TMI Blog1958 (5) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... en arose from the claim made by the workmen for bonus for the calendar years 1953 and 1954. The Unions representing the workmen alleged that the employers had sufficient available surplus in their hands from which they could and should be awarded bonus for the two years in question. The Union representing the working in Mysore Gold Mining Co. Ltd., demanded four months wages and five months wages as bonus for the years 1953 and 1954 respectively. The Union on behalf of the Nundydroog Mines demanded four months total wages as bonus for 1953 and 1954 whereas the workmen in Champion Reef Gold Mines demanded four months wages as bonus for the said two years. The management opposed these demands on the ground that there was no available surplus for both the years in all the mines and so no bonus can be awarded. In substance the tribunal has rejected the case made out by the management and has passed an award in favour of the workmen. Taking into consideration all relevant factors the tribunal has awarded as bonus wages at the rate of 1-1/2 months in 1953 and three months in 1954 to the workers of Champion Ref Mines Ltd; 2-1/2 months in 1953 and 3-1/2 months in 1954 to the workers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkmen and that the amount in question could be treated as a prior charge. The tribunal also found that no evidence had been adduced before it that any part of the amount thus debited had been in fact used for any of the purposes mentioned in the covenant. According to the tribunal there was also no evidence that, in addition to the statutory depreciation any further allowance should be made for rehabilitation reserve and it held that it was not shown that any amount had in fact been spent for rehabilitation in the two relevant years. Oil these findings the amount of ₹ 20.26 lakhs oil which the management relied was not allowed by the tribunal because, in its opinion, the said amount was a mixture of very many items depending upon the options exercised by the management under the terms of the joint operation schemes. Another point of dispute between the parties was in respect of the contribution made by the management to the Pension Fund scheme. The management claimed credit both for the initial and the annual contribution made by it in the relevant years. The tribunal held that, having regard to the circumstances under which the pension fund was introduced by the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade for depreciation and development so necessary for the longevity of the mines. As a result of the negotiations, the Act of 1940 was repealed in 1946 and a fresh agreement made under which contribution was levied by the State of Mysore against the companies. Under this agreement rupee companies had to be formed in India to take over the undertakings and assets in Mysore of the Sterling or U. K. companies and the seat of management had to be transferred from the United Kingdom to India. In pursuance of this agreement four rupee companies corresponding to the four Sterling or U. K. companies were formed in India. Their names were the Mysore Gold Mining Co. (KGF) Ltd., the Champion Reef Gold Mines of India (KGF) Ltd., the Oorgaum Gold Mines (KGF) Ltd., and the Nundydroog Mines (KGF) Ltd. All the shares in the rupee companies were held by the corresponding Sterling or U. K. companies. The assets in Mysore of the Sterling companies were transferred to the corresponding K. G. F. companies and the mining operations were carried on by these companies from April 1, 1951, by conforming to the terms and conditions embodied in the agreements (copies of which are Exs. 1 and 2). The four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im for bonus rests on the view, which is now well established, that both labour and capital contribute to the earnings of the industrial concern and that social justice requires that, workmen should be allowed a reasonable share in the profits made by the industry. In determining the quantum of the profit to which workmen as a whole (,an be held to be entitled, the Labour Appellate Tribunal evolved a formula under which the amount of the available surplus in the hands of the employer (1)(1950) L.L.J. 1247. can be determined. This formula takes the figure of the gross profits made by the industry for the relevant year and makes provisions for depreciation, for reserves, for rehabilitation, for return at 6% on the paid-up capital, for a return on the working capital at a lesser rate than the return on the paid-up capital and for the payment of income tax. These items are treated as prior charges and the amount determined after deducting the aggregrate total of these items from the gross profits is deemed to be the available surplus for the relevant year. It is in this available surplus thus deduced that labour is entitled to claim a reasonable share by way of bonus. It would th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d social and cultural opportunities. The concept of social and economic justice is a living concept of revolutionary import ; it gives sustenance to the rule of law and meaning and significance to the ideal of a welfare state. It is on this concept of social justice that the formula in question has been founded and experience in the matter of industrial adjudication shows that, on the whole, the formula has attained a fair amount of success. It is true that in industrial adjudication purely techinical and legalistic considerations which are apt to lead to rigidity or inflexibility would not always be appropriate; nor is it desirable to allow purely theoretical or academic considerations unrelated to facts to influence industrial adjudication. In its attempt to do social justice, industrial adjudication has to adjust rival claims of the employer and his workmen in a fair and just manner and this object can best be achieved by dealing with each problem as it arises on its own facts and circumstances. Experience has shown that the formula in question is, in its application, elastic enough to meet the requirements of individual cases, and so we do not think that the appellant has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus were stated in a modified form. The adjusted profit was now called the net surplus and the procedure to be adopted to determine this net surplus has been mentioned in para. 5 of this document. Clause (v) of para. 5 is the material clause with which we are concerned. Under this clause a sum up to 15% of the aggregate amount of the expenses of the lessees shown as debit items in their published revenue account or Income and Expenditure account shall be reserved for depreciation and development expenditure of a capital nature such as search for new ore, purchase of machinery, etc., and for renewals and replacements and shall be credited to a separate fund, provided, however, that the accumulated balance in the said fund less commitments does not exceed 25% of the expenses of the lessee shown as debit items in their published revenue account or Income and Expenditure account as the case may be for the first year on which the 15% was calculated or of the last preceding year whichever shall be greater. It is on this clause that the appellant claims to treat the amount of 15% as a prior charge in the present proceedings. The argument is that this is a valid contract between the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, apart from this consideration there is no obligation imposed on the appellant under this clause and any argument based on the alleged obligation cannot, therefore, be accepted. There is also another consideration which must be borne in mind. The fund contemplated by the relevant clause is intended to meet depreciation and development expenditure and it is clear that the depreciation and rehabilitation are included in the Full Bench formula amongst the items of prior charge in dealing with workmen s claim for bonus. If the appellant wants to make a claim for depreciation and rehabilitation it would be open to him to make such a claim even under the Full Bench formula. Indeed its claim for depreciation has been upheld by the present award. The fact that items of depreciation and rehabilitation are included in this clause shows that even if the amounts claimed by the appellant solely on the strength of this clause are not allowed, it would nevertheless be open to the appellant to make a claim in respect of admissible items independently of the clause and if he succeeds in proving this claim there could be no injustice to the appellant. In our opinion it would not be reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions exercised by the management and that it would be impossible to say which part of the said amounts can be legitimately treated as prior charge under the heading of rehabilitation. That is why we do not think that Mr. Sanyal can succeed in his argument that, on the evidence as it stands, the appellant is entitled to any particular amount under the heading of rehabilitation. That takes us to the appellant s case in regard to the annual contribution towards the pension fund which has been disallowed by the tribunal. It appears that the scheme of pension fund which was intended for the benefit of the covenanted servants of the sterling companies came into operation as from January 1, 1951, soon after the rupee companies came into existence. Certain rules appear to have been framed in respect of this pension fund and a trust has apparently been created for the administration of the fund. Under these rules the companies made the contribution which is called the initial contribution to the fund as specified in para. 1(c) of the rules. In addition to this initial contribution, the companies had to pay to the fund by halfyearly instalments on June 30 and December 31 of each year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he finding made by the tribunal in regard to the amount of bonus paid by the companies to their workmen for the year 1950. The employer s case was that though this bonus had accrued for the year 1950 it was actually paid in 1953 and so the amount of the bonus should be deducted from the gross profits for 1953. This contention has been rejected by the tribunal. The tribunal has observed that though the disbursement of bonus for the year was actually made in the early part of 1953 the amount was provided and debited in 1952. This can be seen from the income-tax assessment order to which the tribunal has referred. The employer had claimed as an expenditure the amount in respect of bonus relating to 1950 in the said income tax proceeding and so it was held that the said amount cannot now be taken into consideration for the year 1953. We do not see any error of law committed by the tribunal in recording this finding. It is clear that the respondents were found entitled to bonus for the year 1950, because the companies held in their hands sufficient available surplus from the trading profits of that year. In the absence of satisfactory evidence, normally the bonus paid to the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the pension fund Mr. Dave disallowed the claim for initial contribution but allowed the claim for annual contribution. He was inclined to hold that the annual contribution was made for services rendered during that year and should certainly form part of the expenses of that year. This award was taken before the Labour Appellate Tribunal. The Labour Appellate Tribunal confirmed Mr. Dave s decision both in regard to the initial and the annual contribution towards the pension fund. The Appellate Tribunal, however, different from Mr. Dave in regard to the employer s claim for the deduction of 15% under the relevant clause. It accepted the finding of the tribunal that the employer had failed to prove that in a particular year the maximum of 15% was in fact required to be contributed to the reserve fund. However, it held that the amount of ₹ 4.77 lakhs represented the actual expenditure incurred by the employer during the year and so this amount was allowed to be treated as a prior charge., It would no doubt appear as if the Appellate Tribunal took the relevant figure from the balance-sheet as showing the actual expenditure. It is unnecessary for us to consider wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of one of the items substantially as a result of the previous awards passed in its favour, he cannot be penalised as suggested by Mr. Jha. We would accordingly allow the appellant to put forward before the tribunal a specific claim under the heading of rehabilitation and lead evidence in support of the said claim. While we are sending this case back for the purpose of determining the appellant s claim for rehabilitation and for deciding two other points which we would presently indicate, it would be useful, if we briefly refer to the principles which are usually adopted by industrial courts in adjudicating upon the employer s claim for rehabilitation. It is not disputed before us that these principles would have to be borne in mind by the tribunal in determining the validity of the appellant s claim for rehabilitation which we are now permitting it to make. It has been observed by the Labour Appellate Tribunal in Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills Staff Union (1952) L.A.C. 172) that though the employer is entitled to claim deductions from the gross profits in respect of rehabilitation as a matter of right it is difficult to lay down any general rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the special-needs and requirements of the industry. This position appears to be fully recognised by the Labour Appellate Tribunal in these decisions themselves. There is another point on which Mr. Sanyal has requested us to call for a finding from the tribunal. His case is that the award of the tribunal in one material particular suffers from an error apparent on the face of the record. In the award, the initial contribution to the pension fund and the annual contribution to the pension fund have been added back for both the years in respect of all the companies. Mr. Sanyal contends that the amount added back under the heading annual contribution to the pension fund really includes the initial contribution to the said fund also, and so it was erroneous to have added back a separate amount under the heading the initial contribution to the pension fund . Inother words, the grievance is that the amount of the initial contribution has been added back twice. Mr. Jha, for the respondents, does not accept Mr. Sanyal s contention that this is an error apparent on the face of the record. He disputes the assumption made by Mr. Sanyal that the annual contribution to the pens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily be allowed by industrial courts in determining the available surplus under the Full Bench formula. We wish to make it clear that it would not be open to the respondents to raise any contention on the strength of this decision under the issue which is being remitted to the tribunal at their request. It is somewhat unfortunate that, though we have held against the appellant on the main points urged by Mr. Sanyal before us, we cannot finally dispose of the appeal today. It is true that it is of the utmost importance that industrial adjudication should be dealt with speedily and without unnecessary delay; but in the present case we have come to the conclusion that it would be fair and just to allow the appellant to raise the two points mentioned in the judgment. That is why we think it necessary that this case should be sent back to the tribunal with the direction that the tribunal should make its findings on the issues remitted to it by this judgment. The three issues on which we want a finding from the tribunal are: (1)In addition to the statutory depreciation allowed, is the appellant entitled to claim any deduction under the head of rehabilitation, and if yes, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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