# WORKMEN OF M/S. HINDUSTAN MOTORS LTD v. M/S. HINDUSTAN MOTORS, LTD., & ANR

- **Citation:** [1968] 2 S.C.R. 311
- **Court:** Supreme Court of India
- **Decided:** 1968
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-m-s-hindustan-motors-ltd-v-m-s-hindustan-motors-ltd-anr-4327
- **Pages:** 42

## Headnote

A
WORKMEN OF M/S. HINDUSTAN MOTORS LTD.
v.
M/S. HINDUSTAN MOTORS, LTD., & ANR.
Norember 2 ~, 1967
8
!M. HIDAYATULLAH, V. BHARGAVA AND C. A. VAID!ALINGAM, JJ.J
c
D
E
F
G
H
Industrial Dispute-Bo1111s-Rehahilitatio11 surpl;1s,
calcu/!:1tio11
ojAge of machinery-Multiplier-Deductions to be made-DepreciationReturns 011 H-·orkine caoita/ nr,d oai-1 uo
canital--E-ttr-anC'OU'i
i11con1clnterest on fixed deposits-Home delivery
commission paid by foreign
collaborator.
The workmen of the respondent company raised an industrial dispute
about bonus claimed by them for the year
1960-61.
The
Industrial
Tribunal applying the Full Bench Formula held that the sum needed for
rehabilitation of machinery exceeded the surplus otherwise available and
therefore no bonus was payable.
Against this decision of the Tribunal
the workmen appealed to this Court and raised various objections as ft)
the manner in which the available surplus was calculated by the Trihuna I.
HELD : (i) On the facts and .the evidence produced in the case the
life· of the respondent company's machinery should be taken at an average
of 15 years if the machinery is worked in two shifts. and 10 years if it
is ·worked in three shifts.
The artificial rule laid down in the Income-tax Act for calculation of
notional depreciation can provide no criterion at all fot determining the
life of the machinery, and the Tribunal committed an error in proceeding on that basis. [319 HJ
The life Of machinery taken in other ca.s>~s is also net a correct basis
for fi.xing tLJ· life of machinery in a particular case.
Various factor<
come _in that affect the useful life of a machinery. Factors such as the
qualitv of the material used in the machines, and the nature of the material on which the machines are to operate, very materially affect their life.
Funher the life. of a machine will also depend on the manner in which
it is handled in a particular factory.
Consequently the correct principle
is to determine the life of machinery in each case C'ln ·the evidence adduced
by the parties. [3 I 9 E-F: 320 DJ
Further what has to be determined is the useful life of the machinerv
rather than itS ecoilomic life.
In fact one of the very major considera-
:ions which should be taken into account is the actual P'"actice of the
manufacturers using the machinerv and, if the evidence be available, to
find out hov.' long the manufacturers continue to use the machinery as a
rule.
r324 D~Hl
·
The fact that in the Full Bench Formula the br<'kdown value of
machinery is taken at 5 % is certainly an aspect to be taken into account.
but it cannot be accepted that a machinery should be deemed to have
useful life until it reaches the st~ge of havin.I! a breakdowr valu·e of 5%-
No such ahsolut~ rule can be inferred. f328 Al
The Tribunal was wrone in not takinl! into account machinerv installed during- the b_onus year itself for making provision for rehabilitation.
1f any machiricry is iristalk.J in th'? bonus yea.r. the company. would h-:
312
SUPREME. COURT
REPORTS
[I 968) 2 S.C.R.
justified in claiming that it must immediately start making provision
for
A
1" ~ohabili'tation, though the period for rehabilitation of that machinery
would only start at the end of ·th·o bonus year. [330 A-Cl
(ii) The multipliers given by the company in the schedule originally
submitted by the company which were not objected to by the workers
\Vere the correct basis for calculation of the rehri.bilitation ·cost and the
Tribunal should not have departed' from them.
There was no justification for taking an average of the multipliers submitted at first and those
B
submitted thereafter in a second schedule.
The Tribunal also was not
justified in reducing the multiplier~ on the ground that the new machines
which would be purchased to replace the original ones would necessarily
have more productive capacity. There was no material .at all from which
the Tribunal coulcL justifiably have inferred that the increase in production would be so material as to attrac

## Text

_Characters 0–39,961 of 119,016. This is a partial read: ask again with offset=39961 for what follows._

A
WORKMEN OF M/S. HINDUSTAN MOTORS LTD.
v.
M/S. HINDUSTAN MOTORS, LTD., & ANR.
Norember 2 ~, 1967
8
!M. HIDAYATULLAH, V. BHARGAVA AND C. A. VAID!ALINGAM, JJ.J
c
D
E
F
G
H
Industrial Dispute-Bo1111s-Rehahilitatio11 surpl;1s,
calcu/!:1tio11
ojAge of machinery-Multiplier-Deductions to be made-DepreciationReturns 011 H-·orkine caoita/ nr,d oai-1 uo
canital--E-ttr-anC'OU'i
i11con1clnterest on fixed deposits-Home delivery
commission paid by foreign
collaborator.
The workmen of the respondent company raised an industrial dispute
about bonus claimed by them for the year
1960-61.
The
Industrial
Tribunal applying the Full Bench Formula held that the sum needed for
rehabilitation of machinery exceeded the surplus otherwise available and
therefore no bonus was payable.
Against this decision of the Tribunal
the workmen appealed to this Court and raised various objections as ft)
the manner in which the available surplus was calculated by the Trihuna I.
HELD : (i) On the facts and .the evidence produced in the case the
life· of the respondent company's machinery should be taken at an average
of 15 years if the machinery is worked in two shifts. and 10 years if it
is ·worked in three shifts.
The artificial rule laid down in the Income-tax Act for calculation of
notional depreciation can provide no criterion at all fot determining the
life of the machinery, and the Tribunal committed an error in proceeding on that basis. [319 HJ
The life Of machinery taken in other ca.s>~s is also net a correct basis
for fi.xing tLJ· life of machinery in a particular case.
Various factor<
come _in that affect the useful life of a machinery. Factors such as the
qualitv of the material used in the machines, and the nature of the material on which the machines are to operate, very materially affect their life.
Funher the life. of a machine will also depend on the manner in which
it is handled in a particular factory.
Consequently the correct principle
is to determine the life of machinery in each case C'ln ·the evidence adduced
by the parties. [3 I 9 E-F: 320 DJ
Further what has to be determined is the useful life of the machinerv
rather than itS ecoilomic life.
In fact one of the very major considera-
:ions which should be taken into account is the actual P'"actice of the
manufacturers using the machinerv and, if the evidence be available, to
find out hov.' long the manufacturers continue to use the machinery as a
rule.
r324 D~Hl
·
The fact that in the Full Bench Formula the br<'kdown value of
machinery is taken at 5 % is certainly an aspect to be taken into account.
but it cannot be accepted that a machinery should be deemed to have
useful life until it reaches the st~ge of havin.I! a breakdowr valu·e of 5%-
No such ahsolut~ rule can be inferred. f328 Al
The Tribunal was wrone in not takinl! into account machinerv installed during- the b_onus year itself for making provision for rehabilitation.
1f any machiricry is iristalk.J in th'? bonus yea.r. the company. would h-:
312
SUPREME. COURT
REPORTS
[I 968) 2 S.C.R.
justified in claiming that it must immediately start making provision
for
A
1" ~ohabili'tation, though the period for rehabilitation of that machinery
would only start at the end of ·th·o bonus year. [330 A-Cl
(ii) The multipliers given by the company in the schedule originally
submitted by the company which were not objected to by the workers
\Vere the correct basis for calculation of the rehri.bilitation ·cost and the
Tribunal should not have departed' from them.
There was no justification for taking an average of the multipliers submitted at first and those
B
submitted thereafter in a second schedule.
The Tribunal also was not
justified in reducing the multiplier~ on the ground that the new machines
which would be purchased to replace the original ones would necessarily
have more productive capacity. There was no material .at all from which
the Tribunal coulcL justifiably have inferred that the increase in production would be so material as to attract the principle of
apportionment
Iafd down by this Court in the case of the Associated Cenu~nt Co1npanies
Lid. [331 A-F; 332 D-E]
C
(iii) Io calculating the rehabilitation requirement for the machinery
the depreciation pro\ision .made in accordance with the principles of con1mercial accounting has to be deducted from the amount that would be
required to purchase the new machinery for replacement.
The contention tbat deduction shoUid be made onlv of depreciation reserves
available to the employer cannot be accepted.
Such an interpretation mili-
"t'ltes against the very purpose for which rehabilitation provision is allO\\'-
D
ed., namely, to enable the industry to cover the difference between the
amount of depreciation which is recouped by making provision for it in
accorc1ance with the principles of commercial accounting and the a1nount
that would be required to purchase the new machinery for replacement.
Therefore, in the present case, the Tribunal erred when in calculatin!}
the provision for re,liabilitation it took tlie entire orice of the replace1nent machinery. as required to be provided, entirely out of profits ~'ithout reducing tho.;: price to the extent of the depreciation provided for in
E
th·e accounts. r333 E-334 B-FJ
(iv) The claim of the workmen that the sum shown in 1he balancesbeet of the company as development rebate reserve should be deducted
from th;:! available sur_olus mn~t be afJoWed.
The mere sta'ement of the
General Manager on affidavit to the effect that the reserves had been
utilised as part of the ~vorking capital could not be accepted as evidence
of the fact.
When the balance·shePt it1:elf ':ho\ved
tha~ cash amounts in
the form of fixed deposits were available which were far in excess of the
development rebate reserve in question, there would be no iustification
for holding that this develooment rebate reserve was not avi.iilable as :i.
liquid asset and had been included by the company in the working capital.
This development rebate reserve was a liquid asset
available
for
rehabilitation and consequently liable to· be deducted when calculating
the rehabilitation requirement. [335 A-Gl
( v) If some machines have fully run out their lives, they must necessarily be replaced out of resources available immedi~tely and -f,herc would
be no justification for keeping the available resources in reserve for future
rehabilitation while not providing out of those availahle re-sources fur
immediate. replaC,zmen'. of machinery.
There is also the aspect that an
employer in order to claim more and1 more rehabilitation provision \Vil1
have a tendencv to keep old blocks of machinerv running and to avoid
adoption of such a device it would be fair that he is required to utilise
~vailable resources at the vcrv first opportunity when the old blocks of
machinerv require renlacement and cl~irn an·nnal
provision
for
future
,1nly in respect of that machinery which will require replacement later
F
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WORKMEN \', HINDUSTAN MOTORS LTD. (Bhargava, J.)
313
on.
Consequently. in the present case the depreciation provision and the
available development rebate ·reserve must be taken into account when
calculating the annual provision for rehabilitation required for replacement
of the earliest installed n1achincrv until i1: \.1/aS exhausted, whereafter the
annual requirement for the remiiining blocks of machinery Would have
to be calculated. ignoring these a\'ailabtc resources. [336 G-H; 337 C-D]
(vi) f.Jr the purpose of \\·orking -..1ut return on \li'Orking capital in
the year of bonus the origin of the fund used as working capital is immaterial and it cannot be said that the return must be allo\\.'ed only on
reserves used as working capital and not on any other funds used as
such. Ho\\·ever the fund must be available for investment before a claim
can he niade by the employer for a return on it. [340 E-F]
But, the mere existence of reserves and funds at the beginning of
the year, even taken together with their existence at the end of the year
cannot lead to any inference that these reserves and funds must have
formed part of the working capital during the year and could not form
part of oth~r items such as fixed deposits. investments etc.
The affidavit
filed by the company in this connection did not exclude lhc possibility
!hat they \\"ere utilised for purposes other than that of \\·orking capital.
In the balance-sheet the amouiits -w·hich
represented
fixed
assets,
fixed
deposits, investments and other loans and advances could not be classified as part of the working capital. The items representing working capital were r.urrent assets, stock-in-trade.
sundry
debts.
bank
and
cash
balances, certain loans and advances and insurance and other claims. The
i:ems representing working capital had a total valu~ of Rs. 498.02 lacs.
Deducting from this the sum of Rs. 377.34 lacs· available from ·subscribed
ca.pita! ·or other sources. there remained a balance of Rs. 120.68 lacs
which must have necessarily come out of the various reserves includinf!
the depreciation, and this amount at least must be held to represent resources actually used as working capital during the year by the company,
On this amount it would be fair to allow a 4% return to the company.
[344 F-H; 347 D-El
(vii) The company's claim that half the amount from the fol101?ing
sources, namely. (I) the profit in the profit and loss account \\"orked out
at the end of the vear, (2) depreciation reserve for the year. (3) development rebate for· the vear. (4) value of discarded fixed, assets written off
should be treated as a fund which v.:as available during 1!he bonus year
for being available for being utilised as working capital, could not
he
accepted. There was nothing to show whether any of these amounts became available to the companv during the year and if so \vhen thev came
available. D47' F!
(viii) In allowing 6% return on paid-up capital in accordance \\1ith
the Full Bench Formula no question could arise of deducting the amount<;
G
inYested in subsidiary companies from the paidrup capital because the
said investment
had not be·~n held to have corn·e out of paid-up cani«d
f348 Fl
(ix l The income of the con1panv fron1 interest on :fixed deposit.;; was
its extraneous income which accrued to the company without any contribution by the workmen.
This income had therefore to be excluded in
-calculating the available surplus.
At the same time the company could
not on equitable grounds be permitted to claim the interest paid by it
0n its borrowings as business expenditure. Therefore the interest on fixed
deposits was to be treated as extraneous income
onlv after deducting
from it the interest Paid on the borrowings. [349 D-F]
SUPREME COURT REPORTS
jl%8]2 SCR
t\) fhl' 1ncon1c rccci\'cd by the con1p,lny fro1n its
foreign
collaho-
,.\
r;itors a~ comn1i~s.on on sales effected ry the ~aid collaborators of their
ov. n cars in India was extraneous income to v.·hich the compan!·'s \\·orkmen made no contribution. lt was not therefore to be taken into account
in cak:ul01ti-1lg the availahlc surplus. (349 (~]
(xi) Calculated in the above manner the available surplus
came to
Rs. 30.56 lacs. The Tribunal was not right in its decision that the com·
pany \i.-.is n-.Jt in a posilion to pay bonus at all.
Ho~·..!'vCf. though the
B
company had earned a large amount of profit in tbe year of bonus it
had for quite a large number of years been running at a loss. The aYail- ·
able surplus being only Rs. 30.56 lacs, the workmen's demand of boJu'
equivalent to six months' wages amounting to Rs. ::!4 lacs \vas too hij?.h.
Jt \\'ould be just and proper to allov.· bonus at 20'if· of their annual v.·ages
\\ hich \\·ould come 10 R .... 8.tio l:1cs. ! 35~ A-El
Associated Cement Cotnpanies Ltd. D"·arka Cement Works.
J)lrar;a
c:
v. If\· ll"u1k111en & Anr. 11959] S.C.R. 925. Sa.rhy &
J-"cn11er /l.la:door
l/11io11. ("11!c11/la \'. 1\1/s, Su.\'hy & Fan11er (/nc/ia) Ltd. {1955) L.A.C. 707,
ll,.ork111c11 of ,\/.',_ Sa.rhy & F(Jrlll'.'r 1J11Ji(I) P1·t, Lid. v. ,\1:'\. Saxby &
Fun1tcr (/udi(.) l'rii·<11e I.lei. C.t\. 152,'64 Jt. 12-4-1965, The A-fil/vwner.\"
A,·~oci..1rio11. /Jo1J1bav \'. Tht• Ra\·h1riva Ji;lill Mu:door San;?h, Bo111haY, [1950]
I ... L.J. 1247. The ilo11ora11· Secre1Qry South India Millo•0 11er.~· As5ociatio11
& Ors. v. The Secretary, Coimbatore District Textile
..Vorkers'
Union.
~ J 962]
2 Supp.
S.C".R.
926.
l\'utivna/ J:::nginerrin.i: lncluHri<·~ ltd. v.
I)
Tlit• Work1r1t'n & Vice. Versa,
(1968)
1 S.C.R. M.ts. Tita;?hi:ir Paper
.\1ills Co. Lui. '" ii.< Workmen, [1959] Supp, 2 S.C.R. 10~2. Mil/owners.
A<.rocia!ion, Bombay v.
Tlie Rashtriya Mill Mazdoor Sangh, [1952] 1
L.L.J. 518.
Tata Oil Mills Co. Ltd. v, !rs Workme11 & Ors. [1960] 1 S.C.R. l,
Anil Starch.Products Ltd. v. Almudabad Chemical Workers' U11io11 & Ors.,
A.LR. 1960 S.C. 1346, Kha11desh Sp11 &
Wvg. Mi/fr Co.
Ltd. v. The
E
RcL<l>triya Girni Kamgar Sangh, Jnlgaon.
[1960]
2 S.C.R. 841, Bengal
Ka11azknl Mazcloor Unio11 & Ors. v. Titagarh Peper Mills Company, Ltd.,
11963] II L.L.J. 358 and Voltas Limit<d v. Its Workmen, [1961] 3 S.C.R.
167, col\sidered.
C1v1L APPELLATE JuR1s01cnoN : Civil Appeal No. 635 of
1965.
Appeal by special leave from the Award dated January 8.
1963 of the First Industrial Tribunal, West Bengal ;., Case No.
VJII-354 of 1961.
B. Sen, Janardan Sh"rma, P. K. Ghosh and S. K. Nandy, for
!he aopellants.
Niren De, Sulicitor-Grncral, M.
Mukherjee and Sa•dar
TJohad111'. for res?>ondent No. 1.
The Judgment of the Court was delivered by
Bhal'!lava, J.
This appeal by special leave has been filed by
the: workmen of Messrs Hindusta11 Motors Ltd. against the deci-
<ion of the First Industrial Tribunal, West Bengal in a dispute
relating to payment of bonus for the year 1960-61.
The respondent. M/s Hindustan Motors Ltd., (hereinafter referred to as
F
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II
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WORKMEN v. HINDUSTAN MOTORS LTD. (Bhargava, J.) 315
·'the Company") was established in the year 1942 and, initially.
the work taken up by the Company was that of assembling of
motor cars from "omponents imported from foreign countries.
Later on, manufacture of components of motor cars was started
and gradually the Company developed this work of manufacture
of components by increasing the number of components manufactured by it until, at the present time, the Company is manufacturing more than 70% of the components utilised in the cars put
on the market by the Company.
The work of manufacturing
components was taken in hand for the first time in the year 1949,
according to the reply of the Company filed on 10th January,
1962, to the statement filed on behalf of the workmen before the
Tribunal.
At the initial stages of its existence, the Company was
running at a loss and even, as late as the year 1956, the Tariff
Commission's Report 011 the Automobile Industry mentioned that
this Company was making a loss of Rs. 8 33 per car on the Hindustan Landmaster which was the car put on the market by the
Company at that time.
Even subsequently, for several years. no
profit was shown in the profit and loss account and. consequently,
no bonus was paid to the workmen until the dispute about it was
raised for the first time in respe{;t of the year 1959-60.
We were
informed that the dispute relating to the payment of bonus for the
year 1959-60 is still pending before the Industrial Tribunal. while
the dispute with respect to bonus for the next year 1960-61 has
been decided and is now hefore us in this appeal.
In this year
1960-61, the profit and loss account of the Company showed a net
profit of Rs. 249.71 lacs.
Out of this, a sum of Rs. 59.53 lacs
was allocated for payment of dividend on ordinury shares @
12 % and a sum of Rs. 27 .55 lacs for dividend on preference shares
@8.57%. The total amount allocated for payment of dividends
was thus Rs. 87.08 lacs.
In view of the fact that, in this year,
the Company had earned a net profit of over Rs. 249 lacs. the
workmen demanded bonus equivalent to six months' wages.
The
monthly wage bill of the workmen is about Rs. 4 lacs, so that the
total amount claimed towards bonus by the workmen came to
Rs. 24 lacs.
It was also stated on behalf of the workmen that. if
this bonus to the extent of Rs. 24 lacs is awarded, the actual
amount which the Company would have to pay will only be 55 %
of this amount, because 45% representing income-tax on this
amount would. be refundable to the Company from the Government.
Before the Tribunal, there was no dispute between the parties
that, in crder to find out whether any surplus was available for
distribution of bonus, calculations must be made on the basis of
the Full Bench Formula approved by this Court in The Associated
Cement Companies Ltd., Divarka Cement Works, Dwarka v. It.<
:116
SUPRl!MI! COURT
REPORTS
[ 1968) 2 S.C.R.
Workme11 & A not her( 1).
The Tribunal, after making all other
deductions from the surplus which have to be made in accordance
with the Full Bench Formula and without taking into account
provision for rehabilitation, arrived at a figure of Rs. 87 .80 lacs
as the amount of surplus available.
Thereafter, the Tribunal
held that a sum of Rs. 373.62 lacs every year was needed for
rehabilitation purposes and, since this amount very much exceeded the surplus otherwise available. there was no scope for granting
any bonus at all.
Consequently, the Tribunal decided the reference against the workmen and held that no bonus was payable
for chis year.
The workmen have come up co this Coun against
~his decision of the Tribunal.
Jn chis appeal also, there is no dispute that the principles to be
applied for working ouc che surplus available for distribution of
bonus muse be those approved by chis Coun in the case of Associated Cement Companies Ltd. ( 1). On behalf of the workmen.
however, ic was urged that the Tribunal
committed an error in
applying the Formula in respect of five different items involved
in the calcul~tion.
These arc :
(I) Rehabilicacion,
( 2) Return on reserves used as working capital,
( 3) Return on paid-up capital,
( 4) Inceresc on fixed deposits, and
( 5) Home delivery commission.
Of these items, the most controversial is the first item of rehabiliuaion and that is also the most material one, because, if the figure
of annual rehabilitation arrived at by the Tribunal is accepted, it
is clear chat no surplus can possibly remain out of the profits
earned during the year for distribution of bonus.
In Che calculation of rehabilitation, various factors arc involved which have
been indicated by this Court in the case of Associated Cement
Companies( 1). The factors in calculation of rehabilitation accepfed by the Tribunal which have been challenged by the workmen
are:
( i) the divisor, which depends upon the life of the
plant, machinery and buildings, the year of their
installation or erection, and the residuary life
which must be taken into account when working out the divisor.
(ii) the calculation of the multiplier for arriving at
the replacement cost of the old machinery which
requires rehabilitation, and
-(!) fl9-59) S.C.R. 925.°-
A
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WORKMEN v. IDNDUSTAN MOTORS LTD. (Bhargava, J.)
317
A
(iii) the deductions which should be made when
B
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working out the annual rehabilitation.
We shall now proceed to deal with. these points.
When the dispute was taken up for adjudication by the Tribunal, the Company, on 31st May, 1962 filed statements showing
calculations of rehabilitation provision required for rehabilitating
the plant, machinery and buildings. Amongst these statements
was a statement described as Schedule IA (hereinafter referred to.
as "the first Schedule IA") and in that statement it was claimed
on behalf of the Company that the average total life of its machinery was 6 years.
On behalf of the workmen, it was urged that
the life of the machinery should be taken to be 30 years and on
this basis, after the arguments were over a rehabilitation cost
calculation was filed on 21st November, 1962. Thereafter, in the
course of arguments on 22nd November, 1962, some fresh statements were filed by the Company.
These statements in respect
of the machinery had two new Schedules, both marked as Schedule
IA. In one of these Schedules IA filed on 22nd November,
1962, the multiplier taken for replacement of the machines installed in various years was higher than the multiplier in the first
Schedule IA. This Schedule shall be referred to as "the second
Schedule IA".
At the same time, as mentioned earlier, another
Schedule 1 A was filed and, in this Schedule IA, the multipliers
were the same as in the first Schedule lA. This shall be referred
to liereiriafter as "the tl}ird Schedule lA". In none of these
Schedules filed, either on behalf of the Company or on behalf of
the workmen, was there any classification of plant and machinery
into precision or non-precision machinery. Some statements for
the purpose of calculation of rehabilitation were again filed on
behalf of the Company on 28th December, 1962 under the directions of the Tribunal and it appears that, taking into account the.
evidence which had been led before the Tribunal, the Tribunal at
this stage asked the Company to give separate Charts for precision machinery and non-precision machinery.
Consequently, the
statements filed on 28th December, 1962 classified the machinery
into precision and non-precision machinery.
It seems that the
Tribunal, in making this direction, was also influenced by the
circumstance that, under the Income-tax Law, the depreciation
allowed in respect of precision and non-precision machinery is
different, from which the Tribunal inferred that precision machinery will have a shorter life than non-precision machinery. In
fact, the Tribunal was of the view that the proportion between
the life of precision and non-precision machinery can be safely
taken to be the same as the proportion between the depreciation
allowed ih respect of the two.
Proceeding on this basis, the Tribunal, in the statements prepared for and annexed as part of the
L!Sup.C.I.168~6
318
SUPllEMB OO'U1T llBPOllTS
(19~8] 2 S.C.R.
Award, classified the machinery into precision and non-precision
machinery and worked out different life for the. two kinds of
machinery.
In the course of arguments before us, it was urged
on behalf of the workmen that the Company not having claimed
that machinery classified as precision had a shorter life than
machinery classified as non-precision either in the written statements or at the stage of filing the first Schedule IA or even the
second or third Schedule 1 A, there was no justification for the
Tribunal to accept this classification and
work
out
dlfferent
periods of life for different classes of machinery.
Mr. Niren De.
counst: appearing on behalf of the Company, in his argument
before us also urged that the Company at no stage put forward
the case that the machinery should be classified into precision and
non-precision machinery and different life should be attributed to
the two classes of machinery.
According to him. the Company's
case throughout has been that all machinery installed in the factory of the Company has an economic. life of 6 years only, so that
the Company is not prepared lo justify the decision given by the
Tribunal on the basis of this. classification.
Since both parties
before us challenge the adoption of this classification by the
Tribunal, we consider that it will be rig.ht to ignore this classification and to proceed on the basis that the total life of the machinery
must be worked out on an average for all the machines installed
in the factory of the Company, without making any distinction
between precision machinery and non-precision machinery.
As we have mentioned earlier, the contention on behalf of the
l\·orkmcn was that the life of the whole machinery should be taken
to be 30 years.
Mr. B. Sen, cmmscl appearing on behalf of the
workmen, drew our attention to a number of cases, in which the
life of the machinery came up for consideration either before the
Labour Appellate Tribunal or before this Court in connection
with calculation of rehabilitation provision.
The first case brought
10 our notice was Saxby & Farmer Mazdoor Union, Calcutta v,
M/s. Saxby & Farmer (India) Ltd .. Calcutta('), in which, for
purposes of calculation of rehabilitation, the life of machinery was
taken to be 30 years.
Another case between the Workmen of
M/s. Saxby & Farmer (India) Pvt. Ltd. v. Mis. Saxby & Farmer
(India) Private Ltd.(') in respect of a subsequent year came up
before this Court.
In that case. the Tribunal, in its Award, fixed
the life of the machinery at 20 years and on behalf of the workmen it was urged that it should have been 30 years as accepted by
the Labour Appellate Tribunal in respect of the carl~r year in the
case of
Saxby & Farmer Mazdoor Union, Calcutta(').
This
Court held that the life of 30 years had been laken at a time when
(I\ (t959] L.A.C. 707.
(2) Civil Appeal No. 152of1964 decided on t2-4-1965.
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WORKMEN :v .. HINDUSTAN MOTORS LTD. (Bhargava, J.)
319
the machinery was being worked in two shifts, while, in the subsequent case, it was shown that the machinery was working in three
shifts, so that it could not be said that the Tribunal was wrong in
fixing the life in this subsequent case at 20 years.
Relying on
these cases, Mr. Sen urged that, in the present case also, we should
take the life of the machinery to be 30 years.
In The M illowners'
Association, Bombay v. The Rashtriya Mill Mazdoor Sangh,
Bombay('), the Full Bench of the Labour Appellate Triburtal,
when laying down the formula that was . later approved by this
Court, appears to have accepted the life of textile machinery as
25 years, while this Court, in the case of the Associated Cement
Companies Ltd.("), proceeded on the basis that the life of the
machinery was 30 years.
In the Honorary Secretary, South India
Mil/owners' Association and Others v. The Secretary, Coimbatore
District Textile Workers' Union( 3 ), this Court confirmed the finding of the Tribunal that the estimated life of the textile machinery
of the Company concerned in that case should be taken to be 25
years.
It is on the basis of these decisions that the clain1 was put
forward that the life of the machinery in the present case should
also be taken to be 30 years or at least 25 years.
In our opinion,
this argument proceeds on an entirely incorrect basis.· The life
of a machinery of one particular factory need not necessarily be
the sanie as that of another factory.
Various factors come in
that affect the useful life of a machinery.
There is, first, the consideration of the quality of machinery installed. If the machinery
is purchased from a country producing higher quality of machines,
it will naturally have longer life than the machinery purchased
from another country where the quality of production is lower.
Again, the articles on which the machinery operates may very
markedly vary the life of a machine.
If, for example, a machine
is utilised for grinding of cement,· the strain on the machine will
necessarily not be the same as on a machine which operates on
steel or iron.
We are, therefore, unable to accept the suggestion
that the life of the machiner.y in the present case- should have been
filled on the basis of the life accepted in other cases in which decisions were given on bonus disputes either by the Labour Appellate
Tribunal or by this Court.
The Tribunal, in its decision, worked out the life of the machinery on the basis .of the percentage of depreciation allowed under
the Income-tax Act.
The application of this principle bas been
attacked before us by both the parties. It is urged that the artifi-·
cial rule laid ciown in the Income-tax Act for calculation of
notional depreciation can provide no criterion at ail for determining the iife of the machinery.
We think that the parties are
(I) [1950] L.L.J. 1247.
(2) (1959] S.C.R. 925.
(3) (1962] 2 Supp. S.C.R. 926.
320
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( 1968] 2 S.C.R
correct and that the Tribunal committed an error in proceeding on
this basis.
Though, in the case of tlze Honorary Secretary, Sowlz India
Millowncrs' Associatio11 (1), this Court, on tbc facts of that case.
accepted the lifo of the textile machinery as 25 years, the Court
also laid down the principle for finding out the life of machinery
in the following words :-
"We are not prepared to accept either argument
because, in our opinion, the life of the machinery in
every case has to be determined in the light of evidence
adduced by the parties." (p. 933)
Obviously, this is the correct principle, because it is only when the
life of machinery is determined in the light of evidence adduced
by the parties in a particular case that the authority determining
the life can take into account all the factors applicable to the particular machinery in question.
As we have indicated earlier.
when determining the life of a machinery, factors, such as the
~uality of the material used in the machines and the nature of the
material on which the machines arc to operate. very materially
affect their oife.
further, the life of a machine will also depend
on the manner in which it is handled in a particular factory.
We.
consequently. in this case proceed to examine the evidence given
by tile panics in this behalf.
Jn order to prove the life of machinery. one method usually
adopted by the Companies is to tender evidence of experts.
Jn
the present ca>e. the Company tendered in evidence the statement
of an expel'!, Gerald Waplington. which was recorded earlier on
5th November, 196 I by the fifth Industrial Tribunal in a disput~
pending before it.
That dispute was also between this very Company and its workmen.
In giving the life of machinery, Waplington first classified the machines into two classes-general purpose
machine tools and special or single purpose machine tools-and
expressed the opinion that a general purpose machine tool used
for one single operation is likely to have a shorter economic life
than special or single purpose machine tool.
According to him. a
general purpose machine carrying on work of high accuracy will
have an economic life of the order of 2 to 3 years only, while a
special purpose machine doing similar work of high accuracy
working 400 hours a month will have· an economic life of S to 6
vcars.
If the work taken from the machines is of less accuracy.
ihen, in his opinion. a general purpose machine may have an economic life up to 5 years, and a special purpose machine an econo·
mic life of 7 to I 0 years. Jn his evidence. further. he made a dt>-
(1) [t962] 2 Supp. S.C.R. 926.
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WORKMEN v. HINDUSTAN MOTORS LTD. (Bhargava, J.)
321
tinction between economic life and ·useful life.
He twice stated
that economic life of a machine would be only 1/3rd .of the useful
life of the machine, so that if, on the basis of his evidence, the
useful life of various classes of machines mentioned by him is to
be worked out, the number of years given for each class by him
above will have to be multiplied by 3.
Thus, according to his
evidence·, the economic life of a machine will vary from 2 to 3
years as a minimum to 7 to l 0 years at the maximum, and working out the useful life on the basis of his statement that economic
life is.only 1/3rd of the useful life, the machines would ha\'e a
minimum of 6 to 9 years and a maximum of 21 to 30 years useful
life.
We shall consider what inferences can be drawn from his
statement at a later stage when we have discussed the other
evidence available in this case.
It may, however, be noted that
Waplington 'is the only expert who can be held to be entirely disinterested, because the other two experts examined are employed
as Engineers by the Company itself.
This .independent witness,
Waplington, was not asked whether he had seen the various
machines in the factory of the Company, nor was he at any time
requested to indicate how many different machines in the factory
of the Company would fall in the various classifications mentioned
by him for which he has given different periods in respect of economic life.
The Other two witnesses examined are Joseph Joyct:, Genera 1
Master Mechanic, and Girish Chandra Bansal, Master Mechanic,
employed by the Company.
Both of them have, in their statements given out their qualifications and experience which they
have in dealing with automobile manufacturing machinery.
According to Joyce. the economic life of the machinery of the
Company cannot go beyond 6 years, and this statement was made
on the basis of the machines working 16 hours a day in two shifts
of 8 hours each.
Later on, he added that, applying American
standard, the life of the machines can only be 6 to 10 years.
In
giving the life, he qualified that word with "economic" or "economic useful", so that he equated economic life with economic useful life and gave the figures on this basis.
In cross-examination.
he, h0wever, admitted that useful life of a machine is longer than
its economic life.
Thus, if various statements of his are taken into
account and it is kept in view that he is an employee of the Company, it may be accepted that, according to him, the maximum
economic life of the machinery of the Company will be between
6 to 10 years and the useful life will be longer; how much longer,
he has not indicated. If we were to assume that he is ;:sing the
expressions "economic life" and "useful life" in the same sense
in which they were used by Waplington, economic life would be
I/3rd of the useful life, with the result that, on his evidence, useful life of the machinery of the Company would work out to be
SUPREME COURT REPORTS
[1968] 2 S C.R.
anywhere between 18 to '.lo years.
The third witness. Girish
Chandra Bansal, estimated the efficient economic life. based on
16 hours per day working, at 6 to I 0 years, which coincides. with
the c'tunate by Joyce.
In his case, however, no questions were
put to elicit from him whether he would
make any distinction
between efficient economic life and useful life, so that his evidence
<loes not appear tc carry us any farther than the evidence of Joyce.
It may be added that both these witnesses in their evi:Jence
st:i.ted that the workmen employed by the Company we;e not
very skilled workers and this was a factor that had to c. taken
into account in considering the life of· the machine.< in this
Company.
It is obvious that, if a machine is handled ry a more
skilful worker. it will last longer and have a longer life.
A
statement was also made by Joyce that machines running at high
speed will have shorter life than those running at k'wer speeds;
but this general statement made by him ofter~ no as'lstance to us
in this case, because he has not indicated· in his
·~vidence how
many and which of the machines of the Company run at high speed
and which at lower speed.
Apart from this evidence of experts, th.: Company has attempted to provide some other data which can be of assistance in asse.»-
ing the life of the machinery.
In this connection, Mr. Niren De.
arguing the case on behalf of the Company, drew our attention to
the history of this Company which showe<l that, initially, this
Company star.led the work of assembly of cars from parts imported
from foreign countries some time in the year 1942-43, but, later,
the policy was altered and manufacture of components was taken
up and progressively increased so as to minimise foreign import.
He also pointed out that this policy of progressive proauction of
indigenous parts was pressed upon the Company by the Government and. for this purpose. drew our attention to the first and the
second reports of tho Tariff Commission in the years 1953 and
1956, as well as the report of the Ad Hoc Conunittre on Automobile Industry known as the Report of the Jha Committee. because
Sri L. K. Jha was its Chairman.
This report came out in the
year 1960.
It was urged by Mr. De that, due to this policy of
progressive increase in manufacture of new components. it was not
possible for the Company to find money to rehabilitate old machinery and. consequently. the fact that the Company continued to
use old machinery for a number of years should not be taken as
indicatin" that that machinerv still had economic or useful life.
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It was argued that the Company per force had to continue use of
t:1ese old machine'. because it was under pressure to expand its
activities by taking up manufacture of components and the CompJny was running at a loss.
It has already been mentioned earlier
that in the ~ond report of the Tariff Commission in 1956 it was
clearly stated th~t this Company was selling cars at a loss of
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WORKMEN v. HINDUSTAN MOTORS LTD. (Bhargava, J.)
323
Rs. 833 per car.
It is in this background that the evidence given
by the Company should be judged to find out what is the life of
the machinery possessed by the Company.
He also drew our
attention to the principles laid down in this connection by the
Full Bench of the Labour Appellate Tribunal in the Mil/owners'
Association's case('), and by this Court in the Associated Cement
Companies' case("). In the former case, when laying down the
principle that provision should be made for rehabilitation replacement and modernization of the machinery, the Tribunal held
that :
"It is essential that the plant and machinery should
be kept continuously in good working order for the
purpose of ensuring good return, and such maintenance
of plant and mach;nery would also be to the advantage
of labour, for the better the machinery the larger the
earnings, and the better the chance of securing a good
bonus.''
In the latt~r case, this Court, when examining the scope of claim
for rehabilitation. held that :
"this claim covers not only cases of replacement
pure and simple but of rehabilitation and modernisation.
In the context, rehabilitation is distinguished from ordinary repairs which go into the working expenses of the
industry.
It is also distinguished from replacement. It
is quite conceivable that certain parts of machines
which constitute a block may need rehabilitation though
:be block itself can carry on for a number of years; and
this process of rehabilitation is in a sense a continual
process.
Unlike replacement, its date cannot always
be fLxed or anticipated.
So with modernisation; and all
these three items are included in the claim for rehabilitation.
That is why we think' it is necessary that the
Tribunals should exercise their discretion in admitting
all relevant evidence which would enable them to
determine this vexed question satisfactorily."
Proceeding further to distinguish between cases of replacement,
modernisation and expansion. the Court held :
.. If it appears fairly on the evidence that the introduction of the modern plant or machine is in substance
an ·itein of expansion of the industry, expenses incurred
in that behalf have to be excluded.
On the other· hand,
if the employer had to introduce the new plant essentially because the use of the old plant-though capable
(ll [1950] L.L.J. 1247.
(2) [1959] S.C.R. 925.
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[1968] 2 S.C.R.
of giving service--was uneconomic and otherwise wholly
inexpedient, it may be a case of modernisation.
Similarly, if hy the introduction of a modern plant or
machine the production capacity of the industry has
appreciably increased. it would be relevant for the Tribunal to consider in an appropriate case whether it
would be possible to apportion expenses on the basis
that it is a case of partial modernisation and partial
expansion."
It will thus be seen that. \vhen considering the question of rehabilitation, what is esscmiallv to be taken into account is that the old
plant,. though capable o{ giving service, was uneconomic and
otherwise wholly incxpeclicnt when provision for its replacement
and rehabilitation, even though it will
include
modernisation.
would he fully justified.
In this context.