Case: M/s. Ganesh Flour Mills Co. Ltd Vs. Employees of M/s. Ganesh Flour Mills Co. Ltd

erroneous in law and it needs to be corrected. If any of these debts are fortunately recovered in subsequent years they would no doubt be credited when they are so recovered. Indeed in the relevant year itself Rs. 12,028 which had been shown as an item of bad debt in the previous year has been credited because it has been recovered.We must accordingly hold that the tribunals below erred in law in not accepting the argument of the appellant that, for determining the gross profits, the amount of irrecoverable debts must be deducted.11. It would thus appear to be clear that, if the amount of gross profits found by the Labour Appellate Tribunal is reduced after deducting from it the amount of Rs. 1,47,289 as bad debts and if an allowance is made as a prior charge for Rs. 69,324 as interest on preference shares, it would be difficult to hold that there is any surplus worth the name which is available for distribution by way of bonus amongst employees.12. The position then would be that the cash available would consist of cash in hand Rs. 14,576-2-4 and the amount with the bankers in India Rs. 1,52,285. This total comes to Rs. 1,66,861-2-4. From this amount Rs. 1,47,289 must be deducted as bad and irrecoverable debts and Rs. 69,324 must likewise be deducted as interest on preference shares which have a prior charge. Unfortunately the tribunals below did not take into account the fact that, if the evidence of Shri Sharma was believed in regard to the difficulties experienced by the appellant in bringing over to India cash locked up in Pakistan, they could not have logically reached the conclusion that there was any surplus actually available to the appellant for distribution amongst the employees. There is on paper a fairly large amount of surplus available but in point of fact this surplus is not actually available to the employer for the relevant year and, so far as the recorded shows, is not shown to be likely to be available to him in the near future. That is why we think that, even if the claim for bonus is considered on the basis that the business carried on by the appellant in India as well as in Pakistan constitutes one business, it would be difficult to uphold the conclusion of the Labour Appellate Tribunal that there was any surplus available during the relevant period or was likely to be available in the near future from which bonus could be paid to the employees.13. There remain three more points which have been urged by the learned Attorney-General before us and to which brief reference may be made. It appears that the appellant had claimed an allowance for Rs. 10,29,800 as a prior charge in respect of rehabilitation charges for the relevant year. The whole of this claim has been rejected by the tribunal below on the ground that sufficient material had not been placed by the appellant in support of its claim. The learned Attorney-General conceded that it would have been much better if the appellant had led more satisfactory evidence in support of this claim; but he argued that it was not right to treat the evidence produced by the appellant as wholly insufficient and in any case, according to him, refusal to allow any amount in respect of rehabilitation charges was not justified. It is true that the present appellant company itself had been similarly penalised by the Labour Appellate Tribunal in Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills Staff Union, Kanpur, (1952) 1 Lap AC 172 (M) and that naturally makes the refault of the appellant in leading satisfactory evidence more glaring; but, on the other hand, reasonable rehabilitation charges have been consistently assigned the position of a prior charge in determining the available surplus in cases where claims are made by workmen for bonus. If it had been necessary to decide this point in the present appeal we might have had to consider whether, subject to such terms as to costs as we might have deemed fit to impose, an opportunity should not be given to the appellant to lead more satisfactory evidence in support of the item claimed by the appellant under the heading of rehabilitation charges. As has been held by the Labour Appellate Tribunal in M/s., Singh Plate Mills Ltd. v., The Workmen of M/s. Singh Plate Mills Limited etc. 1955 Lab AC 216 (N), the data necessary for the computation of the rehabilitation charges are:"(a) Dates of purchases of machinery or of erection of building, as the case may be, together with the costs incurred for the same;(b) The number of shifts for which this concern has been working;(c) The existing depreciation fund and evidence as to the life of the machinery and the building. Higher depreciation charges are allowed where a Factory works for three shifts".We have looked at the evidence of Shri Kapur to which our attention was invited by the learned Attorney-General and we are prepared to agree with the view taken by the tribunals below that this evidence is not satisfactory; but the appellants argument is that the penalty visited on the appellant for his failure to lead more satisfactory evidence is unduly severe. However, in view of the conclusion which we have reached in this appeal we do not think it necessary to pursue this point any further.14. The learned Attorney-General has also contended in this appeal that the appellate tribunal has erred in awarding interest at 5% on the paid-up capital and at 2% on the reserves employed as working capital. We do not think it necessary to deal with these points also.15. The result is that the conclusion of the Labour Appellate Tribunal that a surplus of Rs. 9,61,371 was available for distribution during the relevant period or would have become available within a reasonable time thereafter cannot be sustained in view of their own appreciation of the evidence led in the case.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]6.The question thus raised by the parties before us is no doubt of some importance; but we do not think it necessary to decide this question in the present appeal because we have reached the conclusion that even assuming that the business carried on by the appellant in India as well as in Pakistan is treated as one unit, and even if the consolidated statement of profit and loss account is taken as the sole guide for deciding whether the appellant holds in his hands net surplus available for distribution, it would be difficult to sustain the award passed by the tribunals below in favour of the respondents.e next point which is urged by the learnedis in respect of the failure of the Labour Appellate Tribunal to make allowance for any interest on the preference shares.shares.10. Then it is urged that the tribunals below erred in law in not taking into account bad debts shown in the accounts of the appellant. In the accounts of the appellant Rs. 1,47,289 are shown as bad and irrecoverable debts.On this point again, both the tribunals below have not held that the relevant entry in the books of account has been made with the intention of defeating the employees claim for bonus. The argument urged by the appellant in respect of these bad debts appears to have been misunderstood by the tribunals below. They appear to have assumed that the appellant claimed that bad debts should be treated as having a prior charge in determining the amount of surplus available for distribution and it is stated in both the judgments that no further addition can be made in the list of items which can be regarded as prior charges in determining the appellants surplus. It was not the appellants case that bad debts should be a prior chare at all. The appellants case was that, if the debts were irrecoverable they would, to that extent, reduce the gross profits. In our opinion, the failure of the tribunals below to appreciate correctly the contention raised by the appellant in this behalf has led to a finding which is erroneous in law and it needs to be corrected. If any of these debts are fortunately recovered in subsequent years they would no doubt be credited when they are so recovered. Indeed in the relevant year itself Rs. 12,028 which had been shown as an item of bad debt in the previous year has been credited because it has been recovered.We must accordingly hold that the tribunals below erred in law in not accepting the argument of the appellant that, for determining the gross profits, the amount of irrecoverable debts must be deducted.11. It would thus appear to be clear that, if the amount of gross profits found by the Labour Appellate Tribunal is reduced after deducting from it the amount of Rs. 1,47,289 as bad debts and if an allowance is made as a prior charge for Rs. 69,324 as interest on preference shares, it would be difficult to hold that there is any surplus worth the name which is available for distribution by way of bonus amongst employees.employees.13. There remain three more points which have been urged by the learnedbefore us and to which brief reference may be made. It appears that the appellant had claimed an allowance for Rs. 10,29,800 as a prior charge in respect of rehabilitation charges for the relevant year. The whole of this claim has been rejected by the tribunal below on the ground that sufficient material had not been placed by the appellant in support of its claim. The learnedconceded that it would have been much better if the appellant had led more satisfactory evidence in support of this claim; but he argued that it was not right to treat the evidence produced by the appellant as wholly insufficient and in any case, according to him, refusal to allow any amount in respect of rehabilitation charges was not justified. It is true that the present appellant company itself had been similarly penalised by the Labour Appellate Tribunal in Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills Staff Union, Kanpur, (1952) 1 Lap AC 172 (M) and that naturally makes the refault of the appellant in leading satisfactory evidence more glaring; but, on the other hand, reasonable rehabilitation charges have been consistently assigned the position of a prior charge in determining the available surplus in cases where claims are made by workmen for bonus. If it had been necessary to decide this point in the present appeal we might have had to consider whether, subject to such terms as to costs as we might have deemed fit to impose, an opportunity should not be given to the appellant to lead more satisfactory evidence in support of the item claimed by the appellant under the heading of rehabilitation charges.The position then would be that the cash available would consist of cash in hand Rs.and the amount with the bankers in India Rs. 1,52,285. This total comes to Rs.ral has also contended in this appeal that the appellate tribunal has erred in awarding interest at 5% on thel and at 2% on the reserves employed as working capital.We do not think it necessary to deal with these points also.15. The result is that the conclusion of the Labour Appellate Tribunal that a surplus of Rs. 9,61,371 was available for distribution during the relevant period or would have become available within a reasonable time thereafter cannot be sustained in view of their own appreciation of the evidence led in the case.