Appeals Nos 317  318 of 1950
Appeals by special leave from the judgment and order dated the 29th June 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeals Nos
61 and 81 of 1954
N C Chatterjee section N Mukherjee and B N Ghose for the appellants in C A No 317 of 56 and respondent No 1 in C A No 318 of 56
A V Viswanatha Sastri A K Dutt and B P Maheshwari for the appellants in C A No 318 of 56 and respondents in C A No 317 of 56 1959
May 8
The Judgment of the Court was delivered by WANCHOO J
These are two appeals by special leave against the same decision of the Labour Appellate Tribunal of India in a dispute between Messrs Shalimar Works Ltd Howrah hereinafter called the company and its workmen represented by two unions hereinafter called the workmen
Appeal No 317 is by the company while appeal No 318 is by the workmen
We shall dispose them of by one judgment
There was a dispute between the company and its workmen on a number of matters and it was referred to the Sixth Industrial Tribunal for adjudication by the Government of West Bengal
Only two matters now survive out of the many referred to the Tribunal namely 1 profit sharing bonus and 2 reinstatement of 250 old workmen
We shall first deal with the question of profit sharing bonus
It appears that the company had a profit sharing bonus scheme in force on the following lines
It provided that after making certain deductions if the remaining profit was between Rs 150000 and Rs 199999 the workmen would be entitled to quarter of a month s average basic pay as bonus When the 152 remaining profit was between Rs 2 00 lakhs and Rs 249999 the bonus went up to half of a month s average basic pay
When the remaining profit was between Rs 250000 and Rs 299999 the bonus was to be three quarters of a month s average basic pay and when the remaining profit was Rs 3 lacs or more the bonus was to equal one month s basic pay
No bonus was to be paid if the profit was less than Rs 150000
There were provisions that the full bonus would be paid to a workmen who had attended 275 days in a year inclusive of holidays and leave with pay while those with less attendance were to be paid proportionately with the condition that if the attendance of any workman was less than 100 days he would be entitled to no bonus
The workmen wanted this scheme to be revised and the main revision they desired was that the bonus should begin with a profit of Rs 25000 after the usual deductions when it would be one week s wages and should go on increasing till it came to three months  wages for profit above Rs 1 lakh and upto Rs 3 lakhs thereafter it should increase further at the rate of 21 days  wages for each lakh over 3 lakhs
This was opposed by the company though the company agreed to a change in the quantum of bonus when profit after deductions was Rs 3 lakhs or above
In the scheme in force the bonus was equal to one month s basic pay when the profit was Rs 3 lakhs or above with no further increase whatsoever be the profits
The company agreed to revise this term and suggested that when profit was ibetween Rs 3 lakhs to Rs 4 lakhs bonus should be four weeks  wages ii above Rs 4 lakhs upto Rs 5 lakhs bonus should be five weeks  wages
iiiabove Rs 5 lakhs it should be six weeks wages The Industrial Tribunal did not accept fully the contentions of either party in this connection though it varied the scheme in force in certain particulars
After the variation the scheme was as below 153 For remaining profit after the usual deductions ifrom Rs80000 to bonus at the rate of one Rs199999 week s average basic pay ii from Rs2 00 lakhs to bonus at the rate of half Rs 249999 of a month s average basic pay iii from Rs2 50 lakhs to bonus at the rate of three Rs 2 99999 quarters of a month s average basicpay iv from Rs 3 00 lakhs to bonus at the rate of four Rs 4 00 lakhs weeks  average basic pay v from above bonus at the rate of six Rs4 00 lakhs up weeks  average basic toRs 5 00 lakhs pay  and vi from above bonus at the rate of two Rs 5 00 lakhs months  average basic pay
The Industrial Tribunal also accepted 275 days  attendance for earning full bonus and proportionate bonus when the attendance fell below 275 days and the minimum of 100 days  attendance for earning any bonus at all
It also held that bonus for the years 1951 and 1952 should be paid at the existing rates while revised rates should be applied from the year 1953 onwards
Both parties appealed to the Labour Appellate Tribunal against this revision
The company contended that no greater revision than what it had agreed to should have been ordered
In the workmen s appeal it was contended that the scheme put forward on their behalf should have been accepted
They further contended that the condition of minimum attendance for 100 days should not have been laid down and that the bonus for the years 1951 and 1952 should have been awarded at the revised rates
The Appellate Tribunal saw no reason to interfere with the award of the Industrial Tribunal in this respect and dismissed the appeals with one modification namely it added that if in any year it was found 154 that the bonus worked out according to the award of the Industrial Tribunal was less than profit bonus calculated according to the Full Bench formula evolved in the Mill Owners  Association Bombay vs The Rashtriya Mill Mazdoor Sangh Bombay 1 the workmen would be entitled to bonus under the formula otherwise they would get bonus under the scheme as modified by the Industrial Tribunal In the appeals before us the company has attacked the revision ordered by the Industrial Tribunal which was upheld by the Appellate Tribunal as also the condition added by the latter while the workmen have attacked the scale fixed by the Industrial Tribunal as also the order of payment of bonus for the years 1951 and 1952 according to the scheme in force before the revision by the Industrial Tribunal and the conditions as to attendance
Learned counsel for the parties however agreed before us that the revision made by the Industrial Tribunal was acceptable to both the parties and that the condition laid down by the Appellate Tribunal that where the bonus according to the scheme is less than the bonus worked out according to the Full Bench formula that formula should be applied should be deleted
In view of this agreed statement we delete the condition laid down by the Appellate Tribunal and order that bonus should be paid in accordance with the scheme as revised by the Industrial Tribunal
Learned counsel for the workmen however urged that the condition as to minimum attendance of 100 days for entitlement to any bonus at all and of minimum attendance of 275 days for entitlement to full bonus was arbitrary and should be set aside
This condition has been accepted by both the Tribunals and appears reasonable and we see no reason to interfere
It was further contended that bonus for the years 1951 and 1952 should have been ordered to be paid according to the revised scheme
This contention was also negatived by the two Tribunals and we see no reason to differ from them
The two appeals therefore with respect to bonus are dismissed subject to the modification given above
1 155 We now come to the question relating to the term in the reference as to the reinstatement of 250 old workmen
it is necessary to state certain facts in this connection
It appears that a Major Engineering Tribunal was set up by the Government of West Bengal in October 1947 to decide disputes between major engineering firms and their workmen
The company as well as the workmen were parties to the disputes which was pending before that tribunal
The issues before that tribunal were of a very comprehensive nature and included all kinds of disputes that could arise between employers and employees
While that adjudication was pending the workmen suddenly pressed certain demands upon the company for immediate solution without awaiting the award of the tribunal even though the demands so put forward were under adjudication
The company naturally refused to meet the demands when they were under investigation by the tribunal
Consequently the workmen who had come to work on March 231948 started a sit down strike after they had entered the company s premises
This strike continued from March 23 to 27 and it was on March 27 that the workmen were ejected from the premises by the police according to the case of the company or were induced to leave the premises by the police according to the case of the workmen
Anyhow after the workmen left the premises on 27th the company gave notice on that day that the Works would be closed indefinitely
Another notice was given by the company on April 6 1948 in which it was notified that all those who had resorted to illegal strike from March 23 1948 would be deemed to have been discharged from that date
Thereafter no work was done till May 15 1948
On that date the company gave a notice that if sufficient suitable men applied for employment on or before May 19 the works would be opened on a limited scale from May 20
It seems however that nothing came out of this notice
Eventually on July 5 the company gave another notice to the effect that the works would reopen on July 6 1948 and all old employees could apply and if reengaged their past services would 156 be counted and their conditions of service would be as awarded by the Major Engineering Tribunal which it seems had given its award in the meantime
It was also said in the notice that upto July 21 the company would only consider engagement of former employees and no fresh labour would be recruited till that date
Thereafter the majority of the old workmen applied for being retaken in service and everyone who applied upto July 21 was reengaged
Thereafter the company refused to reengage the old employees a few of whom are said to have applied in November and December 1948 August 1951 February 1952 and January 1953
It appears that in November 1949 the Assistant Labour Commissioner was moved by one of the trade unions about non employment of 249 workmen
He wrote to the company in that connection and it replied that the workmen had been discharged for having taken part in an illegal strike and it could not see its way to reemploy them
For a long time nothing seems to have happened thereafter till we come to October 7 1952 when the first reference was made with respect to the reinstatement of 250 old workmen
The original reference was to the tribunal consisting of Shri SK Niyogi
That gentleman went on retirement before he could dispose of the reference and consequently another reference was made on November 18 1953 to the present tribunal consisting of Shri ML Chakraborty
No list of 250 workmen was sent to the Tribunal about whom it was to consider the question of reinstatement
No list of these workmen was filed even before the Industrial Tribunal during the adjudication proceedings It was only after the arguments on behalf of the company were over on December 141953 that a list of names was filed before the Industrial Tribunal
This list consisted of 220 persons only though the reference was with respect to 250
As has been pointed out by the Appellate Tribunal it was a carelessly prepared list in which some names were repeated
Against some serial numbers there were neither names nor ticket numbers
In spite of this the Industrial Tribunal ordered reinstatement without specifying who were to be reinstated it really 157 did not know who were the persons to be reinstated
What it did was to order the company in order that identity of the workmen to be reinstated might be established to give a general notice on its notice board notifying the strikers to come and join their duties on a fixed date and to reinstate whichever striker applied within the time allowed
This award of the Industrial Tribunal has been rightly criticised by the Appellate Tribunal which has charactrized this reinstatement as  vague and highly objectionable 
The Appellate Tribunal was of the view that  no award could be so loosely or vaguely made 
It further went on to consider whether identity could in any manner be fixed
In this connection it relied on the remarks made by the company which had however objected to the production of the list at that late stage on this list under orders of the Indust rial Tribunal
From these remarks the Appellate Tribunal came to the conclusion that the identity of 115 workmen had been established
It found that 100 out of them had withdrawn their provident fund
It therefore held that so far as these 100 were concerned they accepted the order of discharge because of the with
drawal of the provident fund and no further relief could be granted to them
As for the remaining fifteen workmen it pointed out that they had not withdrawn their provident fund
It therefore ordered these fifteen workmen to be reinstated
Finally it ordered that no compensation could be allowed to the workmen for the period between their discharge and their reinstatement because of the delay on their part in asking for redress
The reason which impelled the Appellate Tribunal to order reinstatement was that the notice of discharge dated April 6 1948 was not served on the workmen individually and though the notice of July 5 1948 inviting the former workmen to come and join the company was given wide publicity it was also not served on the workmen individually
According to the Appellate Tribunal  the net result was that there was defective communication of notice of discharge to the workmen and the notice offering reinstatement was not also sufficiently published to enable it to hold 158 that the defect was cured 
As to the sit down strike itself both the Tribunals were of the view that the strike was the result of pre concerted action and there was no justification for it when the matter was pending before a tribunal for adjudication
The plea of the workmen that the strike resulted spontaneously because of the insult offered by the manager to a deputation of the workmen on March 23 was disbelieved by both the Tribunals
The main contention on behalf of the company in this connection is that when both the Tribunals had found the sit down strike unjustified they should have held that the company was entitled to discharge the workmen in the particular circumstances of this case
It is also urged that the discharge took place in April 1948 and the company reopened in July 1948 the reference of the matter more than four years after without the list of the workmen said to have been discharged was not proper
On the other hand it has been urged on behalf of the workmen that as a dispute was pending between the company and its workmen the company could not discharge the workmen without obtaining permission of the tribunal under section 33 of the  and inasmuch as the notice of discharge of April 6 1948 was given without obtaining the sanction of the tribunal before whom the dispute was then pending it was a breach of section 33 and therefore the order of discharge being in breach of law the workmen were entitled to reinstatement
There is no doubt that strictly speaking the order of the company discharging its workmen on April 6 1948 when a dispute was admittedly pending was a breach of section 33 see Punjab National Bank Ltd vs Employees of the Bank1
The remedy for such a breach is provided in section 33 A and it can be availed of by an individual workman
If therefore it was felt by the workmen who were discharged on April 6 1948 that there was breach of section 33 by the company they should have applied individually or collectively to the tribunal under section 33 A None of them did this
It is true that some kind of letter was written to the Assistant 1 159 Labour Commissioner in November 1949 but that was also very late and nothing seems to have happened thereafter for almost another three years till the first reference was made on October 7 1952
It is true that there is no limitation prescribed for reference of disputes to an industrial tribunal even so it is only reasonable that disputes should be referred as soon as possible after they have arisen and after conciliation proceedings have failed particularly so when disputes relate to discharge of workmen wholesale as in this case
The industry has to carry on and if for any reason there has been a wholesale discharge of workmen and closure of the industry followed by its reopening and fresh recruitment of labour it is necessary that a dispute regarding reinstatement of a large number of workmen should be referred for adjudication within a reasonable time
We are of opinion that in this particular case the dispute was not referred for adjudication within a reasonable time as it was sent to the Industrial Tribunal more than four years after even reemployment of most of the old workmen
We have also pointed out that it was open to the workmen themselves even individually to apply under section 33 A in this case but neither that was done by the workmen nor was the matter referred for adjudication within a reasonable time
In these circumstances we are of opinion that the tribunal would be justified in refusing the relief of reinstatement to avoid dislocation of the industry and that is the correct order to make
In addition the reference in this case was vague inasmuch as the names of 250 workmen to be reinstated were not sent to the Industrial Tribunal and no list of these men was given to it till practically after the whole proceeding was over
Even the list then supplied was so bad that the Industrial Tribunal did not think it worthwhile to act upon it and directed the company to give a notice to the strikers to ask for re employment within a certain time
This the company had already done on July 5 1948
That notice had gained con siderable publicity for the majority of the workmen did appear thereafter for re employment by July 21
In the circumstances there was no reason for ordering 160 reinstatement of any one on such a vague reference after such an unreasonable length of time
The defect in the order of discharge of April 6 due to permission not having been obtained under section 33 can in the circumstances of this case be ignored on the ground that the workmen who did not rejoin in July 1948 were not interested in reinstatement firstly on account of the circumstances in which that order came to be made after an illegal and unjustified sit down strike secondly because the workmen in their turn did not avail themselves of the remedy under section 33 A which
was open to them and thirdly because the reference was made after an unreasonable length of time and in a vague manner
We are therefore of opinion that the Appellate Tribunal should not have ordered the reinstatement of even the fifteen workmen in the circumstances as their case was exactly the same as the case of the hundred workmen except in the matter of the withdrawal of the provident fund
After the application for special leave was allowed this Court made an order on September 26 1955 that seven days  wages every month should be paid by the company to the fifteen workmen who had been ordered to be reinstated
Learned counsel for the company informs us that of these fifteen only seven have been turning up to receive this payment while eight men never turned up
This shows that these eight are not interested in the reinstatement
Of the remaining seven two according to the learned counsel for the company have obtained other jobs while one is said to be a member of Parliament
The company was prepared to reinstate out of human considerations the other four though it contends that legally and rightly so it is not bound to reinstate any one of these fifteen workmen
These four workmen whom the company is prepared to take back are Nitai Manji Satya Charan Das Mustafa Khan and Akil ud Din
The appeal of the company must therefore be allowed with respect to the remaining eleven workmen who have been ordered to be reinstated by the Appellate Tribunal
The order of the Appellate Tribunal will stand with respect to the four workmen named above in 161 view of the company s willingness to take them back
The appeal of the workmen on the question of reinstatment fails and is hereby dismissed
We may however make it clear that payment made pursuant to the order of this Court will not in any event be refundable or adjustable towards the future wages of those workmen who will be reinstated by the company
Both the company and the workmen have raised other points in their respective grounds of appeal but as they have not been pressed before us we need not say anything with respect to them
In these circumstances we are of opinion that both the parties will bear their own costs of this Court
Appeal No 317 allowed
Appeal No 318 dismissed


Summary:
For the year 1953 54 the employers paid bonus to the workmen equal to three months  wages but the workmen demanded bonus equivalent to seven months and six months basic wages with dearness allowance
The employers contended that after making deductions for the prior charges from the gross profits in accordance with the formula evolved by the Full Bench of the Labour Appellate Tribunal in Mill Owners Association Bombay vs The Rashtriya Mill Mazdoor Sangh  there was no available surplus left and consequently the 926 workmen could claim no bonus
The workmen countered that the formula required revision as the employers were becoming increasingly more rehabilitation conscious and their appetite for the provision for rehabilitation was fast growing with the result that in most cases after allowing for rehabilitation there was no surplus left for the payment of bonus and the main object of the formula was thus frustrated
The workmen further contended that the whole of the rehabilitation expenses should not be provided for out of trading profits and that the claim for rehabilitation should be fixed at a reasonable amount and the industry should be required to find the balance from other sources Held that though there may be some force in the plea made for the revision of the Full Bench formula the problem raised by the said plea is of such a character that it can be appropriately considered only by a high powered commission and not by this Court while hearing the present group of appeals
Besides the Full Bench formula had on the whole worked fairly satisfactorily in a large number of industries all over the country and the claim for bonus should be decided by Tribunals on the basis of this formula without attempting to revise it
The formula was elastic enough to meet reasonably the claims of the industry and labour for fair play and justice
If the content of each item specified in the formula was determined objectively in the light of all relevant and material facts the Tribunals would generally find it possible to make reasonable adjustments between the rival claims and provide for a fair distribution of the available surplus
Muir Mills Co Ltd vs Suti Mills Mazdoor Union Kanpur   Baroda Borough Municipality vs Its Workmen   Sree Meenakshi Mills Ltd vs Their Workmen  and The State of Mysore vs The Workers of Kolar Gold Mines   referred to
The formula was based on two considerations first that labour was entitled to claim a share in the trading profits of the industry because it had partially contributed to the same and second that labour was entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up
In dealing with the claims for bonus the two fold basis of the formula must always be kept in mind
Further it was not necessary that the workmen must actually manufacture or produce the goods before they become entitled to claim any bonus
Burma Shell Oil Storage  Distributing Co of India Ltd vs Their Workmen  applied
The working of the formula begins with the figure of gross profits taken from the profit and loss account which are arrived at after payment of wages and dearness allowance to employees 927 and other items of admissible expenditure
It would be open to the Tribunal to examine the accounts and to disallow deliberate and mala fide debit entries made to reduce the amount of gross profits
It would likewise be open to the parties to claim the exclusion of items credit or debit on the ground that they were patently and obviously extraneous and entirely unrelated to the trading profits of the year
But the Tribunal must resist the temptation of dissecting the balance sheet too minutely or attempting to reconstruct it
K Cottton Manufacturers Ltd Kanpur vs Their Workmen  applied
The formula deals with the claims for bonus on the basis that the relevant year is a self sufficient unit and the appropriate accounts have to be made on the notional basis in respect of the said year
Hence the refund of excess profits and the adjustment of the previous year s depreciation and losses cannot be made against the bonus year s profits
Model Mills etc
Textile Mills Nagpur vs The Rashtriya Mills Mazdoor Sangh  Bennett Coleman and Co Ltd vs Their Workmen  referred to
After ascertaining the amount of gross profits the first item of deduction therefrom relates to depreciation
The depreciation which has to be deducted from the gross profits should be the notional normal depreciation as explained in the case of Surat Electricity Co Ltd  and should not include the initial and additional depreciation allowable under the Income tax Act
UP Electric Supply Co Ltd vs Their Workmen  Surat Electricity Co section Staff Union vs Surat Electricity Co Ltd  referred to
The second item of deduction is on account of income tax
On the balance obtained after deducting the depreciation from the gross profits the tribunal has to calculate the amount of income tax payable for the bonus year
In making this calculation it would not be reasonable to allow the employer to claim under the item of income tax an additional amount in respect of the two further depreciations which are expressly authorised under section 102vi of the Income tax Act
Therefore the two concessions thus given by the Income tax Act should not be taken into account in determining the amount of income tax under the formula
Sree Meenakshi Mills Ltd vs Their Workmen 1958 SCR 878 explained and followed
The third item of deduction under the formula relates to the return on paid up capital as well as working capital
The formula provides generally for the payment of interest at 6 118 928 per annum on the paid up capital and at 2 on working capital
These rates are not inflexible and will vary according to the circumstances of each case
Workmen of Assam Co Ltd vs Assaam Co Ltd 1959 SCR 327  Rustom and Hoynsby India Ltd vs Their Workmen 1955I LLJ 73 Mill Owners Association Bombay vs The Rashtriya Mill Mazdoor Sangh  Tea and Coffee Workers Union vs Brooke Bond India Private Ltd  U P Elcctric Supply Co Ltd vs Their Workmen  referred to
The fourth item of deduction is on account of rehabilitation which includes replacement and modernisation but not expansion
Rehabilitation has to be calculated for the plant and machinery as well as the buildings
The whole of the rehabilitation charges have to come out of the trading profits as this guarantees the continuance of the industry to the benefit both of the employer and labour
The Tribunal has to estimate the probable cost of replacement of plant and machinery at the time when such replacement would become due
In determining such cost the Tribunal has to project the price level into the future determined not only in the light of the prices prevailing during the bonus year but also of subsequent price levels
The decision on the question of the probable cost of rehabilitation is always reached by adopting a suitable multiplier
This multiplier is based on the ratio between the cost price of the plant and machinery and the probable price which may have to be paid for its rehabilitation replacement or modernisation
As there has been a continuous rise in the price of industrial plant and machinery the older the plant which needs rehabilitation the higher is the multiplier
If the employer has deliberately or mala fide refrained from rehabilitating his old machinery with a view to claim a higher multiplier his conduct may be taken into account in determining the multiplier and the amount of rehabilitation payable to him
Once a proper multiplier is adopted the probable cost of rehabilitation can be easily determined by multiplying the original cost by the multiplier
At this stage the divisor steps in
The total amount required for rehabilitation has to be divided by a suitable divisor in order to ascertain the annual requirement of the employer in that behalf year by year
Before awarding an appropriate amount in respect of rehabilitation for the bonus year deductions have to be made first on account of the break down value of the plant and machinery which is usually calculated at the rate Of 5 Of the cost price secondly the depreciation and general liquid resources available to the employer other than those earmarked for specific purposes thirdly all the rehabilitation amounts which may have been allowed to the employers in the previous years but had remained unused in the meanwhile
929 It is only after all the prior charges have thus been deter mined and deducted from the gross profits that the available surplus can be ascertained for payment of bonus
The procedure adopted by some Tribunals of nationally working out the amount of bonus and then giving it priority in the calculations before the determination of the income tax payable inevitably lessens the amount of tax proportionately and should be deprecated
Rehabilitation cannot be given priority before the income tax payable is ascertained and deducted from the gross profits
No addition should be made to the list of prior charges re cognised by the formula even with respect to the employers claim for deductions on account of gratuity fund created for the benefit of the workmen
But the Tribunal ought to when the available surplus is determined take into account such a claim and reasonable amount of allowance should be definitely borne in mind in finally fixing the amount of bonus
Ms Metro Motors vs Their Workmen  referred to
When the available surplus has been ascertained three parties are entitled to claim shares therein  labour s claim for bonus the industry s claim for the purpose of expansion and other needs and the share holders  claim for additional return on the capital invested by them
The ratio of distribution would obviously depend on several factors such as the gap between the actual wages and the living wages the setting apart of a gratuity fund by the employer and the amount thereof the extent of the available surplus the dividends actually paid by the employer and those paid by comparable concerns the probabilities of expansion the general financial condition of the employer and his necessity to meet urgent liabilities
It would be wrong on principle to take overtime payment into account in calculating the bonus payable to each workman
Once the total amount payable as bonus is determined on the principles as indicated the question of overtime payment being taken into account can no longer be a dispute between the employer and his workmen but one between the workmen inter se