, nor was any leave of the Court taken for the sale.
In a suit instituted by the Receiver for a declaration that the sale
was a nullity o~, at any rate, was illegal and liable to be set aside,
the auction-purchaser contended that the sale without notice to
•
Workmen of
Assam Co.
v.
Assam Co. Ltd.
Kapur ].
lvJarcll JI.