# WORKMEN v. MANAGEMENT DUNLOP RUBBER co. (Vaidialingam, J.)229

- **Citation:** [1974] 1 S.C.R. 228
- **Court:** Supreme Court of India
- **Decided:** 1973-05-04
- **Case number:** Civil Appeal No. 1291 of 1968
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-v-management-dunlop-rubber-co-vaidialingam-j-229-6664
- **Pages:** 12

## Headnote

228
WORKMEN
MANAGEMENT OF DUNLOP RUBBER COMPANY OF INDIA
LIMITED
May 4, 1973
I.A. N. GROVER AND c. A. VAIDIALINGAM, JJ.]
Industrial dispute--Claini for additional bo11us-'Extra11eous profit' -Rerurn
-011 share prc111i1an-Rehabilitation clain1-When may not be included in-profitrReserves use<..l as lt'orking capital-Mode of proof of.
A
B
For the years 1962 and 1963 the appellant~-workmen def!Ianded ~dditio~al
·bonus of three months' basic wages.
The tnbunal, to which ... the 1ndustnal
C
dispute was referred on a consideration of the materials placed before it _by
both the parties, accepted the case of the
respofident-rnanagement,
regard1~g
certain deductions made from the profits. and held that the bonus alread¥ _paid
to the workmen was sufficient and that they were not entitled to any add1t1onal
bonus for those two years.
Dh,missing the appeal to this Court.
.
HELD : (i) The commission and royalties received from Dunlop, L.K.,
D
fclr the two years were rightly not included by the respondent in its profits,
because, the evidence established that the circumstances under which the
respondent earned the amounts· showed that appellants had not made any
-contribution of work or labour for earning those araounts. It accrued to the
,respondent as extraneous income.
[233D~F]
Work1nen of Mjs Hindustan Motors Ltd. v. Mjs Hindustan Motors Ltd. &:
A11r. [19681 2 S .. C.R. 311, !ollowed.
E
Tata Oil Mills Co. Ltd. v. Its W01kme11 and Others [1960] l S.C.R. 1,
rreferred to.
(ii) The contention of the appellants that no return should be allowed on
the share pren1ium of Rs. 70 lacs was rightly rejected by the tribunal.
\Vhen
..a company makes a Rights issue, the Government, while giving consent, fixes
a cerlain amount of premium to be charged for those shares. Those shares
are issued only to the shareholders who ask for them and who pa;· the
F
premium an1ount in addition to the nominal value of the share. Under the
Companies Act. 1956. as amended, a capital introduced by lhe r.hareholders
in a company had to be shown in accordance with schedule VI as a separate
item.
But the share premium is not undistributed profit and cannot be distri~
buted as dividend. It is really the share capital of the respondent and therefore,
the respondent was justified in claiming 6% return on this amount. [234 A·Cl
(iii) Mere production of a balance·sheet by a company cannot be taken
G
as proof of a claim as to what portion of the reserves had been actually
used as working capital. The utilisation of any amount from the reserYes as
working capital has to be proved by an employer by adducing proper evidence
by wav of "affidavit or otherwise after giving opportunity to. the workn1en to
contest its correctness in cross·examination. The company will have to satisfactorily prove that the amount on which the return is claimed has been
actually used as working capital:
But in the present case the respondent has
-adduced oral and documentary evidence. It is not a case where merely profit
and loss account alone has been filed witbout any further evidence beirig
II
adduced by the respondent.
Therefore there is no basis for
the
contention
of the appellants that the respondent had not properly established its claim
for return on working capital [234G-H, 235 C-D]
A
B
WORKMEN v. MANAGEMENT DUNLOP RUBBER co. (Vaidialingam, J.)229
The Oriental Gas Company Ltd. v. Their Workmen, [197l] II L.k.J. 657
and liareilly Electricity Supply Co. Ltd. v. The Workmen & ·Ors. (1972)' I S.C.R.
241 referred to.
(iv) _(a) Even if the claim of the company for rehabilitation is rejected
completely, on the basis of the findings, that is, after taking into account the
claims of the respondent. allowed and rejected, and the rebate in income~tax
that may be received by the company, the workmen would still have been paid
bonus at a rate which has been accepted as correct by this Court. [237 <>Dl
(b) On the basis of the education to b.:: made according to the appellants
in respect of rehabilitation ctaim.

## Text

228
WORKMEN
MANAGEMENT OF DUNLOP RUBBER COMPANY OF INDIA
LIMITED
May 4, 1973
I.A. N. GROVER AND c. A. VAIDIALINGAM, JJ.]
Industrial dispute--Claini for additional bo11us-'Extra11eous profit' -Rerurn
-011 share prc111i1an-Rehabilitation clain1-When may not be included in-profitrReserves use<..l as lt'orking capital-Mode of proof of.
A
B
For the years 1962 and 1963 the appellant~-workmen def!Ianded ~dditio~al
·bonus of three months' basic wages.
The tnbunal, to which ... the 1ndustnal
C
dispute was referred on a consideration of the materials placed before it _by
both the parties, accepted the case of the
respofident-rnanagement,
regard1~g
certain deductions made from the profits. and held that the bonus alread¥ _paid
to the workmen was sufficient and that they were not entitled to any add1t1onal
bonus for those two years.
Dh,missing the appeal to this Court.
.
HELD : (i) The commission and royalties received from Dunlop, L.K.,
D
fclr the two years were rightly not included by the respondent in its profits,
because, the evidence established that the circumstances under which the
respondent earned the amounts· showed that appellants had not made any
-contribution of work or labour for earning those araounts. It accrued to the
,respondent as extraneous income.
[233D~F]
Work1nen of Mjs Hindustan Motors Ltd. v. Mjs Hindustan Motors Ltd. &:
A11r. [19681 2 S .. C.R. 311, !ollowed.
E
Tata Oil Mills Co. Ltd. v. Its W01kme11 and Others [1960] l S.C.R. 1,
rreferred to.
(ii) The contention of the appellants that no return should be allowed on
the share pren1ium of Rs. 70 lacs was rightly rejected by the tribunal.
\Vhen
..a company makes a Rights issue, the Government, while giving consent, fixes
a cerlain amount of premium to be charged for those shares. Those shares
are issued only to the shareholders who ask for them and who pa;· the
F
premium an1ount in addition to the nominal value of the share. Under the
Companies Act. 1956. as amended, a capital introduced by lhe r.hareholders
in a company had to be shown in accordance with schedule VI as a separate
item.
But the share premium is not undistributed profit and cannot be distri~
buted as dividend. It is really the share capital of the respondent and therefore,
the respondent was justified in claiming 6% return on this amount. [234 A·Cl
(iii) Mere production of a balance·sheet by a company cannot be taken
G
as proof of a claim as to what portion of the reserves had been actually
used as working capital. The utilisation of any amount from the reserYes as
working capital has to be proved by an employer by adducing proper evidence
by wav of "affidavit or otherwise after giving opportunity to. the workn1en to
contest its correctness in cross·examination. The company will have to satisfactorily prove that the amount on which the return is claimed has been
actually used as working capital:
But in the present case the respondent has
-adduced oral and documentary evidence. It is not a case where merely profit
and loss account alone has been filed witbout any further evidence beirig
II
adduced by the respondent.
Therefore there is no basis for
the
contention
of the appellants that the respondent had not properly established its claim
for return on working capital [234G-H, 235 C-D]
A
B
WORKMEN v. MANAGEMENT DUNLOP RUBBER co. (Vaidialingam, J.)229
The Oriental Gas Company Ltd. v. Their Workmen, [197l] II L.k.J. 657
and liareilly Electricity Supply Co. Ltd. v. The Workmen & ·Ors. (1972)' I S.C.R.
241 referred to.
(iv) _(a) Even if the claim of the company for rehabilitation is rejected
completely, on the basis of the findings, that is, after taking into account the
claims of the respondent. allowed and rejected, and the rebate in income~tax
that may be received by the company, the workmen would still have been paid
bonus at a rate which has been accepted as correct by this Court. [237 <>Dl
(b) On the basis of the education to b.:: made according to the appellants
in respect of rehabilitation ctaim. the respondent will be entitled to son1e
amount at least in that regard. Even if that lesser amount is taken into account
the available surplus will be reduced further, and, the result will be that even
the amount paid as bonus already by the respondent will be more than what
the workmen will be entitled to accordin2 to the decisions of this Court. {238
E-HJ
C
(c) 'fhc Industrial Tribunal, Calcutta, in relation to a claim for bonus for
the year 1957 had elaborately discussed the matter and allowed a certain sum
;:is rehabilitation charges. When once the tribunal had considered a :;imilar
claim and had adopted it on the basis of evidence adduced by the parties,
normally, the amount so awarded towards rehabilitation should be adopted even
though it will not be conclusive for subsequent years. In the Present case.
the rehabilitation claim was worked out only on the basis of replacement costs
of the year 1958. If the appellant's case was that the tribunal, when working
D ·out the claim for 1957 had not prQperly appreciated the evidence they should
have elicited from the witnesses who deposed on beh_alf of the respondent tha\
the figures furnished by the respondent are not correct and could not be
accepted.
But the appellants had not objected to the data adduced as "rel!
as the documents produced by the company with reference to its rehabilitation
claim.
No suggestions had been made to the various witnesses examined on
behalf of the respondent that the figures on the basis of which the rehabilitation
claim was made were in any way erroneous. f237G-238D]
E
F
G
H
Therefore, considering tP,e matter from any point of vie\\', the_re is no
question of the workmen being entitled to any additional bonus over and ::rbov.!
what has already been paid.
Mis Gannon Dunkerley and Co. Ltd. v. Their Work111e11, A.LR. 1971 S.C.
2567. followed.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 1291 of
1968.
Appeal by special leave from the Award dated October 29, 1967
of the Industrial Tribunal, Madras in Industrial Dispute No. 65 of
1966 published in the Supplement to Part II Section I of the Fort
St. George Gazette dated the 15th day of November 1967.
M. K. Ramamurthi, R. C. Pathak and J. Ramamurthi, for the
appellants.
B. Sen, C. Doraiswami and D. N. Gupta, for the respondent.
The Judgment of the Court was delivered byVAIDIALINGAM, /.-This appeal, by special leave, by the workmen
is against the award dated October 20, 1967, of the Industrial Tribual, Madras, in l.D. No. 65 of 1966 in so far as it declined to
grant additional bonus for the years 1962 and 1963.
The respondent, Dunlop Rubber Company of India Limited, which
is engaged in the manufacture and sale of tyres and tubes for light
and heavy vehicles, has a factory in Calcutta, besides one at Ambattur in Madras, which was started or about 1959. At the time of
the award, the company was employing about 1200 workmen but,
SUPREME COURT REPORTS
[ 197 4] l s.C.ll.
during the years 1962 and 1963, it was employing about 800 workA
men.
The company paid to its workmen for each of these two years,
1962 and 1963. 12 weeks' basic wages as annual bonus. The workmen were not satisfied with the said payment and demanded additi'Jnal
bonus of three months' basic wages for each of these years.
According to the workmen, the company has made a net profit of about
3.30 crores in each of these years.
7he company, however, dechned
to meet the demand with the result that the Government of Madras
by its order dated October 15, 1966. referred the dispute regarding
B
the additional bonus to the Industrial Tribunal, Madras. There was
also another dispute referred regarding the alteration of the gratuity
scheme.
But we are not concerned with this dispute.
The case of the workmen, as_ disclosed by their written statement
b~fcre the Tribunal, was as follows :-
C
The company, according to their published profit and loss account
has made a net profit of Rs. 3.30 crores and. Rs. 3-27 crores
for
th~ years
1962
and
1963
respectively.
The
management have made various deductions from their gross profit, which
wei:e not · justified
according to the Full Bench Fromula.
ThO
management in their work sheet claimed Rs. 2.49 crores as rehabiliI>
talion and this huge amount has been claimed to purposely defeat
the just demands of the workmen. Having due regard to the profits
earned by the company, the demand of three months' basic wages as
additional bonus was .iustified·
The company resisted the claim of the union. The case of the
company was as follows :-
In each of these two years, 1962 and 1963, it has paid
to its
workmen in India bonus equivalent to fifteen weeks' basic wages.
All the workmen. except the wprkmen at Ambattur, who
represent
only about 12 per cent of the total nm:nber of employees, have accepted the payment and they are fully satiSfied with the amount paid
volunt.arily by the company.
The company made proper deductions
and additions according to the Full Bench Formula and arrived at
the available surplus.
Out of the said available surplus, the company has paid nearly 60 or 63 per cent as bonus to the workmen ,
which represents fifteen weeks' basic wages.
Before the Tribunal, the company as well as the workmen filed
charts in respect of their pleas. The union objected to the deduction
made by the company in respect of the commission received out of
the sale~ made by the Dunlop United Kingdom as well as the toyallles rece1vabk out of the sales made by the London firm. There were
alsp objections token by the union in respect of certain deductions and
clam1s made by the company. As those contentions have been raised
b;;-for·c us also. we will refer to those matters later. There was also
controv~rsy regarding
the re~abilitation claimed by the
company.
B
F
G
The Tribunal, on a cons1derat1on of the materials placed before it by
both the parties, ultimately accepted the case of the management and
B
held that the bonus already paid to the workmen was sufficient and
th3t they are not entitled to any additional bonus for these two years.
B
c
E
F
'
G
WORKMEN v. MANAGEM¢NT DUNLOP RUBBER co. (VaidiaUngam, /.) 231
Mr. M. K- Ramamurthi, learned counsel for the appellant-workmen attacked the view of the Tribunal accepting the claims made by
the company in respect of several items.
The company had filed
before the Tribunal a statement, Ext. M-3, extracted below, showing
the available surplus for the years 1962 and 1963 :
"The Dunlop Rubber Co. (India) Limited
Available
Surplus
Computations for the years 1962 and 1963.
Net Profit per Accounts
Add:
Bonus
[account
charged in accounts)
Provision for
Taxation
per Accounts
:Oepreciation per Accounts
Deducts:
Commission
receivable
(Note I)
Royalties
receivable
(Note 2)
Profit on sale of Fixed'
Assets (Note 3)
Provision for Retirement
Gratuities
written
back
Total Gross Profit
Less :
Notional Normal Depreciation
Less:
Notional
Income
Tax
and Super Tax
Notional
Super Profits
Tax/Sur Tax.
Less :
Return on paid-up Capital
Ordinary share. Capital
(6%).
Share Premium (6 %).
Preference
share Capital
(Actual).
4 % Return on Reserves
employed aS
working
capital Schedule A.
Available surplus subject
1962
Rs.
Rs.
95,59,317
48,86,449
2,34,78,958
60,79,969 3,41,45,376
3,94,964
59,191
92,596
4,37,04,693
5,52,751
4,31,51,942
72,67,887
1963
Rs.
s.
1,68,86,953
48,40,912
J,88,82,441
59,87,664 2,67,06,024
3,94,973
50,580
2,974
5,00,000
4,35,92,977
9,42,579
4,26,50,398
83,90,107
3,58.84,055
1,76,23,953
3,42,60,291
l,84,68,616
49,09,965
2,33,78,581
27,00,000
4,20,000
4,60,000
1,25,05,474
25,36,585
2,01.60,538
27,00,000
4,20,000
4,60,000
1,40,99,753
23,35,009
59,15,009
24,50,563
60,70,563
to rehabilitation claim .
65,90,465
80,29,190
Note I. Commission receivable arises 'out of sales made by Dunlop
U. K. of their products to India either through the Indian
High Commissioner's purchasing Commission in London or
to direct importers.
-L373Sup,CI/74
232
SUPREME COURT REPORTS
[ 1974 J 1 s.c.R.
Note 2. Royalties receivable arise out of sales made by D~op U.K.,
of their products to Afghanistan, Burma and Pakistan·
*
"'
*
*
*
*
According to the company, it has paid more than 60 per cent of
the available surplus as bonus to the workm~n and that they are not
entitled to any additional bonus.
The first ttem that was challenged
by Mr. Ramamurthi was regarding the deduction made by the company
in the sum of Rs. 3,94,964 and Rs. 3,94,973 for the years 1962 and
1963 respectively as commission as well as the sums of Rs. 59)91
and 50,582 as royalties for the years 1962 and 1963 respectively
received from Dunlop, Unite~ Kingdom.
According to the counsel,
the workmen have also contnbuted to enable the company to earn
these amounts and therefore, they will be entitled to a share in the
said profits.
In this connection, Mr. Rammurthi referred us to the
decision of this Court in The Tata Oil Mills Co. Ltd. v. Its Workme11
and athers. (')
I'n that decisio}l1 ceJ:llain items were claimed
by
the company as extraneous income obtained by them without any
contribution by labour. While allowing the claim of the company
in re~pect of two items regarding the rest it was held by this Court
that they had been earned by the company in the normal course
of its business and that there was no reason why the labour should
be excluded from its share in the profit. It was no doubt observed
by this Court that normally there must be contribution of the workmen in earning profits before they are entitled to profit bonus, but
it is not necessary that a direct connection between the efforts of
the workmen and a particular item of profit earned has
to be
established before the profit can be taken into account for the purpose
of arriving at the available surplus.
Mr. B. Sen, .learned counsel for the company, on the other hand,
referred us to Notes 1 and 2 in Ext. M-3, which has been extracted
by us earlier. Notes 1 and 2 clearly explain the circumstances under
which the said alllounts are earned by the company and they show
that the labour has made no contribution whatsoever in the company's
earning either the commission or the royalties.
Mr. Sen also drew
our attention to the evidence of MW-1, the Depnty Chief Accountant
of the company, who has explained the circumstances under which
the said amounts were received.
We are of the opinion that the Tribunal was justified in accepting
the contention of the
company
that the
amounts received as
commission and royalties need not be added back. MB-1
the
Deputy Chief Accoun~t of the company, has deposed to the ~ature
of these amounts received by the company.
According to him, the
commission is received from the parent company in United Kingdom
for sales made by them through the High Commission in London
or sales effected as against orders received directly by the company
froll! the Indian customers. The amounts due to the company were
credited by the London office. Similarly, royalties were also received
out . of sales of Dtml~p products made to Afghanistan, Burma and
Pakistan. No canvassmg for orders in those countries is done by the
company·
Apart from the fact that Notes 1 and 2 in Ext. M-3,
(I)
[1960] I S. C. R. 1.
A
B
c
D
F
G
H
A
B
c
D
E
F
G
H
WORKMEN v. M~NAGEMENT DUNLOP RUBBER co. (Vaidialingam, 1.) 233
have not been chajlenged, we also find that there is
no crossexamination by the union of MB-1 when he has referred
to
t~e
nature of these receipts, which go to show that the workmen
m
India have not at au contributed, in any measure, in earning those
amounts.
In our opinion, the amounts received by the
company.
by way of commission and· royalties, are analogous to
the
home
delivery commission, which was held by this Court in Workmen of
M/S Hindustan Motors Ltd. v. MIS Hi11dusw11
Motors
Ltd.
&
A nr. ( ') to be extraneous income.
The Hindustan Motors Limited,
which was manufacturing i.:ars in collaboration with a foreign concern,
was entitled to commission on the sales made in India by the foreign
concern, even though the .;ompany was not a
party
to
those
transactions.
This amount was called home delivery commissiqn.
The company claimed that the said commission should be deducted
while· calculating the surpluS' out of the profits available f()r distribution of bonus. The workmen challenged the said deduction. This
Court, however, rejected the contention of the workmen and held that
the amount received as home delivery commission has to be treated
as extraneous income, which was earned by the company without any
activities in which the workmen participated or contributed
their
labour. The decision relied on by Mr. Rammurthi in the Tata Oil
Mills Co. L/ii.(') was referred and it was held that the
situation
therein was entirely different· But the principle laid in the Tata Oil
Mills Co. Ltd.(2 ) that if any income was earned in the course of the
normal business of a company in which the workmen . were also
engaged, that income must be included in the profits for calculation
of surplus available for distribution of bonus,
was approved in the
Hindustan Motors( 1) case.
Applying the said principle to the case
on hand, we are of the opinion that the commission and royalties
received by the company did not require any contribution or work
or labour on the part of the workmen. and it accrued to the company
in view of the arrangements spoken to by MW-1.
In the circumstances,
the ·deduction of these amounts frorn· the profits by the
company. was ·fully justified.
It may be mentioned that the company had deducted ~from the
profits the provision made for retirement gratuities written back. Mr·
Sen has quite fairly accepted that the deduction is
not justified.
Therefore, this item need not be discussed further.
The company had claimed Rs. 4,20,000 for each of these years
being return of 6% on the share premium of 70 lakhs.
The compa:iy had also claimed a .sum of Rs. 27 lakhs for each of these years
bemg fi% return on ordmary share capital. The claim for return
ma?e m respect of ordinary share capital is l)Ot challenged. But the
chum made for return on the share premium of 70 lakhs is attacked
by Mr. Ra~amurthi ~n the groun~ that the share pi:emium does not
represent paid-up capital. The Tnbunal did not accept this contention advanced on behalf of the workmen.
MW-1 has again spoken regarding the share premium
amount.
From -~s~~ence it is clear that when a company makes a Rights
(I) [1968J 2 S. C.R. 311.
(2) [1960] 1 S. C.R. J.
234
SUPREME COURT REPORTS
[ 1974] 1 S.C.R.
issue, the Government, while giving consent, fixes a certain a':11ount
of premium to be charged for those shares.
Those shares are issued
only to the shareholders who ask for it and who pay the premi!Jm
amount in addition to the nominal value of the
share.
A
capital
introduced by the shareholders in the company is shown as part of
share capital ar.cord'.ng to the Companies Act upto 1956. When the
said Act was amended, it had to
be shown in accordance with
Schedule VI as a separate item, a~ it was only available for issue to
shareholders and could not be distributed as
dividend.
The said
share premium amount had no bearing as general reserves and they
were really the share capital of the company and, therefore, the company was justified in claiming 6% return on this amount.
The share
premium is not undistribute~ profit .and
cannot be
distributed . as
dividend.
We are satisfied, m the c1rcumstances, that th~ content10n
of the union that no return should be allowed on the share premium
amount, has been rightly rejected by the Tribunal.
The third item relates to the deductions made by the respondent
out of the profits of two items of donations
made in 1962.
No
donations were claimed as deduction in 1961. As a substantial part
of the donations was for the National Defence Fund, the Tribunal
held that the expenditure was properly incurred and the company was
justified in deducting the donations from the profits. Mr. Sen accepted that the deduction made by the management under this head is not
justified.
Even otherwise, the company is not
entitled to
deduct
those amounts. as is clear from the C!eei.sion of this Court in V oltas
Ltd. v. Its Workmen(').
·
The fourth item, which is contested by the appellant, is the return
r.f 4 % on reserves employed as
working capital.
The company
claimed Rs. 23,35,009 and Rs. 24,90,563 as 4% return on reserves
employed as working capital in 1962 and
1963
respectively.
According to Mr. Ramamurthi, this claim has not been established in
accordance with the decisions of this Court. He referred us to the
decision in The Oriental Gas Company Ltd. v.
The
Workmen(')
and Bareill/y Electricity Supply CC), Ltd. v. The Workmen & Ors.(').
In both these decisions,
the
nature of the evidence to sustain
.a claim for return on working capital has been discussed and laid
down.
In particular, in the second decision cited above, the various
decisions bearing on the point have been exhaustively reviewed. The
position emerging from the decisions of this Court is that mere production of a balance-sheet by a company cannot be taken as proof
of a claim, as to what portion of the reserves has been actually used
as working capital.
The utilisation of any amount from the reserves
as workin~ capital has to be proved by an
employer by adducing
proper ey1dence by way of affidavit or otherwise,
af:er giving
an
opportumty to the workmen to contest the correctness of the same in
cross-examination.
The company will have to satisfactorily
prove
that the amount on which return is claimed. has been actually used
as war king capital.
(l) [1961] 3 S. C.R. 161.
(3) [1972)1 S. C.R. 241.
(2) [1971] (II) LU 657.
A
8
c
D
E
F
G
H
A
B
. c
D
E
F
G
.R
WORKMEN v. MANAGEMENT DUNLOP RUBBER co. (Vaidialingam, J.) 235
The question is whether the criticism of Mr. Ramamurthi that the
company has not properly established its claim for return on working
capital in accordance with the decisions of this Court, is justified?
The company has filed Ext. M-8 containing particulars regardin,:: the
amount used as ·working capital for the years 1962 and 1963. It
has also filed Ext. M-9, the certificate of the Chartered Accountant,
that reserves of Rs. 5,83.75,236 and .Rs. 6,22,54,083 have been used
as working capital in the years 1962 and 1963 respectively. MW-1
has spoken to ·the contents of Exts. M-8 and M-9.
The Chartered
Accountant of the auditors, who issued the certificate, Ext. M-9, has
also given evidence as MW-2. When they have spoken about the
amounts used as working capital, there is absolute]y no cross-examination by the u_nion regarding these matters. This is not a case where
merely the profit and .loss account alon~ has been filed without any
further evidence adduced by the management. Mr. Ramamurthi no
doubt attempted to satisfy us by a reference to the profit and loss
account for the two years that the entire amount claimed by the company could not have been used as working capital. We have gone
through the balance-sheet and profit and loss account.
We are satisfied that the Tribunal has rightly accepted the ·claim of the management
for 4% return on the working capital.
The fifth and the last item that is in coutroversy between the
parties is the claim for rehabilitation made by the company. Before
we consider that· question, we must refer to a contention raised by
· Mr. Ramamurthi that the management had no claim for rehabilitation and, therefore:no claini for·rehabilitation should be allowed. In
particular, Mr. Ramamurthi referred us to the statement in Ext. l\I-3,
which we have adverted to earlier, to the eff~ct "available surplus
subject to rehabilitation claim" and stressed that the. company itself
has made a calculation without claiming any rehabilitation.
We are
not inclined to accept this plea of Mr. Ramamurthi. · On the other
hand, Ext. M~3 shows that the company was prepared to take a stand
that even without. any claim for rehabilitation being allowed in its
favour, the available surplus shown in E'xt. M-3 will establish tliat the
workmen have been paid more than 60 to 62 % of the available surplus as bonus for each of the two years.
Ext. l\f~3 does not and
cannot be put against the company if it can properly establish a claim
for rehabilitation. · Before we discuss further the claim for rehabilitation, it is now necessary to work out the figures on the basis of the
findings recorded by us earlier. We have accepted the claim for deduction of commission and royalties in favour of the company.
We
have also accepted its claim for return on the share premium amount
236·
SUPREME COURT REPORTS
[ 1974 J 1 s.c.R.
of Rs. 70 lakhs.
We have disallowed the claim of the company re·
A
garding the amount paid by them as dona_tion in 1962. We have
allowed the company's claim for return on the working· capital. On
the above basis, two charts have been prepare(! of the avai!ab!esurplus for the years 1962 and 1963. They are as follows :-
Available Surplus Computations for the year 1962.
Rs.
Rs.
B
Net Profit per Accounts
95,59,317
Add:
Bonus (amount charged in Accounts)
45,86,449
Provision for taxation per Accounts.
2,34,73,958
\
Donation to N. D. F . .
5,25,000
Depreciation per Accounts . .
60,79,969
3,46,70,376
4,42,29,693 .
Deduct: Commission receivable (Note 1) · .
3,94,964
c
Royalties receivable (Note 2).
.
59,191
Profit on sale of fixed Assets (Note 3).
98,596
5,52,751.
Total G~oss Profits :
4,36,76,942
Less.~
Notional Normal Depreciation
72,67,887
3,64,09,065
D
Less:
Notional Incometax and Supertax
1,87,31,118
Notional Sup~r Profits· Tax/Surtax
50,53,434 2,37,34,542
1,25,24,513
Less:
Return on paid-up capital :
Ordinary Share Capital (6%)
27,00,000
Share Premium (6%)
.
.
.
.
4,20,000
E
Preference Share Capital (Actual)
.
.
4,60,000
4 % Return on Reserves employed as \vorking
capital (Schedule A).
23,35,009
59,15,006
f\vailab!e Surplus
67,09,504
Available Surplus Computations for the year 1963
Rs.
Rs.
. '
Net Profit per Accounts
1,68,86,952
F
Add:
Bonus (amount charged in Accounts.)
48,40,912
Previsio!l for Taxation per Accounts.
J,58,82,448
D~preciation per Accounts . .
59,82,664
2,67,06,024
4,35,92,977
D.?duct: Commission receivable (Note 1). .
3,94,973
•
Royalties receivalbe (Note 2).
. .
.
50,580
G
Profit on Sales of Fixed Assets (Note 3).
(2,974)
4,42,579
Total Gross Profit :
4,31,50,298
~-
Less:
Notional Normal Depreciation
83,90,197
Less:
Notional Incometax and Supertax.
1,78,73,953
2,47,60,291
Notional Super Profits· Tax/Sur Tax.
21,90,528
2,00,64,481
1,46,95,810
A
B
c
D
E
F
G
H
WORKMEN v. MANAGEMENT DUNLOP RUBBER co. (Vaidialingam, I.) 237
Less:
Return 011 paid~up capi1al :
Ordinary 'Share Capital (5J 0
0 )
Share Premiun1 (6j0 )
•
Preference Share Capital (Actuul).
.
4 ° 0 Return on Reser\ cs e1nrlo~ ed .1~ "rt k111g
, capital (Schedule A),
Availabk Surplus
27,00.0CO
4,20,000
4.t0,000
24,90,563
60,70,563
26.25.~47''
ln both the charts no claim for rehabilitation has been take.n into
account.
Out of the available surplus in 1962, the company. paid
nearly c•v.; as bonus for that year.
Similarly out of the available
surplus in 1963, the company has paid ~early 60. to 62% as bonus.
Prima-facie, we are of the view that even if the claim of tJ:e company
for rehabilitation is rejected completely,
still on the basis
of the
figures worked out in the above charts, after taking into account the
rebate in Income-tax that will be received by the company, the workmen have been paid bqnus at a rate which has been
a~epted a&
correct by this Court and as such they cannot have any grievance.
Regarding the claim for rehabilitation, the compapy
had . filed
three statements. Exts:· M•15, M-16 and M-17 are charts relating to
the buildings, plant and. machinery and moulds.
The company has
also adduced evidence in respect of the claims made in these statements.
Mr . .A:amamurthi has attacked the claim for
rehabilitation
made by th<: company.
When the charts prepared by the manageDIOliit regarding rehabilitation were before the Tribunal, wc find that
several matters spoken to by the witnesses regarding the charts do
not appear to have been seriously challenged IJy the workmen.
Regarding the multipliers and divisor for plant and machinery, including
moulds, these have been spoken to by the factory Engineer, MW-3.
Regarding the buildings, the Architect, MW-4, has also given evidence.
Regarding all these matters, the Chartered Accountant attached to
the auditors of the respondent com_pany, bas given evidence as MW-2.
The appellant has not objected to the data adduced as well as
the
documents produced by the company.
No suggestions
have been
made to these witnesses that the figures on the basis of' which the
rehabilitation claim was made, were in any way erroneous. It is-be·
fore us for the first time that Mr. Ramamurthi has urged that ·the evidence of these witnesses is not sufficient to justify the claim for rehabilitation made by the company.
Mr. Ramamurthi has referred u~
to the various decisions regarding the nature of the evidence that is
required to be· produced by a company, when it makes a claim for
rehabilitatioh.
Mr. B. ·sen .invited our attention to the award dated
Februa.ry 5, 1960 of the Industrial Tribunal, Calcutta, Ext.
M-26,
which related to the claim of the workmen of the respondent company
in Calcutta for bonus for the year 1957. In that award, the Tribunal
has very elaborately gone into the evidence adduced by the company
and has allowed a sum of Rs. 2,18,36,983, as calculated by the company, as rehabilitation charges. When once a Tribunal has considered
a similar claim and has adopted on the basis of the evidence adduced
by the parties, normally the amount awarded towards rehabilitation
claim should be adopted. We do not say that it is conclusive.
But
that award is certainly entitled to due consideration at our hands. In
23~
SUPREME COURT REPORTS
[ 1974 j 1 S.C.R.
that award the Tribunal bad worked out tl)e rehabilitation claim for
the year 1957.
The charts filed by the company regarding rehabilitation, though for the years 1962 and 1963, were worked out only on
the basis of the replacement cost of the year 1958. We are mentioning this aspect because if the appellant's case was that the Tribunal,
when working out the claim for 1957 in Ext. M-26, has not properly
appreciated evidence, it should have elicited from the witnesses, who
deposed on behalf of the company, that the figures furnished by them
are not correct and cannot be accepted.
No such attempt bas been
made by the appellant. Mr. Sen, learned counsel, relied on the decision of this Court in M/s Hindustan Motors Ltd.(') case and pointed
out that according to th~t decision, the only permissible deduction
from the total amount claimed as required for rehabilitation by the
appellant can be the depreciation amounting to Rs. 5.17 crores and
Rs. 5.75 crores in 1962 and !963 respectively.
He further pointed
out that if the amount representing depreciation reserve Is taken out
of the total reserves, which is established by the evidence, then the
·balanc~ amount has been utilised in raw material and hence tnere
were uo available liquid assets towards rehabilitation.
We do not propose to go into the details of the claim for r~habili
tation made by the respondent·company, as well as the objections now
made on behalf of the workmen to the said claim. The reason is that
when evidence, oral and documentary, was adduced by the company
before the Tribunal, the appellant bas not objected to the data adduced and the documents produced by the management and they have
not put any questions to the witnesses to establish that the calculation
made by the company is erroneous. There is also the additional fact
that from the two charts of available surplus for the years 1962 and
1963, reproduced earlier, even without allowing any claim for rehabilitation, the workmen have been paid bonus for the two years in question at rates higher than 60%. Allowing for the benefit that the
management will get by way of tax rebate on the amount of bonus
paid, the payment of bonus already made is in accordance with the
proportion accepted by this Court vide Mis Ga1UWn Dunkerley and
Co. Ltd. v. Their Workmen( 2 ). Even on the basis of the calculation to be made, according to the appellant, in respect of the rehabilitation claim, the company will be entitled to some amount at least
in that regard. Even if the ·amount, as contended by Mr. Ramamurthi,
is taken into account, the available surplus, as shown in the charts,
will be reduced further. The result will be that even the amount paid
as bonus already by the company, wil! be more than what t,he workI) [1968) 2 S.CR. 311.
(2) AIR 1971,S. C. 2567.
A
B
c
D
E
F
G
H
II
'
WORKMEN v. MANAGEMENIDUNLOP RUBBER co. (Vaidialingam, /.) 239
men will be entitled to according to the decisions of this Court.
As
pointed out earlier, even without making any provision for rehabilitation, the percentage of bonus paid is amply sufficient.
Considering the matter from any point of view, there is no question of the
workmen being entitled to any additional bonus
over
and
above
what has already been paid.
To conclude, we are satisfied that the award of the Tribunal holding that the workmen are not entitled to any additional bonus for the
years in question, is correct. The appeal fails and is dismissed. There
will be no order as to costs.
V. P. S.
Appeal dismi5'ed.