Case: Management of The Kirlampudi Sugar Mills Limited Vs. Industrial Tribunal, A.P. and Another

about Rs. 30 lakhs on its personal security to pay these demands and that is why Rs. 16 lakhs loss is paid off and hence in the year 1962-63 the unsecured debt is shown as Rs. 28 lakhs. The Tribunal was therefore justified in coming to the conclusion that the Company was not in a sound financial position to implement the recommendations of the Wage Board to increase Rs. 10/- on the basic wage and the dearness allowance or Rs. 51- as weightage. Apart from these losses the general reserves are very negligible. Each year about Rs. 3, 000/- is being provided for. In all Rs. 8 lakhs reserves were accumulated from its inception which is not very encouraging.While this is so having regard to its working we had called for the balance-sheets subsequent to 1964-65 to assess the financial prospects of the Appellant during this period. These reveal the following position The balance-sheet for the year ending 30-6-65 Showed a profit of Rs. 12, 72, 126/- before depreciation. After deducting Rs. 5, 25, 545/- towards depreciation and Rs. 1, 16, 138/- as reserve towards development rebate and after adjusting the loss brought forward from last year, a loss of Rs. 30, 943/- was carried forward to the next year. 15. The balance-sheet for the year ending 30-6-66 showed a profit of Rs. 3, 23, 789/-. After setting apart depreciation a sum of Rs. 2 .27, 942/- was the loss carried forward and in the balance sheet for the period ending 30-6-67 there was shown a loss of Rs. 5, 10, 771/- and after providing for depreciation there was a loss of Rs. 9, 90, 526/-. It may also be noticed that in the year of account the Company had to provide a sum of Rs. 2, 16, 353/towards additional cane price payable to the cane growers for the seasons 1958-59 and 1959-60. After allowing for this there was a total loss of Rs. 14, 23, 505/- which was carried forward , to the next year. In the balance-sheet for the year ending 30-6-68 there was a gross profit of Rs. 13, 22, 932/- and after providing for depreciation and adjustment of loss brought forward there was a balance, of loss of Rs. 5, 93, 620/- carried forward to the next year. The year ending 30-6-69 was one year in which dividend of 7.15% was paid on the 5-1/2% income-tax Free Cumulative Preference shares. The profits for the year after adjusting all the losses and providing for depreciation, payment of bonus to staff and taxation it showed a balance of Rs. 2, 27, 430/- out of which dividend was declared as aforesaid. For the year ending June 70 there was again a loss of Rs. 5, 96, 913/- after providing for depreciation. The Directors explained this loss due mainly to high rates of interest charges, provision for depreciation and the passing on of the entire realisable profit on 1968-69 season production for the benefit of the cane growers in that year.The balance-sheets for the years 1960 to 1970-for a period of 10 years show that except for the year ending 30-6-69 the Company was not in a position to declare any dividends. , Though the factory appears to have been expanded after 1964 to 1300 tons capacity it did not show uniform net profits; on the other hand losses continued. The profits that it made in any year seem to be consumed by losses of the previous years. In some years the yield of cane seem to be slightly over 100% the average being a little over 9% which no doubt is encouraging but in spite of it there are various factors which seem to contribute to its financial unsteadiness. 16. This being the position we think that the Tribunal was justified in holding that the Appellant did not have the financial capacity to bear the burden of payment of Rs. 10/- increase and Rs. 51- as weightage in accordance with the recommendations of the Sugar Wage Board. On this conclusion and also on an examination of the relevant material it is evident that the Company is not in a financial position to meet the burden of implementing the recommendations of the Wage Board. The claim of the Respondent for categorisation and fitment in accordance therewith cannot in the circumstances be accepted. The Appeal of the Respondents which challenges the Award of the Tribunal rejecting their claim, for an increase of Rs. 10/and a weightage of Rs. 5/- and for the categorisation and fitments in respect of the heirarchy of supervising category namely Assistant Cane Organisers, Liaison Field Supervisors and Field Supervisors as also in respect of Head Panman, and Panman Incharge of shift, Panman, Asstt. Panman, Bench Chemists and Cane analysists and Canteen Supervisor are all dependent upon the financial capacity of the Respondent Company to implement the Wage Boards recommendations which we have held it has not. As stated earlier the Company which is the Appellant in Civil Appeal No. 1602 of 1966 has already implemented the Award of the Tribunal in respect of a large number of workers both as to categorisation and fitment. It is in respect of fitment of only four categories that it has not implemented, namely Welders, Turbine Engine Drivers, Switch Board Attendants and Boiler Masons that the Appellant has objected to the award on the ground that the Tribunal has acted without evidence and in some cases contrary to the recommendations. The learned Advocate for the Respondents felt that he could not really challenge the contention in respect of the Switch Board Attendants and Turbine Engine Driver, as it would appear that the Tribunal has acted without any evidence. Why we have referred to these specific cases objected to by the Company in their Appeal is to indicate that, notwithstanding the finding that the Wage Boards recommendations in the circumstances, cannot be implemented, the Company has given effect to the Tribunals Award, which will remain in force till a revision takes place.

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

Explanation:
1[ds]In answer it is pointed out that the contention raised on behalf of the Respondents is implicit in issue 1 (a) which is as follows:1(a) "Whether the demand for categorisation of workers and their fitment and work load should be in accordance with the recommendations of the Wage Board for Sugar industry is justified"7. These cases were considered in Worknen v. Bajrang Jute Mills([1969] 2 S.C.R. 593.) to which one of us was a party (Vaidialingam, J.). That case was considering the Report of the Jute Wage Board which in making recommendations for the industry adopted a different approach. The Wage Board took the whole of India. as one unit while in fact almost all the Jute Mills were situated in West Bengal and a few in Bihar and still fewer in Andhra Pradesh. What the Wage Board did was to compare 20 Mills from West Bengal and 9 mills from the rest of India as representing a fair cross section of the industry. The Respondents have a fairly small unit in Andhra Pradesh which was considered as a comparable unit with two larger mills in the State and with some of the prosperous Mills in West Bengal. The management of the Mill refused to accede to the demand of the workman to pay the wages in accordance with the recommendations of the Wage Board, fixing uniform wage scale for the industry on the plea that the Mill had no financial capacity to bear the burden of the wage scale On the dispute being referred to the Tribunal it upheld the claim of the management. This Court in Appeal sustained the Award of the Tribunal that the payment of the workmen for implementation of the, recommendation of the Wage Board is not justified. In this connection at page0 it was observed by reference to the manner in which the Wage Board had laid down uniform scales for the entire industry irrespective of where its several units were situate and of the different conditions prevailing in various areas, that it would have been better if it had "considered the units in each area separately and mined thes for each such area by taking from that area a representativen of the industry where possible or where that was not possible by taking comparable units from mother industries within that area, thus following the principle oft was further observed:"It is true that in doing so uniformity of wage scales for the entire industry would not have been attained. But in a vast country like ours, where conditions differ often radically from region to region and even the index of living differs within a fairly wide range, such a target cannot always be just or equitable. If the wage scales had been determined by the Board in the manner aforesaid, even though the Board is not a statutory body and consequently its decision are of a recommendatory character, it would be possible for industrial tribunals to give due weight to its recommendations as such recommendations would have been in conformity with the principle of9. It would therefore appear that the Wage Board following the principles laid down by this Court has considered the capacity of the industrye and has also fixed wages different from region to region having regard to the difference in the capacity of the industry. Further it has given good reason for not furnishing a criteria for further classification of the industry within the region. In these circumstances prescribing the same wage for all units of industry in the same region is in our view justified and the fact that the industry in the region has not been divided into classes cannot vitiate the recommendations of the Wage BoardIt appears to us that if in law it, is open to the unit to plead financial inability to implement the recommendations of the Wage Board the hypothesis on which the question has been posed will not be relevant because in such a contingency as is envisaged there would be a specific issue and a determination of the wage structure by the Tribunal will be on the evidence produced before it according to the financial capacity of the unit. Once this is finally determined, the unit cannot continue to assert that it has no financial capacity to implement the Award11. In our view there is warrant for the submission of the learned Advocate for the Appellant that notwithstanding the fact that a fair wage has been fixed by the Board which would be applicable to all the units in the region for which wage has been fixed, it may be open to any particular unit to plead that in fact its financial position is not such that it can bear the burden of implementing the recommendations. In Ahmedabad Mill Owners Association etc. v. The Textile Labour Association([1966] 1 S.C.R. 392), the observations of this Court at page 421 lend support to our conclusions13. The details of debts would show that they are far in excess of the paid up share capital and even taking the profit and development rebate reserves and other reserves into account the financial position of the Company is certainly bad. A reference has also been made to the notices issued by the Revenue Divisional Officer, Ex. M. 53 for showing that on 30th December 1962, a sum of Rs. 15, 91,1 ps. was due towards Sugar cane cess for2 and a sum of Rs. 11.66, 718.37 ps. towards cane price in accordance with the details given there under. Subsequently it would appear from Ex. M. 53/1 that notices under Sec. 53 of the Revenue Recovery Act were also issued by the Revenue Divisional Officer, Kakinada for the recovery of these amounts. There were also other notices and a press note published in the Indian Express showing that the Government was going to auction the Sugar Mills for recovering its dues. The Minister concerned is reported to have said that its Department was taking action to collect its dues as arrears of land revenue.It is on the other hand contended that the Appellants unit is an economic unit and has been expanded into a 1000 ton unit in 1956 and there is nothing to show thereafter what its financial , position was. In any case the profit and loss figures for the four years starting with 1960 would indicate that there was loss only in one year whereas in all the other three years there was profit and from this we are asked to conclude that the Appellant company was in a sound financial position. No doubt any unusual profits or losses in any year due to advantageous circumstances should not be allowed to cloud the decision one way or the otherThe conclusion of the Tribunal in respect of the claim for increase of Rs. 10/is that having regard to thes ", the profits made in the 4 years are about Rs. 4 lakhs and the loss sustained in3 is of Rs. 16 lakhs and after wiping it off to some extent by sale of debentures it is about Rs. 9 lakhs. This will show that the financial position of the concern is not satisfactory". After noting that except for this one year the concern has always been making profits, it went on to observe: "Still, to judge the financial position of a concern, it is always relevant to see what are its reserves. It appears from thet that the reserves have never risen beyond Rs. 8 lakhs or so. In the circumstances, it appears to me that it will be difficult to hold that the financial position of the Company is sound. 1, therefore, agree with learned Advocate, that it has not the financial capacity to implement this increase of Rs. 10/over and above the fitment in the grade recommended by the Board. I hold accordingly". The comment of the learned Advocate for the Respondent is that these losses did not preclude the management from accepting the recommendations of the Wage Board and willingly agreeing to its implementation. In a letter dated the 18th December 61 to the President of the Workers Union, the Management stated that as per their talks on 10th December 61, it accepts the implementation of the Wage Board recommendations and will pay from December 61 onwards salary as per fitments made by it. Final figures and fitments will be made after the Government Tripartite Committee comes and discusses with it and the Union and arrives at a decision. It also promised to pay the difference in the wage as per wages paid till the month of November 1961 and the Wage Board fitments as made by them will be paid to the workers before the end of March 1962. Again in the agreement between the Management and the employees under see. 18(1) of the Industrial Disputes Act dated3 it was Specifically stated that "the question of fitments will be taken up as per the Sugar Boards recommendations in the month of January 1964 and finalise before the end of the. Even at that stage it was never the case of the Management that the Wage Boards recommendations could not be implemented. Even the new management in its letter of September 5, 1964 addressed to the Union (Ex. W. 36) stated:"With a view to arrive at an amicable settlement with regard to fitments a discussion had taken place between the members of the Tripartite Committee constituted by the Commissioner of Labour and it was agreed during the discussions among other matters, that(1)Wherever there is a standard nomenclature in the Wage Board Report corresponding to the previous designation held by an individual before November 1960, he will be given that designation provided the duties and responsibilities of the individual are similar to the duties assigned by the Wage Board(2)In other cases, where no standard nomenclature can be applied to the existing cadre, the cadre will be fixed with reference to duties and responsibilities and the time scale of pay attached to the cadre in factory before November 1960"From the several exhibits it would appear that both old and the new management were anxious to implement the Wage Boards recommendation but according to the fitments made by it. But the employees as represented by the Workers Union were not prepared to accept those fitments and wanted fitments in a higher cadre and other advantages according to their reading of the Wage Boards recommendations which the management felt, it is not able to accommodate not only because those recommendations did not justify it but on the ground of financial incapacity14. No doubt it is for the management to show what its financial position is and how it is going to place undue or impossible burden upon it to implement the recommendations. That burden it seeks to discharge by production of the balancesheets which have not been challenged and the contents of which are, therefore deemed to have been accepted. We find from the balance sheet and the Directors Report for the period ending0 that a sum of Rs. 6, 15, 254/had to be written off against the old losses leaving a balance of Rs. 40, 774/in the profit and loss account. The Directors thought that the Companys financial position has now been stabilised and all the old losses have been wiped off but that hope was only short lived as the subsequents for the period ending 30th June 61 would show. According to the report for 1961 though there was a net profit of Rs. 1, 08, 005/which together with the carry forward profit of the previous year of Rs. 40, 774/amounted to Rs. 1, 48, 779/and after making provision for reserve for development rebate of Rs. 38, 788/a balance of Rs. 1, 09, 991/was , carried forward to next years account. For that year no dividends were declared and the Managing Agents also waived their remuneration. For the year ending 30th June 1962, the position is more or less thee net profit for the year amounted to Rs30, 616/which together with the profits of the previous year of Rs. 1, 09, 991/amounted to Rs. 1, 40,. This amount was again recommended by the Directors to be carried forward for the next year. No dividend was declared and the Managing Agents also waived their remuneration. In 1963 the position had become critical the loss incurred was Rs. 16, 12, 196 which wiped out the previous years profits. There was no question of declaration of any dividends but Managing Agents remuneration of Rs. 30, 000/(minimum) was drawn. These losses would have the effect of eating into the capital of the Company, unless it could borrow and tide over them. In the year ending 30th June 64 a loss of Rs. 6, 61, 386/was carried forward to next year. It may be noted that in that year in June 1964 the Government of India had approved the change in the Constitution of the Managing Agency of the Company and it is stated that because of the efforts of the new Management who borrowed large sums on their personal security for putting the Appellant in better shape, large sums were in fact advanced to the Appellant. As could be seen from the statement M. 51 that for the years3 and4 the Secured and unsecured debts were approximately Rs. 81 lakhs, Rs. 70 lakhs, Rs. 61 lakhs and Rs. 51 lakhs respectively. It is stated that the losses were coming down and therefore the financial position is getting better but in our view this by itself does not mean that , the Company is in a sound financial position. What was happening evidently is as suggested by the learned Advocate for the Appellant that the Sugar stocks pledged were being sold and therefore the debts were getting less. It is no doubt true that attachment orders which were made in 1962 must have been paid off and the attachment withdrawn. That again is not an indication of the soundness of its financial position because there is evidence to show that the new management had to secure a large loan of about Rs. 30 lakhs on its personal security to pay these demands and that is why Rs. 16 lakhs loss is paid off and hence in the year3 the unsecured debt is shown as Rs. 28 lakhs. The Tribunal was therefore justified in coming to the conclusion that the Company was not in a sound financial position to implement the recommendations of the Wage Board to increase Rs. 10/on the basic wage and the dearness allowance or Rs. 51as weightage. Apart from these losses the general reserves are very negligible. Each year about Rs. 3, 000/is being provided for. In all Rs. 8 lakhs reserves were accumulated from its inception which is not very encouraging.While this is so having regard to its working we had called for thes subsequent to5 to assess the financial prospects of the Appellant during this period. These reveal the following position Thet for the year ending5 Showed a profit of Rs. 12, 72, 126/before depreciation. After deducting Rs. 5, 25, 545/towards depreciation and Rs. 1, 16, 138/as reserve towards development rebate and after adjusting the loss brought forward from last year, a loss of Rs. 30, 943/was carried forward to the next year15. Thet for the year ending6 showed a profit of Rs. 3, 23,. After setting apart depreciation a sum of Rs. 2 .27, 942/was the loss carried forward and in the balance sheet for the period ending7 there was shown a loss of Rs. 5, 10, 771/and after providing for depreciation there was a loss of Rs. 9, 90,. It may also be noticed that in the year of account the Company had to provide a sum of Rs. 2, 16, 353/towards additional cane price payable to the cane growers for the seasons9 and. After allowing for this there was a total loss of Rs. 14, 23, 505/which was carried forward , to the next year. In thet for the year ending8 there was a gross profit of Rs. 13, 22, 932/and after providing for depreciation and adjustment of loss brought forward there was a balance, of loss of Rs. 5, 93, 620/carried forward to the next year. The year ending9 was one year in which dividend of 7.15% was paid on thex Free Cumulative Preference shares. The profits for the year after adjusting all the losses and providing for depreciation, payment of bonus to staff and taxation it showed a balance of Rs. 2, 27, 430/out of which dividend was declared as aforesaid. For the year ending June 70 there was again a loss of Rs. 5, 96, 913/after providing for depreciation. The Directors explained this loss due mainly to high rates of interest charges, provision for depreciation and the passing on of the entire realisable profit on9 season production for the benefit of the cane growers in that year.Thes for the years 1960 tor a period of 10 years show thatexcept forthe year ending9 the Company was not in a position to declare any dividends. , Though the factory appears to have been expanded after 1964 to 1300 tons capacity it did not show uniform net profits; on the other hand losses continued. The profits that it made in any year seem to be consumed by losses of the previous years. In some years the yield of cane seem to be slightly over 100% the average being a little over 9% which no doubt is encouraging but in spite of it there are various factors which seem to contribute to its financial unsteadiness16. This being the position we think that the Tribunal was justified in holding that the Appellant did not have the financial capacity to bear the burden of payment of Rs. 10/increase and Rs. 51as weightage in accordance with the recommendations of the Sugar Wage Board. On this conclusion and also on an examination of the relevant material it is evident that the Company is not in a financial position to meet the burden of implementing the recommendations of the Wage Board. The claim of the Respondent for categorisation and fitment in accordance therewith cannot in the circumstances be accepted. The Appeal of the Respondents which challenges the Award of the Tribunal rejecting their claim, for an increase of Rs. 10/and a weightage of Rs. 5/and for the categorisation and fitments in respect of the heirarchy of supervising category namely Assistant Cane Organisers, Liaison Field Supervisors and Field Supervisors as also in respect of Head Panman, and Panman Incharge of shift, Panman, Asstt. Panman, Bench Chemists and Cane analysists and Canteen Supervisor are all dependent upon the financial capacity of the Respondent Company to implement the Wage Boards recommendations which we have held it has not. As stated earlier the Company which is the Appellant in Civil Appeal No. 1602 of 1966 has already implemented the Award of the Tribunal in respect of a large number of workers both as to categorisation and fitment. It is in respect of fitment of only four categories that it has not implemented, namely Welders, Turbine Engine Drivers, Switch Board Attendants and Boiler Masons that the Appellant has objected to the award on the ground that the Tribunal has acted without evidence and in some cases contrary to the recommendations. The learned Advocate for the Respondents felt that he could not really challenge the contention in respect of the Switch Board Attendants and Turbine Engine Driver, as it would appear that the Tribunal has acted without any evidence. Why we have referred to these specific cases objected to by the Company in their Appeal is to indicate that, notwithstanding the finding that the Wage Boards recommendations in the circumstances, cannot be implemented, the Company has given effect to the Tribunals Award, which will remain in force till a revision takes place.