Supreme Court Upholds Industrial Tribunal's Bonus Award for Workmen in Aluminium Manufacturing Dispute. Employer's Claims for Rehabilitation Charge and Reserve Used as Working Capital Rejected for Lack of Proper Evidence Under Full Bench Formula.

Case Note & Summary

The dispute arose out of an industrial reference made by the Government of West Bengal to the Fifth Industrial Tribunal, West Bengal, concerning the quantum of profit bonus payable to workmen of Aluminium Corporation, a manufacturer of aluminium with factories at J.K. Nagar near Asansol, for the year 1957-58. Two references were made; the first covered a dispute between the company and some of its workmen, and the second, made on May 2, 1959, included a similar bonus dispute for workmen at the same factory. In the second reference, the parties filed joint petitions agreeing to abide by the Tribunal's decision in the first reference and requesting a similar award. The Tribunal awarded bonus equivalent to three months' basic wages, inclusive of an amount equivalent to half a month's basic wages already paid voluntarily by the company, and applied the Full Bench Formula approved in Associated Cement Companies Ltd. v. Its Workmen. The Tribunal determined the available surplus to be Rs. 4.63 lacs, allowed Rs. 0.43 lacs as return on reserves used as working capital, and allowed nothing under rehabilitation charge. The appellant company challenged both awards by special leave before the Supreme Court, contending that the Tribunal erred in rejecting the rehabilitation charge and in under-assessing the return on reserves used as working capital. The company's counsel argued that the balance-sheet itself would show what part of reserves was used as working capital, and proposed deducting current liabilities from current assets as a safe way to ascertain the correct figure. The company also maintained that the rehabilitation charge should not have been rejected altogether. The Supreme Court rejected these contentions. On rehabilitation, the Court reiterated the settled rule that the burden to prove any prior charge under the head rehabilitation lay on the employer, and unless the employer established its claim by proper evidence, the claim had to be rejected. The company examined only its Manager, who produced statements showing different rehabilitation figures—Rs. 6,27,234, Rs. 5,84,534, and Rs. 10,25,021—without explaining the discrepancies. The Manager did not explain the multipliers or divisors used in the revaluation report, and the two other members of the Revaluation Committee were not examined. The Court held that mere submission of office-prepared statements could not satisfy legal requirements; the basis of calculation had to be explained by testimony on oath subject to cross-examination. Accordingly, the Tribunal was justified in rejecting the rehabilitation claim. On the return on reserves used as working capital, the Court noted that the company had also given widely different estimates: Rs. 111,74,162 in some statements and Rs. 199,56,718 in others, with depreciation reserves shown as Rs. 86 lacs in one set and Rs. 173,82,556 in another. The Court strongly condemned the arbitrary figures and found justification for refusing to accept any as correct. The Court observed that standard accountancy treatises supported using the excess of current assets over current liabilities as a measure of working capital, but two difficulties prevented acceptance of the company's approach. First, balance-sheet statements as to current assets and liabilities were not sacrosanct; their correctness had to be established by those responsible for preparing them or by other competent witnesses. Second, the inquiry was not the total working capital of the concern but what portion of reserves had actually been used as working capital. The Court disapproved the tendency of employers to show the entire amount of reserves available for use as working capital as the actual amount used, which was obviously wrong. It held that accountants or other competent officers should testify to assist tribunals on this issue. Since no such attempt was made, the Tribunal's allowance of only Rs. 0.43 lacs was upheld. Finally, the Court held that for deciding the bonus payable to workmen, only the wage bill of workmen had to be considered, not salaries paid to officers. The Tribunal had not committed any error in fixing the bonus figures. Accordingly, both appeals were dismissed, and the awards directing payment of three months' basic wages as bonus for 1957-58 were affirmed.

Headnote

Issue of Consideration

Final Decision

Appeals dismissed; Industrial Tribunal's awards confirmed; workmen entitled to bonus equivalent to three months' basic wages inclusive of voluntary half month; employer's claims for rehabilitation and higher return on reserves rejected; no error in fixing bonus.

Law Points