Case: Textile Machinery Corporation Limited Vs. Their Workmen

holding that there was no relevant evidence on the point. The learned Solicitor-General has invited our attention to the affidavit made by Mr. Radhey Shyam Sharma, the Finance Officer of the appellant, in which it is averred that the details showing that the reserves were fully utilised in the business under the heads mentioned were as shown in the audited balance-sheet which had been tendered. Then follow the details about the reserves. A similar statement is found in the statement of the case filed on behalf of the appellant. We are unable to hold that the statement made in the affidavit can be treated as evidence of the fact that the reserves in question had in fact been used as working capital. What the statement purports to do is merely to collate the relevant figures and set them out as deduced from the balance-sheet and nothing more.It has been held by this Court that before an employer can claim any return on liquid reserves by way of interest, he must lead evidence to show that the reserves in question have been used as working capital during the relevant period. We are satisfied that the tribunal was right in holding that no evidence in fact had been adduced before it by the appellant in that behalf.Therefore, the appellant is not justified in making any further claim in respect of this item.5. Then in regard to the amount of Rs. 2.50 lakhs donated by the appellant to the West Bengal Engineering Foremens College, it may be conceded that the grant is charitable but the point which the tribunal had to consider was whether in determining the available surplus this amount should be debited. On this point the tribunal followed the decision of the Labour Appellate Tribunal in the case of Sree Meenakshi Mills Ltd. v. Their Workmen, 1954 Lab AC 132 at p. 138, and held that such a donation, however charitable or philanthropic it may be, has to be added back for the purpose of arriving at the gross profit. This decision has been confirmed by this Court in Sree Meenakshi Mills Ltd. v. Their Workmen, 1958 SCR 878: (AIR 1958 SC 153 ). Therefore, the tribunal was justified in adding back this amount for the purpose of determining the gross profit.6. Then as to the amount of Rs. 2.35 lakhs in respect of which a reserve has been created by the appellant to meet the possible losses in future, the tribunal was clearly right in adding this amount back for determining the gross profit. It is true that some of the debts due to the appellant may not be fully realised but it is difficult to understand how the appellant can create a reserve solely for the purpose of meeting any possible losses on account of bad or irrecoverable debts, and claim a deduction of this amount while determining the available surplus.The creation of such a reserve is wholly inconsistent with the Full Bench formula in question. There is, therefore, no substance in the argument that this amount would not have been added back.7. That takes us to the principal contention raised by the appellant and that is in respect of the rehabilitation and replacement charges. The appellants grievance is that though it had led evidence in support of this claim and filed the necessary statements bearing on the relevant points, the tribunal has not considered the said evidence but has proceeded on the assumption that "it has become a convention of all the tribunals to multiply cost of buildings constructed prior to 1949 by 2.25 and the cost of plants and machineries installed prior to 1948 by 2.7 for the purpose of equating the requirement to the present market value. It has also been a convention of the Industrial Tribunal to assess total life at 27 to 30 years in the case of buildings and 15 years in the case of plants and machineries". No doubt the tribunal has added that it thought that these conventions were not always favourable to the industries but there was no help. It is on this view that the tribunal reached the conclusion that Rs. 12 lakhs should be allowed to the appellant by way of rehabilitation charges.8. It is obvious that this conclusion is unsound and cannot be affirmed. The tribunal was in error in assuming that there was any convention legally established by which certain assumptions had to be made about the life of the machinery and about the price which would be needed to replace it. In fact decisions have consistently held that the amount of rehabilitation can be and should be determined only in the light of evidence adduced by the employer.This position has not been disputed by Mr. Viswanatha Sastri on behalf of the respondents. His argument, however, was that the evidence adduced by the appellant is unsatisfactory and had therefore been properly rejected. We propose to express no opinion on the merits of the evidence . We are satisfied that it was necessary for the tribunal to have considered the evidence before finally determining the amount which should be paid to the appellant by way of rehabilitation charges. The result is that the appeal must be partly allowed and the proceedings sent back to the Second Industrial Tribunal for dealing with the appellants claim for rehabilitation charges in accordance with law. The tribunal should consider the evidence led by the parties and then apply the principles which have been laid down by this Court in the case of the Associated Cement Companies Ltd. v. The Workmen Employed, 1959 SCR 925 : (AIR 1959 SC 967 ). It would not be open to the parties to lead any further evidence. After the tribunal reaches its conclusion in respect of the appellants claim for rehabilitation it may make its final award in regard to the bonus claimed by the respondents. No further point can be raised by the parties hereafter in the subsequent enquiry which we are now directing.

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

Explanation:
1[ds]e question then which needs an answer is whether the tribunal was right in holding that there was no relevant evidence on the point.al has invited our attention to the affidavit made by Mr. Radhey Shyam Sharma, the Finance Officer of the appellant, in which it is averred that the details showing that the reserves were fully utilised in the business under the heads mentioned were as shown in the auditedwhich had been tendered. Then follow the details about the reserves. A similar statement is found in the statement of the case filed on behalf of the appellant.We are unable to hold that the statement made in the affidavit can be treated as evidence of the fact that the reserves in question had in fact been used as working capital. What the statement purports to do is merely to collate the relevant figures and set them out as deduced from theand nothing more.It has been held by this Court that before an employer can claim any return on liquid reserves by way of interest, he must lead evidence to show that the reserves in question have been used as working capital during the relevant period. We are satisfied that the tribunal was right in holding that no evidence in fact had been adduced before it by the appellant in that behalf.Therefore, the appellant is not justified in making any further claim in respect of this item.Then in regard to the amount of Rs. 2.50 lakhs donated by the appellant to the West Bengal Engineering Foremens College, it may be conceded that the grant is charitable but the point which the tribunal had to consider was whether in determining the available surplus this amount should be debited. On this point the tribunal followed the decision of the Labour Appellate Tribunal in the case of Sree Meenakshi Mills Ltd. v. Their Workmen, 1954 Lab AC 132   at p. 138, and held that such a donation, however charitable or philanthropic it may be, has to be added back for the purpose of arriving at the gross profit. This decision has been confirmed by this Court in Sree Meenakshi Mills Ltd. v. Their Workmen, 1958 SCR 878: (AIR 1958 SC 153  ). Therefore, the tribunal was justified in adding back this amount for the purpose of determining the gross profit.6. Then as to the amount of Rs. 2.35 lakhs in respect of which a reserve has been created by the appellant to meet the possible losses in future, the tribunal was clearly right in adding this amount back for determining the gross profit. It is true that some of the debts due to the appellant may not be fully realised but it is difficult to understand how the appellant can create a reserve solely for the purpose of meeting any possible losses on account of bad or irrecoverable debts, and claim a deduction of this amount while determining the available surplus.The creation of such a reserve is wholly inconsistent with the Full Bench formula in question. There is, therefore, no substance in the argument that this amount would not have been addedis on this view that the tribunal reached the conclusion that Rs. 12 lakhs should be allowed to the appellant by way of rehabilitation charges.8. It is obvious that this conclusion is unsound and cannot be affirmed. The tribunal was in error in assuming that there was any convention legally established by which certain assumptions had to be made about the life of the machinery and about the price which would be needed to replace it.In fact decisions have consistently held that the amount of rehabilitation can be and should be determined only in the light of evidence adduced by theare satisfied that it was necessary for the tribunal to have considered the evidence before finally determining the amount which should be paid to the appellant by way of rehabilitation charges. The result is that the appeal must be partly allowed and the proceedings sent back to the Second Industrial Tribunal for dealing with the appellants claim for rehabilitation charges in accordance with law. The tribunal should consider the evidence led by the parties and then apply the principles which have been laid down by this Court in the case of the Associated Cement Companies Ltd. v. The Workmen Employed, 1959 SCR 925  : (AIR 1959 SC 967  ). It would not be open to the parties to lead any further evidence. After the tribunal reaches its conclusion in respect of the appellants claim for rehabilitation it may make its final award in regard to the bonus claimed by the respondents. No further point can be raised by the parties hereafter in the subsequent enquiry which we are now directing.