)INNYLTD v. THEIR WORKMl!: N February 15 & Anr.

We will ·first take up Civil Appeal No. 1291 of 1967. The appellant was making two 1>8ymetl'!S of bonu8 every year, one.for the half-year ending 30th June and half-year ending 30th De. cember. The accounting year is the Calendar year. The balf H yearly payments were unilaterally declared by the appellant and not on the basis of any aJU"eemell'I: between the pal'lies. The quantum of bonus that was paid for each half-year was also not cbostant. Half-yearly payments were made at the end of the half-year when 466 SUPREME COURT REPORTS (1972] 3 S.C.R. the working result of 'the said year was known and if there was sufficient profit to pay bonus. The payment of bonus for the half years also depended upon the approximate estimate Directors used to make about their prospective future earnings for the ne~t half-year. According to the appellant the bonus amounts were paid out of profits. As the Payment of Bonus Act, 1965 (hereinafter to be referred as the Act) had come into force on August 28, 1965, the appellant issued a circular to 1he efP>..ct that for the half-year ending June 30, 1965, payments will be made a' advance of wages equivalent to I/ 6th of the basic earnings of the. In this circular there is a reference to the Payment of employees. Bonus Ordinance 1965, promulga~.!d on May 29, 1965 and that under the terms of the Ordinance, bonus is payable only within a period of 8 months from the end of the accounting year. The circular fu~ther states that no bonus is payable for the accounting year 1965 unti) the accounts for the year are closed. It was fur ther mentioned that the amounts are paid as advance wages in view of the representations made by the employees. The circular further mentioned that the amounts paid as advance wages will be set off against the bonus that may be found payable for the ac counting year 1965 and that if no bonus is payable, the amount paid will be adjusted against the wages due for any month after March, 1966. The issue of the above circular led to the Unions concerned raising a dispute with the Management that the payment of bonus irt the end of each half-year has become a condition of service of the workmen as the same was being paid for several decades with out any relation to profits. The appellant was charged by the Unions of having changed the conditions of service by offering to make payments as advance against wages instead of payment by way of bonus. As conciliation proceedings failed, the work men resorted to a strike in December 1965, which Reference being made by the State Government on December 8, 1965, No. A.I.D. 6 of 1966. A B c D E F The short stand taken by the appellant before the Tribunal was that the payments were being made as bonus 11'1 the end of each half-year on the basis of the profits earned by the Company. G Such payment was a voluntary act of the appellan!t and related to profit and it had not become a condition of service of the em ployees. The further case of the appellant is that as· the Act had CO!lJe into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965. H The Unions pleaded that the payment of bonus at the end of each half-year, which was being done for a long number of years, BINNY LTD. V, WORKMEN (Vaidialingam, J.) 467 A has become .ll. condition of serviee and too amounts paiq were not related to the profits earned by the Company. The Unions furtller contended that the Act has not in any manner afiected the right of the employees getting bonus in the manner paid by the appellant namely, at the end of every half-year. B c D £ F The Tribunal has recorded the following findings : The pay· ment of bonus was not a settled condition of service, but is de· pendent upon the profits earned during the half·yGar. Payments made by the appellant at the close of the half-year cannot be con· sidered as customary or festival bonus and that the appellant has made no change in the conditions of service of rthe workmen by altering the quantum of bonus. Though bonus was paid at close of each half-year, the quantum of such bonus varied de pending upon the profits earned by the Company. The Company has no doubt been paying for a long time profit bonus in instalments, namely, in the month of August for the half year end· ing 30th June and in the month of March or April of the succeed· ing year for the half-year ending 31st December. The coming into force of the Act has not created any right in the appellant to withhold the payment for each half-year as it used to do. The appellant will be entitled to deduct the amount of bonus paid for the first half year from the amount of bonus payable to its em· p!oyees under the Act in respect of the accounting year and the employees will be entitled to receive only the balance for th" second half-year. On these findings the Tribunal held that the ap pellant was not justified in announcing the payment of the amount. towards advance wages under the circular dated August 28, In the end <the Tribunal gave a direction to the effect that 1965. the ai>Pellant is liable to pay profit bonus in two insta!ments--Olle as advance against the final declaration of bonus to oo paid dur- ing the last week of August or first week of September and balance, if any, was to be paid in the month of March or first week of April of the succeeding year. It further gave a direction that the first payment that is to be paid is to be as advance against pay ment of bonus and not as against wages. G Mr. Malhotra, learned counsel for the appellant, has cha!· Ienaed . t,be above directions given by the Tribunal. The counsel pointed out that after the OOllling into force of t'he Aot, the rights and liabllitiOB·of the parties, re~g bonus, are governed by its provisiODI. · Under the Act, the compurtalions of the available and allocable ~rplus have to be made on the basis of the gross-profits .asceitained e.t the end of the relevant accounting year and the.pay· H ment of bqnus has to be made within eight months of the close of the 11ccou, ntin11; year. As the Act envisages payment of only one. bonus, at the end of tho aci:ountiug year, .after computation qf the amount as per llhe Act, the· ~on given by the Tribunal 468 SUPREME COURT REPORTS [ 1972] 3 S.C.R. regarding paymell"t of half-yearly bonus is illegal and contrary to A · the provisions of the Act. This direction, the counsel pointed out. given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years. On .the other hand, Mr. H. K. Puri, learned counsel for respondents Nos. 2 and 3, whose contentions have been.accepted B by the counsel for the other respondents, urged '!hat the Act does not prohibit an employer from paying bonus at the end of each half-year. The appellant has been paying bonus in two instal· It is always open !O ments, nan1ely, at the end of each half-year. the appellant, both by virtue of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus c at the end of the accounting year. any amounts that may have been paid for the first half-year. Therefore, accordinit to Mr. Puri. the directions Jtiven by '!he Tribunal are neither illegal nor con· trary to the provisions of the Act. We are not inclined to accept the con~ntion of Mr. Puri. We D have already referred to the findings of '!he Tribunal to the effect that the amount that was paid by the appellant as bonus at the end of each half-year was on the basis of the profits earned by i't. The Tribunal has re.iected the claim of the Unions that the pay· mcnt of bonus, in the manner claimed by them, was not a condi- tion of service and th:it the payment had nothing to do with any custom or festival. These findings have not been and in fact could E not be challenged by the respondents. There is also no contro versy that payment of bonus for the accounting year 1965 governed by the provisions of the Act. If so, the question whether the directions given by the Tribunal and referred to above. can be supported by the provisions of the Act. F G The Act has come into force with effect from August 28. 1965. As provided under sub-section ( 4) of seotion 1, it applies to all accounting years commencing on any day in the year 1964 and in respect of every subsequent accountinl!: year. ·Section 2 defines amongiit others the expressions, "accounting year", "al!o· cable surplus", "available ·surplus" and "~ross profits" Section 4 deals with •the computation of gross-profits. So far as the· appel lant is concc; ned, under s. 4, cl. (b) the gross-profits are to be calculated in the manner specified in the Second Schedule. Sec- tion 5 provides for computation of available surplus. It is to be the various ascertained after deducting from items, referred to in s. 6. Section 6 deals with the items to be deducted as prior charges from the gross-profits. makes it obligatory on an employer ·to pay minimum bonus to the employees in an accounting year of 4% of his salary or wages or Rs. 40/- whichever is higher. This payment is irrespective of the the gross-profits Section l O H I A B c D E F G H BINNY LTD. v. WORKMEN (Vaidialingam, J.) 469 fact whether a Company has or has not earned profits in an ac· countinl!; year. But this provision is subject to ithe provisions of ss. 8 and 13. Section 11 provides for payment of bonus subject to a maximum of 20% of the salary or wages, if the conditions mentioned. therein are satisfied. Section 17 enables an employer, who has paid .during any accounting year Puja Bonus or other customary bonus or a part of the bonus payable under the Act before the due date, to deduct the amount so paid from the amount of bonus payable by him to an employee under the Aot in respect It further provides th!!t under such cir· of that accounting year. cumstances the employee will .be entitled to receive only balance. Seotion 19 fixed the tinie limit for payment of bonus. If there is a dispute regarding payment of bonus pending before any authority, the .bonus will have to be paid within a month from the date, on which the Award becomes enforceable or ithe settle ment comes into operation. In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year. Under ithe proviso to s. 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein. Section 34 provides that the Act exoopt as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965. We. have referred to some of the relevant provisions of the Aot. From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of gross-profits which are determined at the close of the accounting year. The Act itself provides as to how the gross-profits are to be calculated and the available and allocable surplus arrived at. The Act also provides the outer limit, the period within which bonus has to oo paid. It further gives the employer a right to deduct any amount that any have been paid during the accountil).g year as part of .the bonus payable under the Act. It will be seen ·from the scheme of the Act that the claim f6r bonus can be made only after the close of the accouttting year and in accordance with the provisions of the Act. The gross-profits can be calculated only· at the end of the accountirig year' and the available and allocable surplus can also be worked out only at the end of the. accounting year. There is no question of an employer computing the gross-profits, available and allocable surplus in the middle of an accoilnting year or at any time before the close of the relevant accountinl!; year. The direction l!;iven by the Tribti· nal really amounts to the employer having to make .2-1031 Sip CI/72 I 470 SUPREME COUl!.T REPORTS [1972] 3 S.C.R. computations at the end of each half-year. No doubt, the Tribunal A ha.s given a direction to the effeet that any amount paid for the first half~year can be deducted when the final bonus is paid at the end of t]je accounting year. Even without any such comideration be· in!f shown by the Tribunal allowing an employer to so deduct, section 17 iiself clearly gives such a right to an employer. We are not impress~d with the contention of Mr. Puri that as there is no B prohibition .in the Act against an employer making the paymel1t by way of bonus at the end of a half year, the direction given by the Tribunal can be sustained. Mr. Puri referred us particularly to the provisions contained in s. 17 of the Act. He pointed out that though a time limit is fixed bys. 19, the Act itself as is evident from s. 17, clearly en· C visages payment of bonus at the end of each half year. We are not inclined to accept this contention of Mr. Puri. The direc tion given by the Tribunal making !t obligatory on the Manage D!ettt to make half yearly payment of bonus, apart from being opposed to the scheme of the Act, also runs counter to the provi sions of s. 19. Whether it is the minimum bonus of 4% under D s •. 10 or t}te maximum bonus of 20% under s. 11, they have to be paid, as is made clear by s. 19, only within the period mentioned therein. It may be that an employer voluntarily pays amount during the accouating year by way of- part bonus which he is en· titled to take into account and adjust when making final payment at the close of the accounting year. It is one thing to say that an E 1'11lployer can make voluntary paY1Dent, but it is a different thing for the Tribunal to give a direction to that effect. Section 17 on which reliance is placed by Mr. Puri is as follows : "Where in any acC®nting year- (a) an employer haS paid any puja bonus or other cu&to.mary' bonus to an employee; or (b) an emploJ'Cl' has ~d a part of !lie . qonus pay· able under this· Act to an employee before date on which such bonus becomes PllYl!ble, then, the cnployer shall be entitled to deduct lllllOUllt ofbo11119 so Paid froni .the·"'3101Jnt of bonua pay-· able by bbil to'the eniplilyee undu tbl1 'Act in resiieot of that aee<>i.illlim vear 'lilld 1he em,,loyee atrall be' entitled to 1'ecei\re aniy'llbe balance." Clallse (.&) Ids po "1Jlllica~ ·as 1hlJ :Tribunal has catejClri- ·~ ~~ that·~ u :!10 qu.esaoo of .Hr paymeat by way.ill pWJa bonus Or• otller cuatlllilarr ~ Even thein, if uy SllCll bon'os p G BINNY LTD. V. WORKMEN (Vaidialingam, J.) 471 A has been p~d, the employey is entitled to deduct the same ~om the amount of bonus payable under the. Act. Clause (b) JS an enabling section in favour of the emplo}'er in that it visualises a situation or contingency where he may have paid during the ac countin11: year a part of bonus payable under the Act "before tbz date on which such bonus becomes payable". If an employer has B paid any amount during an accounting year by way of part of the bonus he is entitled to deduct the same from the final amounts that n:ay be payable under the Act. That provision does not give a riJ?ht to an employee to claim payment of bonus even by way of part payment during the currency of tlie accounting year. If so, the Tribunal has also no jurisdiction to give a direction to an c employer to pay bonus at the end of each half-year. In tl!is case, it is no doubt, seen tha't the appellant has been paying bonus at the end of each half-year. But the Tribuna1 has found that such payment has not become a condition of service. Therefore by the mere fact that the appellant has been making payments on previous occasions every half-yearly, does not confer D a right on the employee to have such payments by way of bonus in the ~ame manner even after the Act came into force,. From the above discussion it follows that the directions given by the Tribunal in A.I.D. No. 6 of 1966 have to be set aside. __ Now coming to Civil Appeal No. 1292 of 1967, as mentioned E earlier, it is a2ainst that part of the Award of the Tribunal A.J.D, No., 8 of 1966. The question 1that was referred to !he Tribunal has also been extracted in the earlier part of the judg ment. That relates to a claim for additional bonus for the years 1962 and 1963. There is no controversy that 'the appellant has already paid for the year 1962, three months basic wages as bonus. F Similarly for the year 1963 also four months basic wages as bonus has already been paid. The claim was for wap, cs as additional bonus for 'the year 1962 and four months' total wages as additional bonus for the year 1963. The findings recorded by the Tribunal in A.I.D. No. 6 of 1966 regarding the nature of ·bonus paid to the employees have been adopted for thi~ reference also. The respondents-Unions do not challenge those findings. Therefore, even in respect of .!Pe years 1962 and 1963, what is P.,ayable is only profit bonus .. JJ:'here is also no contro versy 'Iha~ for thele two years the quantum of bonus payable has to be calculated in accordance with what is known as the Labour Appellate Tribunal Full Bench :Formula, which has been approved by this Court in The Associated Cement Companies Ltd., H Dwarka Cement Works, Dwarka v. Its Workmen and Another(!). BOth the parties have filed ·statements of calculations according to two months G (I) [19'9J S.C.R. 92S. A B c 3563843 10365599 1745426 8620173 D '1465812- 715,4361 E 472 SUPREME COURT REPORTS [1972] 3 S.C.R. the said Fonnula. The statements Bxs. M.1 and M.2 filed by the Management represent the c0mputation of available surplus for the years ended December 31, 1962 and 1963 respectively. Ex. · M.l is as follows:

#1. "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surplus for the year ended 31st December,' 1962 (Under L.A. 'T, Formula/ Profit as per profit and loss Ac.count Add: ' . 68017S6 Provision for Bonus Depreciation on Fixed As°sets Donations .Additional Bo~us fo; l 96i 1614000 1696481 107362 146000 Liss: Profit on sale of asaets Leis: Normal Depreciation and Shift Allowance • Less: Tax Liability : Profit as aobove Liu Devolopment Rebate Inc<im .. tax Liability at . '°" oo Rs. Jnco111&-Taxat · 15" on Rs: :Supor Proftt1 Tu on Rs. • .. 7154361 586415 6567946 6553408 .3276704 1•538 3635 rsf,= mYW

3689497. '.Return on Capital employed Pt.rorenoe Share Capital . 7 •8 Y, on RI. 600000 Oidlnary ~hare Capital · . ' " oa lbd2150000. • llolerV11 J:lploye~ in business durlns the • . . : 46800 729000 ~r en 4" 011 b. #46831' 31·12·1962 • • . • 178733 . 2554533. 62M030 Availalilo $urp).us. Rs. '91°'3J •3ubjoct to claim for rehabilitation. -G H A B c D E F G H BINNY LTD. v. WORKMEN (Vaidialingam, J.) 473 We have preparod the above statement from the audited accounts of the Company and is in accordance therewith. The return on Capital and Re!cJvt>S is as claimed by the Company. Similarly Ex. M2 regarding the year 1963 is as follo\\'S : Sd/- lllegible Chartered Accountants." "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surpJus for the year ended 31st December 1963 (Under L· A. T. Formula) Profit as per Profit and Loss Acco~nt 5239220 ADD: Provision for Labour Bonus Depreciation on Fixed Assets Donations Provi'iion for Taxation ' LESS: Profit on Sale of Assets Excess Provision of Electricity charges , written back . . • • • • . 2245000 1733719 8804 8110000 12097523 17336743 1°nd interest .... 83093 675184 758277 LESS: Normal depreciation and Shift Allowance . 16'78466 . 1647555 14930911 LESS: Tax Liability Profit as above USS Development Rebate Income-tax Liability at SO"·On Rs. 2!1 / 0 tOD Rs. Dividend-tax . Companies (Profit) Surtu • . Liability on Rs. 14455825 Return on Capital Empioyed': Preference Share ·eapitat 7 ·8 % on Rs. 600000 Ordinary Share Capital 6% on Rs.12150000· Reoerves employed in the busiMss 4 % on Rs. 46937947 • 14930911 460548 14470363 .. 46800 7290oo 14455825 7227912 14538 3635 164025 1786212 -.--.-. 9111784' 1877518 2653318 11835102 Available s~rpl¥•· 3095809 Subject to claim for rehabilitation. 474 SUPREME COURT REPORTS [1972] 3 S.C.R. We have prepared the above statement from tht; audited accounts of .the co1npany and c'rtify that it is in accordance therewith. The return ~n capital and reserves is, as claimed by the company. Sd. Illeg~bile Chartered Accountants. A B The Tribunal has accepted as correct the gross-profits as given by the appellant in these two exhibits for the two years in question. Even though the Unions contested the return on Prefe rence Share Capital at 7 .8 % , the Tribunal has rejected their ob jections. It has held that under the Preference Share Regulations Act, the Company is bound to pay 7.8% on Preference Share C Capital. The Workmen did not raise any coll'lroversy regardi11g the return on Ordinary Share Capital at 6%. The Tribunal, therefore, accepted the figures given in both Exs. M. 1 and M. 2 and to the return of Ordinary Share Capital. But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years. neither in Ex. M. 1 nor in Ex. M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement that they &re subject to a claim for rehabilitation. It will be noted that D The two points in controversy between the parties regarding these two :years were : and (2) Provision for. Rehabilitation. ( 1) The claim for Return on Reserves E We will first take up the question regarding the claim of the In Ex. M. 1, the appellant has appellant for return on Reserves. claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00 being the amount employed in business. for the year 1963, it had claimed Rs. 1877518.00, being 4% re turn on Reserves on Rs. 46937947.00, employed in the business. The Unions contested the claim of the appellant on the ground that they are not entitled to any return on Reserves. The appel lant had filed two statements Exs. Ml(a) and M.2(a) for years 1962 and 1963 respectively, showing how the amounts claimed as Reserves employed in business have been arrived at. G Ex. M.1 (a) for the year 1962 is as follows : Similarly in Ex. M.2, F ,,THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LID. Year ended 31st December 1962. H Reconciliation of c.apital employed in the business during the year ended 31st December. 1962. BINNY LTD. V, WORKMEN (Vaidialingam, J.) 475 A "As at 31-12-1961: Fixed Assets and Capital Works in Progress ' ' Investments ' Interest accrued on Investments Stores and spare parts Raw Materials Process Stocks Finished Stocks Sundry Debtors Advances . Balance with Rail~av and Excise Authorities • B D~posits c LESS: Sundry Creditors Due to Directors Unclaimed Dividends Provision for Taxation Proposed Dividends Provision for Gratuity Officers• Retiring Fund (Fund loss investments) D ; LESS.- E Share Capita] 43139570 595216 17477 6179042 6886058 5053558 1381082 2473722 2768233 292529 18993 6880fi470 ---- 7077709 63744 18257 1057850 1481400 1860431 26764 11588155 57218315 Rs. 12750000 ---- 44468315" - - - Exhibit M.2(a) for the year 1963 is as follows :- F "THE BANGALORE WOOLLEN, COITON & SILK MILLS CO. LTD. Year ended 31st December, 1963. Reconciliation of Capital employed during the year ended 31-12-1963. G H . . As at 31-12-1962 Investments . . Interest accrued on Investments Stores and Spare Parts Raw Materials Process Stocks Finished Stocks Sundry 'Debtors . Advances Balances with Rai'lway a11d Excis.e Authorities Deposits . · • • . . . . . . . . 45229453 548575 8703 6553343 4701434 7285534 1688931 3429299 3165324 346450 24234 72981280 4 7 6 SUPREME COURT REPORTS [1972] 3 S.C.R. LESS: Sundry Creditors . Due to Directors Unclaimed Dividends Provision for Taxation Proposed Dividends Provision for Gratuity Officers Retiring Fund (Fund less investments) Less Share Capital 7686123 65278 22837 2305645 1481400 1706251 25799· 13293333 ---- 59687947 Rs. 12750000 ---- 46937947'" - - - It will be seen that the last figures: shown in both the state• ments have been clalined by the appellant as Reserves employed in business for each of these two years. A B c The Tribunal after a reference to the evidence of the Char~ tered Accou..!ltant, M.W.l, has held that the amounts which. should have been used as Working Capital are those mentioned in Exs. D M.l(a) and M.2(a), less the fixed assets and capital works progress. ·The Tribunal has further held that the working capi- tal cannot .include fixed assets nor the capiial works in progress,. as they represent the funds required· for day to day work of the· Company. According to the Tribunal these fixed assets have been accumtilated over years and they cannot form part of the E working capital. However, the Tribunal accepted the claim of the appellant that the other items in Exs. M.l(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc. are the amounts available to be used as working ca~taj. On this reasoning the Tribunal held. that in cal- · F culating the return on working capital, the amounts mentioned in Ex.M.1(1!) and M.2(a) less the amount sunk in fixed assets and working capital in progress1 have to be deducted. On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570,'and fixed a sum of R~. 1328745, as Reserves employed in business during· the year ended December 31, 1962. On this amount it allowed· a sum of Rs. 53150/- as return on Reserves at 4 % for the year G 1962. Similarly, for the year 1963, it deducted from Rs. 46937947, a sum of Rs. 45229423, and fixed a sum of Rs. 1708524/- Reserves employed in business during that year. On this amount it a'llowed ~· 68340/- as return on Reserves at 4 % . H Mr. Malhatra, learned counsel for the appellant, while accept- is. ing that the principle adopted by the Tribunal in this regard BINNY LTD. v. WORKMEN (Vaidialingam, J.) 477 A correct, contended that it had made a mistake in calculation. According to the learned counsel, the claim must have been allowed in the manner calculated by the appellant. In this con nection, the learned counsel pointed out that e\-en in cases where the evidence regarding the utilisation of Reserves as Working Capital as cla.imed by the Company, is not very satisfactory, this B Court, on the bas\s of the balance sheets, which indicated that some amount must have been used as working capital has allowed such a claim. In this connection, he relied on Workmen.of Mis: Hi1u/11s1an Motors Ltd. v. Mis Hindustan Motors Ltd., and An other(') and Messrs. Aluminium Corporation of India v. Their Workmen('). c We may straightway say that these decisions do not assist the appellant. In the· case before us it is not necessary to do any guess work as the appellants wants us to do. The appellant has filed g1atements showing how it has calculated the amount of Reserws utilised as working capital and we have to find out whether the In fact, Mr. Malhotra has calculations made by it are. correct. D not been ab]!l to point out from ~he balance sheets, as to what to have amount, according to the appellant, can be considerd been used as working capital. In the two decisions, relied on by him, the company concerned was llble to refer to ithe figures in the balance sheets from which this Court was able to draw a conclu sion regarding the approximate amount that would have been is el}tircly utilised as working capital. The position before us E different. On the other hand, Mr. Puri, learned counsel for the respon dents, referred us to the balance sheets for the years in question regarding tb_e share capital of 1the company being shown as Rs. 12750000/-. The counsel further pointed out that the said share capHal must have been sunk in acquiring the fixed assets F and for capital works in progress and, therefore, the Tribunal was justified in deducting the amount of fixed assets and capital works in progress shown in Exs. M.l(a) and M.2(a) from the totaI shown by the appellant in those statements. The counsel further urged that in considering the claim for return on working capital two questions have to be kept in view: ( 1) Whether the Reserves G were available, and if they were (2) whether they were used as working capital and if so what is that amount. The Tribunal in our opinion, bas c9rrectlv kept these two principles in view in arriving at the amount of Reserves used as working capital and on which a retui;n is to be allowed. We see no error committed by the Tribunal in the calculation made for arriving at the Reserves. which must have been used as working capital, especially as the H evidence on the side of the appellant was very unsatisfactory. Even the appellant has deducted the amount of share capital before (1) [1968] 2 S.C.R. 311. (2) [1969] 3 s.c.c. 832: -( 478 SUPREME COURT REPORTS [1972] 3 S.C.R. arriving at the final figures mentioned in Exs. M.l (a) and M.2 (a). But the appellant was claiming Ute whole of the. final amount shown..in these two statements as Reserves. used as work ing capital, which it was not certainly entitled to in law. We have :Jready pninted out that the Tribunal has held that tlr~ capital the working capital cannot include fixed assets nor works in progress as i'I represents •the funds required for day to day running of the Company. The Tribunal has further held that the appellant is entitled to deduct investments, interest accrued on investments etc. which have been shown in Bxs. M.1 (a) and M.2(a) on the ground that they must be considered to be the amounts available to be used as working capital. These findings have .not been challenged by the learned counsel for the appel lant. The appellant has also filed d•!tails of Reserves employed in the busin.ess during the years ended 31st December, 1962 and 1963 as shown in Exs. M.l(b) and M.2(b) respeotively. Even there the appellant has deducted the share capital before giving final figures."' Therefore, the contention of Mr. Malhotra that the Tribunal has committed a mistake in calculating the amount of Reserves used as working capital for these two years, cannot be accepted. If so, i'I follows that the amount fixed. by the Tribunal as return at 4% an Reserves used as working capital for these two years, is correct The second question that arises for consideration is the claim ·made by the appellant for provision for rehabilitation for the two years and which claim has been re.iected by the Trib~. The claim made by ¢he appellant for provision for rehabilitation for 1he year 1962 was Rs. 18030871.00 and the year 1963 Rs. 18062336.00. 'Thus the appellant was claiming for each year provision being made of more than a crore of rupe.-..s for re habilitation. . The ;ippellant has filed a chart Ex. M.8 giving the calculations for the year 1962, its claim for Rs. 18030871.00. If the claim for rehabilitation is accepted, then the result will .be that there will be no profits at all from and out of which any bonus can be paid for the years in question. rehabilitation 'The claim of the appellant has been opposed by Mr. I. N. Keshava, learned counsel for the first respondent and His conten· ·tions have been adopted by the counsel appearing for the other is opposed respondeIYts--Uriions. The claim of the appellant mainly on two grounds, namely, (1 ) that the appellant has no scheme for .rJ:habilitation for the relevant years and (2) in any event there were huge Reserves available from which the claim for rehabilitation can be easily met. The Tribunal has rejected Che claim for rehabilitation both oh the grounds that the appeTiant A B c D E F G H BINNY LTD. v. WORKMEN (Vaidialingam, J.) 479 A B c D E F G H has no scheme for rehabilitation and that the rehabilitation claim can be adequately met .with from the hul\e Reserves of nearly four crores of rupees that the appellant had. It must be noted that Rehabilitation Reserve is a substantial item which goes to reduce <the available surplus and as a result affects the right of the employees to receive the bonus. Hence the emplo~r will have 'IO place all relevant materials and the Tribu nal will have to scrutinize them carefully and to be satisfied that It is no doubt true that it is but proper in the claim is justified. the larger interest of the industry as well as the employees proper rehabilitation Reserve should be built up taking into con sideration the increase in price in plant and machinery which has to be replared at a future date and by determination of multiplier and its divis~. It is also clear from the decisions of this Court that if a Company has no scheme for rehabilitation, then of course, tvide Azam Jahi Mills, its claim on that head must be rejected. Ltd. v. Their Workmen(')]. Further, since it is the employer who seeks replacement costs, it is for him to satisfy the Tribunal as to what wii(be the overall cost of replacement and in doing so, it is he who has to discharge this burden by adducing proper evi dence and giving other pa~ty an opportunity to test the correct [vi de National En ness of that evidence by cross-examination. gineering Industries Ltd. v. Its Workmen(')]. It is also' now well-settled that in determining the claim of the employer for rehabilitation, two factors are essential to be ascer tained, namely, ( 1) the multiplier, and that has to be done by reference to the purchase price of the machinery and the price which has to be paid for rehabilitation or replacement; and (2) the determination of the diviser and thait has to be done by decid [vide The Honorary ing the probable life of the machinery. Secretary, South India Millowners' Association and others v The Secretary Coimbatore District Textile Workers' Union(') and Mis Gannon Dunkerley and Co. Ltd. and another v. Their Work men(')]. Mr. Malhotra, learned counsel for the appellant, very strongly relied on the statement Ex. M.S. as well as the evidence of M.W. 2, ithe Mill Manager and M.W. 3, the Assistant Officer, Efficiency Section of the Mill, in support of his contention that the appellant has a scheme for rehabilitation and that the claim made by the appellant for making provision for rehabilitation is proper. The counsel also pointed out that the evidence of these two witnesses clearly establishes that most of the items of machi nery have long out lived, their normal age of 25 years. and (I) [1967p L.L.1' 18. (3) (1962] SuPJi. 2 l .c.~ 2) [1969J 1 s.c.R. 779. (4) A.I.R. 1971 S.C. 2567. /480 SUPREME COURT REPORTS [ 1972] 3 S.C.R. therefore they require replacemeait in order to ensure proper pro duction. The counsel further pointed out that the rejection by the Tribunal .of the claim made by the appellant, on 'the basis that the life of the textile machinery is only 25 years, is .not correct and that the view of the Tribunal that the normal age is more than 25 years is opposed to the decisions of this Court. So far as the age of the machinery is concerned, it is no doubt true 1that in The Honorary Secretary, South India Mil/owners' Association and others v. The Secretary Coimbatore District .'f.exti/e Workers' Union( 1), this Court, after a reference to the evidence adduced confirmed the findings of the Tribunal 'i:hat estimated life of the textile machinery in question should be taken to be 25 years, but in the said decision itself it is observed as follows : "We are not prepared 'to accept either argument be cause, in our opinion, the life of the machinery every case has to be determined in the light of evidence adduced by the parties." But it is unnecessary for us to pursue this aspect further as we are disallowing ~he entire claim for rehabilitation. Mr. Malhotra, also criticised the view of the Tribunal that in this case the evidence of the witnesses on the side of the appellant clearly shows that the. machines are working very efficiently though they have been running for over 50 years. On the other hand, the counsel ur, ged that the principle to be borne in mind, when considering the claim for rehabilitation, is that 'the life of machinery is the period during which it is estimated to work with reasonable efficiency and not the period during which it has actu ally been operated, that is, till it becomes too deteriorated for use. No doubt the last proposition enunciated by the counsel abstrtact is correct; but the question is whether 1the appellant has discharged its burden of satisfying the Tribunal that it had a scheme for rehabilitaition and whether it had placed the necessary mate rials for the purpose of working out the multiplier and the diviser. Mr. Keshava, learned counsel for the first respondent, refer red us to the written statement filed by one of the Unions, Binny Mills Labour Association, wherein it has specifically stated that the plant and machinery owned by the Mills are among~t the most modern machineries and that no provision for reply state necessary. The appellant, it is pointed out, in its ment did not controvert these averments. Even in the statements Exs. M. 1 and M. 2, filed by the appellant, no claim for rehabili ithe evidence of ta~tion has been made. He also referred to rehabilitation (1) [1962] Supp. 2. S.C. R. 926. A B c D E F G H BINNY LTD. v. WORKMEN (Vaidialingam, J.) 4'81 A M.Ws. 2 and ~. and pointed out that their evidence does not show that the Company had any scheme for rehabilitation. On ·thei;e grounds, the counsel pointed out that the appellant has not placed sufficient materials before the Tribunal to. sustain its claim for rehabilitation. 8 C It must be emphasised that in _dealing with the claim of an employer for rehabilitation, as pointed out earlier, the onus of proof is on the employer. He has to prove the price of the plant and the machinery, its age, the period during which it requires replacement, the cost of replacement, the amount standing in the Debentures and Reserve Funds and to what extent the funds at its disposal would meet the cost of replacement. If the employer fails to lead satisfactory evidence on these ppints, the result will be that the claim for rehabilitation will have to b! itotally rejected. It is no doubt true that a chart Ex.M. 8 has been filed by the appellant and N:.W. 3, the Assistant Officer, Efficiency Section, has spoken regarding the same. But he has admitted ~hat the D original quotations received from the do.lalers regarding the price of new machinery for the purpose of replacement have nat been produced before the Tribunal. He has further admitted that the appellant has not produced the lel!ters written by it calling for quotations regarding the price of the machinery. He has further admitted that no charts have been produced to show the value of the machineries in 1962 .. The multipliers, according to this witness, E have been adopted as advised by the appellant's Legal Adviser. F It is clear from the above answers of the witness that there is no material placed before the Tribunal by "the appellant from which the multiplier and diviser can be properly worked out for In fact the purpose of considering the claim for rehabilitation. the Mill Manager, M. W. 2 has stated that the company has floated a debenture for 1 i crore for buying new machinery. This clearly shows that the appellant had no scheme for rehabilitation and that explains the r~son why it had not made any provision for rehabili tation. Mr. Malhotra, then urged that at any rate the Tribunal itself G has proceeded on the basis that some amount for rehabilitation is necessary to be provided for each year. Based on this observa tion ·of ihe Ttibunal, 100 counsel pointed out that the appellant ~hould be allowed at least the amount that it has actually spent for replacement of machineries in the years 1962 and 1963. Accor· ding to himJ!. sum of Rs. 2619608 and Rs. 2124102 have been H spent in the years 1962 and 1963 rcspcctiwly for machinery and plant installed in those years. In this conneotion m referred us to the balance sheet and profit and. loss accounts for these two years and stres9':d that the Tribunal has committed an error in not 482 SUPREME COURT REPORTS [1972] 3 S.C.R. allowing at least these amounts by way of provision for rebabiU- rtation. A It is no doubt true that these amounts are shown in the sche dules to the balance sheets for the years concerned. Admittedly, there is_ no such claim made in 1the written statement filed by. the appellant before the Tribunal. When the Unions were constest- ing the claim of the awellant on the ground that it bas no scheme B for rehabiliitation and that it has not spent any amount by way of replacement of old machinery, it was the duty of the appellant to have ma4e a proper claim and it should have adduced evidence regarding that aspect before the Tribunal. Mere production of balance sheet and profit and Joss accounts by themselves will not entitle the appellant to sustain its claim for rehabilitation. c For all the reasons given above, it is clear that 1the Tribunal was justified in holding that the appellant has not been able to In this make out its claim for making provision for rehabilitation. view the Tribunal was justified in rejecting this claim of the appel lant. We may also state that the Tribunal is also of lhe view that D the appellant has large Reserves with which it can meet rehabili tation expenses of the machinery. In this connection the Tribu- nal has also referred to the evidence on the side of the appellant, that even according to the appellant rehabilita1tion will have to be completed only within eight years from 1962 and that only a sum of rui>ees eighty Jakhs will be required •for each year. On •this E reasoning the tribunal has held that this amount of rupees eighty lakhs can be ea5ily met with from the large Reserves available with It is not necessary for us to consider this aspect the appellant. further because we have already agreed with. the findings of the Tribunal that the appe!lant has no scheme for rehabilitation and that it has not placed any satisfactory evidence before the Tribu- nal in support of its claim. F The last point that arises for consideration is regarding available surplus for the years 1962 and 1963 as calculated by the Tribunal and the award by it of 1 /3rd of the amount as additional bonus for the two years after deducting the bonus already paid by .the appellant. The Tribunal, after re.jecting the appellant's claim for rehabilitation and also allowing return on Reserves used as G working capital in 'the manner, already referred to, had arrived at the. available surplus for the year 1962 in the sum of'Rs. 2635914 and for the year 1963 at Rs. 4904987. The appellant filed a statement Ex. M. 4 showing the amount of bonus already paid for the year~ 1962 and 1963 to all employees drawing a total of Rs. 500/- and less per mensem: From that statement it is seen H that for the year 1962· it had paid a sum of Rs. 1441455 and for the year 1963 a sum of Rs. 1960795. On the basis of the avail able surplus worked out for the years 1962 and 1963, the balance A ·B c D BINNY LTD. v. WORKMEN (Vaidialingam, !.) 483' available surplus after deducting bonus already paid will be as follows : 1%2 A vailabie surplus as worked out by the Tribunal Amount already paid as bonus by the apPellant . Balance: • 1963 Available surplus as worked out bY. the Tribunal Amount already paid as bonus by the appellant Balance, Rs. 2635914 1441455 1194459 490498' 1960795 2944191 What the Tribunal has done is to distribute 1/3rd of amouat shown as balance above, for each of the years as addi ti.onal bonus. That results in the workmen getting Rs. 398153 representing 25 days basic wages as additional bonus for the year 1962. Similarly, the workmen get Rs. 981397 representini two months basic wages as additional bonus for the year 1963. Therefore, i<t will be seen that the total bonus that the work men wi!I get for each of the years will be as follows : 1'62 E

#1. Amount already paid by the appellant

#2. Additional amount awarded by the Tribunal TOTAL Rs. 1441455 398153 1839608" F G . From the available surplus of Rs. 2635914 in 1962, the .work men will get a total sum of Rs. 1839608 as bonus for that year which works out to more than 60% of the available aurplus. Similarly for the year 1963 th~ figures are as follows : . 1963 I. Amount already paid by the appellant

#2. Additional amount awarded by the Tribunal TOTAL Rs. 19l5079s· 981397" .2942192 H thc- From the available surplus of Rs. 4904987 in.· 1963, workmen will get a sum of Rs. 2942192 for that year which works" out more or less about 60% of the available surplus, falling short , by a sum of Rs. 800/-. 484 SUPREME COURT REPORTS [1972] 3 S.C.R. Mr. Malhotra, learned counsel for the ·appellant attacked the A method of calculation adopted by the Tribunal. According to him the Tribun11l should not have fixed more than 60% of the available surplus as bonus payable for a year. On the other hand, th·: amounts of bonus now awarded by the Tribunal and already paid by the appellant exceed 60%. Jn our opinion, there is consider able force in the contention of the Learned counsel. The avail- U able surplus, as found by lb~ Tribunal for the year 1962 Rs. 2635914. Working out roughly 60% of this surplus to be distributed as bonus to the workmen, the amount of bonus will be aboui Rs. 1581600. The appellant has admittedly paid a sum of Rs. 1441455. The balance that tthe workmen will be entitled to will be Rs. 14.9145.00, whereas the Tribunal has directed apJ"llant to pay for this year by its Award a sum of Rs. 3~153. The award of this amount is not justified. the c So far as 1963 is concerned, the available surplus as found by the Tribunal is Rs. 4904987. 60% of this available surplus, to which the workmen will be entitled to will be Rs. 2942992. On the other hand, the total amount that the workmen will get as per o the award includi111t the amount already paid by the appellant as bonus is Rs. 2942192. The appellant will have to pay only an additional sum of Rs. 800/. to make up 60%. There is no appeal by the Unions and therefore the bonus awarded for the year 1963 does not require any interfereno:. In alloc~ting the available surplus between the company and E the workmen, it has been held by this Court that it will be eguit able if roughly 60% of the surplus is distributed as bonus to the workmen and the Company is left with the remaining 40%. The Company will get in addition to this 40%, Income-tax rebate on the 60% bonus payable to the workmen. !vide Mis. Gannon Dunkerley and Co. Ltd. and anotlrer v. Their F workmen( 1 on hand. )]. We have ·adopted the same principle jn the·~ase the benefrt of To conclude the Award of the Industrial Tribunal in A:J.D. No. 6 of 1966 is set aside and Civil Appeal No. 1291 of 1967 is allowed. Ture will be no order as to costs. The Award of the Industrial Tribunal in A.I.D. No. 8 of G 1966 is modified to the following extent: For tthe year 1962 the appellant will be liable to pay as additional bonus only a sum of Rs. 140145 inste1d of a sum of Rs. 398153 as directed by the Tribunal in the Award. To this extent Civil Appeal No. 1292 of 1967 is allowed in part. In other respects, it is dismissed. There ·will be no or.der as to costs. 'V.P.S. H (I) A.l.R.1971, S.C. 2S67