Case: Bihar State Electricity Board, Patna Vs. Their Workmen

met without undue strain on the financial position of the employer, that bur den must be borne by the employer. It will certainly result in some reduction in profits; but if the industry is in a stable condition and the burden of provident fund and gratuity does not result in loss to the employer that burden will have to be borne by the employer like the burden of wage-structure in the interest of social justice. While on the one hand casting of this burden reduces the margin of profit, on the other hand it will result in the reduction of taxation in the shape of income-tax."4. That case was a case of an ordinary commercial concern. Even so it was noticed that the stability of the industry as well as the fact that the burden of provident fund and gratuity does not result in loss to the employer are to be taken into consideration. the actual burden was calculated and it was pointed out that 63 per cent of it would be met by reduction in taxation. Nothing of the sort has been done by the Tribunal in this case. It is true that in that case it was said that the amounts to be provided for taxation and for development rebate reserve could not be deducted in order to ascertain the financial capacity of the employer. Nothing was said there about the depreciation reserve which is obligatory under s. 68 of the Electricity (Supply) Act the Electricity Board is not an ordinary commercial concern. It is a public service institution. It is not expected to make and profit. It is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred as a result of such extension. The Government makes subventions to the Board for the purposes of the Act. Section 59 of the Electricity supply Act, 1948 provides that as far as practicable and after taking credit for any subventions from the State Government the Board shall carry on its operations so as not to incur a loss. Under s. 64 the State Government may advance loans to the Board and under s. 65 the Board itself has the power to borrow. Under s. 66 the State Government may guarantee the payment of principal and interest of any loan proposed to be raised by the Board. Under s. 67 after meeting its operating maintenance and management expenses and after provision has been made for the payment of taxes on its income and profits the revenues of the Board have to be distributed as far as they are available in the following order, namely:-(i) interest on bonds not guaranteed under section 66;(ii) interest on stock not so guaranteed;(iii)credits to depreciation reserve under section 68;(iv) interest on bonds guaranteed under section 66:(v) interest on stock so guaranteed;(vi) interest on sums paid by the State Government under guarantees under section 66;(vii)the write-down of amounts paid from capital under the proviso to sections 59;(viii)the write-down of amounts in respect of intangible assets to the extent to which they are actually appropriated in any year for the purpose in the books of the Board;(ix) contribution to general reserve of an a mount not exceeding one half of one per centum per annum of the original cost of fixed assets employed by the Board so however that the total standing to the credit of such reserve shall not exceed fifteen per centum of the original cost of such fixed assets;(x) interest on loans advanced or deemed to be advanced to the Board under section 64, including arrears of such interest:(xi) the balance to be appropriated to a fund to be called the Development Fund to be utilised for-(a) purposes beneficial, in the opinion of the Board, to electrical development in the State;(b) repayment of loans advanced to the Board under section 64 and required to be repaid:Provided that where no such loan is outstanding, one half of the balance aforesaid shall be credited to the Consolidated Fund of the State.Section 68 lays an obligation on the Board to make a credit to the depreciation reserve in the prescribed manner.5. The facile assumption by the Tribunal that the interest should no. be taken into account in working out the profits is no t borne out by the provisions of the statute. Indeed the Tribunal did not look into the Act at all. Whether in view of the statutory obligations laid on ii under the various sections just now referred to in analysing the capacity of the Board to bear any additional burden in the matter of provident fund or other amenities the same considerations that applied in the case of private commercial concerns could be applied is a rather difficult question. In fact the decision might very often depend on a close analysis of the financial condition of the Board. We do not want at present to express one view or the other. one thing at least is obvious, that the various sums payable under the provisions of s. 67 have to be deducted before the profits could he ascertained. Even with regard to the depreciation reserve the provisions of s. 68 may have to be taken into account. If it is not it would have to be met by loans on which interest will have to be paid and deduction of interest so paid will have to be taken into account in calculating the profits. The contribution to the depreciation reserve is a statutory obligation and is a definite proportion whereas it is open to an ordinary commercial concern to credit any amount to the depreciation reserve. These and other matters cannot be properly decided in the absence of a detailed examination of the finances of the Board. That is why we said that the Tribunal has dealt with the matter in a perfunctory way. It should be directed to dispose of the matter afresh in the light of the observations made in this judgment.

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

Explanation:
1[ds]5. The facile assumption by the Tribunal that the interest should no. be taken into account in working out the profits is no t borne out by the provisions of the statute. Indeed the Tribunal did not look into the Act at all. Whether in view of the statutory obligations laid on ii under the various sections just now referred to in analysing the capacity of the Board to bear any additional burden in the matter of provident fund or other amenities the same considerations that applied in the case of private commercial concerns could be applied is a rather difficult question. In fact the decision might very often depend on a close analysis of the financial condition of the Board. We do not want at present to express one view or the other. one thing at least is obvious, that the various sums payable under the provisions of s. 67 have to be deducted before the profits could he ascertained. Even with regard to the depreciation reserve the provisions of s. 68 may have to be taken into account. If it is not it would have to be met by loans on which interest will have to be paid and deduction of interest so paid will have to be taken into account in calculating the profits. The contribution to the depreciation reserve is a statutory obligation and is a definite proportion whereas it is open to an ordinary commercial concern to credit any amount to the depreciation reserve. These and other matters cannot be properly decided in the absence of a detailed examination of the finances of the Board. That is why we said that the Tribunal has dealt with the matter in a perfunctory way. It should be directed to dispose of the matter afresh in the light of the observations made in this judgment.