Case: Baroda Borough Municipality Vs. Its Workman

not dealt with by the Municipal Act; it is dealt with by the Industrial Act, 1947. Therefore, it is not relevant consideration whether there are provisions in the Municipal Act with regard to payment of bonus. The provisions of the Municipal Act are relevant only for the purposes of determining the quality or nature municipal property or fund; those provisions cannot be stretched beyond that limited purpose for defeating a claim of bonus. We do not, therefore, think that the absence of provisions in the Municipal Act for the payment of bonus through municipal employees is a consideration which is either determinative or conclusive of the question at issue before us.If we had come to a different conclusion as respects the first contention of the learned Attorney-General and his third contention to be referred to presently the absence of suitable provisions relating to payment of bonus to municipal employees in the Municipal Act would not have stood in the way of our allowing the claim of the respondents for the payment of bonus.14. We now proceed to consider the third and last contention of the learned Attorney-General. This contention centres round the question whether one department of the municipality can be isolated and a distinction made between the employees of that department and other departments in the matter of the payment of bonus. We have already pointed out that under the Municipality Act a municipality may perform various functions, some obligatory and some discretional. The activities may be of a composite nature; some of the departments may be mostly earning departments and some mostly spending departments. For example, the department which collects municipal taxes or other municipal revenue, is essentially an earning department whereas the sanitary department or other service department is essentially a spending department. There may indeed be departments where the earning and spending may almost balance each other. In spite of these distinctions in the internal arrangement of departments within a municipality, the property or income of the municipality remains of the same nature, or quality and it will be obviously unfair to draw a distinction between the employees of one department and the employees of another department for the payment of bonus.The result of such distinction will be that the staff of the spending departments will never be entitled to any bonus at all and instead of promoting peace and harmony amongst the employees of the municipality, a distinction like the one suggested by learned counsel for the respondents will create unrest and discontent. Learned counsel for the respondents submitted before us that beyond the fact of single ownership, there was no other connection between the electricity department of the municipality and its other departments. We do not think that this submission is correct. Under the Municipal Act, the total income and expenditure of the municipality form one integrated whole; they are both for the purposes of the Act; and if the workmen of a service or spending department do not work efficiently with the result that the expenses on the obligatory functions of the municipality increases, that in efficiency is bound to affect - even to dwindle or wipe out the surplus of an earning department. For a true appreciation of the financial position of a municipality, its total income, and expenditure must be considered; we must look at the whole picture the part which is in shade as well as the part which has caught the sun, for a correct appraisal of the picture.15. Learned counsel for the respondents, referred us to a number of decisions of Labour Tribunals where a distinction was made between a parent concern and subsidiary concerns or even between different units of the same concern, in the matter of payment of bonus:Rohit Mills Ltd. Ahmedabad v. Sri R. S. Parmar,1951-1 Lab. L. J. 463 (C).Mackinnon Mackenzie and Companys Indian Staff Organization v Mackinnon Mackenzie and Co. Ltd.1955-1 Lab. L. J. 154 (D),Ahmedabad Mfg. and Calico Ptg. Co. Ltd. v. Their Workmen,1951-2 Lab. L. J. 765 (E),Shaparia Dock and Steel Co. v. Their Workers1954-2 Lab. L. J. 208 (F) andMinakshi Mills Ltd. v. Their Workmen,1953-2 Lab. L. J. 520 (g). Recently, we have had occasion to consider the question inBurn and Co., Calcutta v. Their EmployeesC A. No. 325 of 1955, D/-11 Oct. 1956: ((S) A. I. R. 1957 S. C. 38) (H)where we pointed out the harmful consequences p73 which might arise if an invidious distinction were made amongst employees of the same industry. Considering the question with reference to the facts of the present case, it is clear to us that the different activities of the Baroda Municipality constituted one integrated whole and the activities of the different department of the Municipality were not distinct or unconnected activities of the different departments of the Municipality were not distinct or unconnected with activities so as to permit the isolation of one department from another or of an earning department from another or of an earning department from a spending department. From this point of view also, the claim of bonus was not maintainable.16. Some decisions were brought to our notice in which the question of the payment of bonus to their employees by Electric Supply Companies, not run as a state or municipal under taking, was considered with reference to the provisions of the Electricity (Supply) Act, 1948, and one of the points which fell for consideration there was the interpretation of clause XVII(-) (b) (xi) of Schedule VI of the Electricity (Supply) Act, 1948. It is not necessary to consider those decisions in the present case, because they have no bearing on the questions which we have to consider in this case.17. For the reasons given above, we hold that the Industrial Tribunal came to the correct decision that the respondents p73 employed in the electricity department of the Baroda Municipality were not entitled to the bonus claimed, and the Labour Appellate Tribunal came to an erroneous decision on that question in its order dated November 23, 1955.

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

Explanation:
1[ds]4. It is now finally settled by the decision of this Court in D. N. Banerjee v. P.R. Mukerjee (A) (supra) that a municipal undertaking of the nature, we have under consideration here is an industry within the meaning of the definition of that word in S.2 (j) of the Industrial Disputes Act 1947 and that the expression industrial dispute in that Act includes disputes between municipalities and their employees in branches of work that can be regarded as analogous to the carrying on of a trade or business.It is clear to us that having regard to the provisions of the Bombay Municipal Boroughs Act,1925 (Bombay Act XVIII of 1925) hereinafter called the Municipal Act under which the appellant Municipality is constituted and functions, the earnings of one department of the Municipality cannot be held to be gross profits in the ordinary commercial or trading sense; nor can the principles governing the grant of bonus out of such profits after meeting necessary or prior charges be applied to the presentscrutiny of these provisions clearly establishes two propositions: one is that all municipal property, including moneys, etc., received by way of gift, is vested in the municipality and shall be held and applied by it as trustee subject to the provisions and for the purposes of the Municipal Act, and it is not open to the municipality to treat some of its property separately from other property and divert it for purposes other than those sanctioned by the Municipal Act; the other proposition is that there are some obligatory functions which a municipality must perform and one of these is the lighting of public streets, places and buildings, and there are some other functions which the municipality may at its discretion perform either wholly or partly out of municipal property and fund, and one of these discretional functions is the supply of electrical energy which is for the use of the inhabitants of the municipal borough or for the benefit of any person, buildings or lands in any place whether such place is or is not within the limits of the municipal borough.In our opinion, such a treatment of the income of one department of the Municipality would be clearly against the provision of the Municipal Act. It is pertinent to refer here to Chapter XI of the Municipal Act dealing with Municipal Accounts. Under S.209 a complete account of all receipts and expenditure, of the municipality and a complete account of the actual and expected receipts and expenditure, together with a budget estimate of the income and expenditure of the municipality, have to be prepared for each year and these have to be prepared and laid before the municipality on or before a particular date. These budget estimates have then to be sanctioned at a special general meeting of thesound point stressed was that the distinction between the obligatory and discretional functions of the municipality showed that in the exercise of discretional functions the municipality might engage in an undertaking with p73 a profit makingour opinion, these submissions are based on a misappreciation of the true position in law.With regard to the first point, it is worthy of note that the maintenance of separate accounts of a particular department by the Municipality does not alter the nature or quality of the property or income therefrom. The property or income is still municipal property within the meaning of Ss.63 and 65 of the Municipal Act and it can be utilised only for the purposes of the Act as laid down by S.66. Maintenance of a separate account for a particular department is in the nature of an internal accounting arrangement; it does not really alter the quality or nature of the property or income: and for the purposes of S.209 of the Act the property or income has to be treated like all other property or income of the Municipality inhave already pointed out that in the present case also, the claim of the Municipality was that,even including the income of its electricity department, municipal budget for the relevant year was a deficit one. With regard, to the second submission of learned counsel for the respondents, nothing turns upon the distinction between obligatory and discretional functions of the municipality so far as the nature or quality of municipal property or municipal income is concerned.The distinction referred to above does not entitle the municipality to treat the income from one, department as though it were not part of the whole income of the municipality. Moreover, in its true nature or quality, such income is not profit in the sense in which that expression has been held to be the basis for the grant of bonus in the, Muir Mills case (B) (supra), though the word "Profits" occurs in S.65 of the Municipal Act and has been loosely used in connection with State or municipalare not concerned with those refinements and it is unnecessary to discuss them here. For our purpose it is sufficient to state that what the Baroda Municipality got from the State Government of Baroda merged in and became municipal property or municipal fund under the provision of the Municipal Act and was not capital on which a return had to be earned in accordance with the principles laid down in theMuir Millscase p73 (B) (supra). In our opinion, it is impossible to apply these principles in the case of a municipal undertaking of the nature we have under consideration here.The argument of learned counsel for the respondents that once it is found that there was capital and actual profit in the sense of excess of earnings over outgoings from the undertaking in question no distinction can be drawn between private enterprise, and municipal enterprise cannot, therefore, be accepted. In the case before us, there was neither capital nor profit on which the principles laid down in Muir Mills case (B) (supra) could operate. We must make it clear that the question is not merely one of terminology;that is, whether the more appropriate word to use in connection with a municipal undertaking is surplus or profit; it is the nature or quality of the municipal property or fund which must be determinative of the question at issue, and it is on that basis that we have come to the conclusion that in the present case there were no profits of one single department of the municipality out of which the respondents could claim ado not take those observations as deciding any question of principle; at best they express an opinion of the members of the committee -an opinion which is expressly confined to undertakings organised in the form of corporations with the aim of making a profit in the ordinary trading or business sense. In our opinion, those observations have no apt application to a municipal undertaking meant for the purpose of augmenting municipal revenues in order to meet the municipal service demands and improve the amenities of the inhabitants of a modern municipal borough.13. We proceed now to consider the second argument of the learned Attorney General. This argument depends on the provisions of S.58 of the Municipal Act. That section deals with the rule-making power of the municipality and proviso (a) lays down that no rule or alteration or rescission of a rule made shall have effect unless and until it has been approved by the Statecannot accept this argument as correct. The demand for bonus as an industrial claim is not dealt with by the Municipal Act; it is dealt with by the Industrial Act, 1947. Therefore, it is not relevant consideration whether there are provisions in the Municipal Act with regard to payment of bonus. The provisions of the Municipal Act are relevant only for the purposes of determining the quality or nature municipal property or fund; those provisions cannot be stretched beyond that limited purpose for defeating a claim of bonus. We do not, therefore, think that the absence of provisions in the Municipal Act for the payment of bonus through municipal employees is a consideration which is either determinative or conclusive of the question at issue before us.If we had come to a different conclusion as respects the first contention of the learned Attorney-General and his third contention to be referred to presently the absence of suitable provisions relating to payment of bonus to municipal employees in the Municipal Act would not have stood in the way of our allowing the claim of the respondents for the payment ofspite of these distinctions in the internal arrangement of departments within a municipality, the property or income of the municipality remains of the same nature, or quality and it will be obviously unfair to draw a distinction between the employees of one department and the employees of another department for the payment of bonus.The result of such distinction will be that the staff of the spending departments will never be entitled to any bonus at all and instead of promoting peace and harmony amongst the employees of the municipality, a distinction like the one suggested by learned counsel for the respondents will create unrest anddo not think that this submission is correct. Under the Municipal Act, the total income and expenditure of the municipality form one integrated whole; they are both for the purposes of the Act; and if the workmen of a service or spending department do not work efficiently with the result that the expenses on the obligatory functions of the municipality increases, that in efficiency is bound to affect - even to dwindle or wipe out the surplus of an earning department. For a true appreciation of the financial position of a municipality, its total income, and expenditure must be considered; we must look at the whole picture the part which is in shade as well as the part which has caught the sun, for a correct appraisal of thethe question with reference to the facts of the present case, it is clear to us that the different activities of the Baroda Municipality constituted one integrated whole and the activities of the different department of the Municipality were not distinct or unconnected activities of the different departments of the Municipality were not distinct or unconnected with activities so as to permit the isolation of one department from another or of an earning department from another or of an earning department from a spending department. From this point of view also, the claim of bonus was notis not necessary to consider those decisions in the present case, because they have no bearing on the questions which we have to consider in this case.17. For the reasons given above, we hold that the Industrial Tribunal came to the correct decision that the respondents p73 employed in the electricity department of the Baroda Municipality were not entitled to the bonus claimed, and the Labour Appellate Tribunal came to an erroneous decision on that question in its order dated November 23, 1955.