Case: Management of Shri Chalthan Vibhag Khan Udyog Sahakari Mandal Ltd Vs. B.S. Barot Member, Industrial Court, Gujarat and Another Etc

the manufacturing units. These amounts relate to ex pansion of the industry and should be shown in the capital account and cannot be claimed as deduction due to depreciation. The accounting of the sugar factories concerned is for the purpose of minimising the profits and showing loss for the purpose of depriving the workers their due. Such depreciation cannot be allowed. But as pointed out by us the actual depreciation which should be deducted in the interest of the industry can be taken into account. In the cases before us if the inflated figures should be left out of account we feel that the industry has the capacity to bear the additional burden.The High Court after referring to the decisions of this Court in Gramophone Co. and Indian Link Chain Manufacturers and the Shivraj Litho Works (supra) came to the conclusion that gross profits before allowance is made for depreciation has to be taken into account for the purpose of considering the paying capacity of the industry. The High Court added the amount of depreciation to the net profits as shown in the balance sheet and found that large profits were available as gross profits. The High Court was of the view that the position of the three factories in South Gujarat, namely Gandevi, Bardoli and Madhi is not at all gloomy so far as their financial prospects are concerned. The High Court found that though the price of sugarcane was fixed for delivery at the factory, it has paid the price to the growers ex-sugarcane field, thus bearing the charges for cutting sugarcane and for carrying it to the factory premises from the field. This payment was unjustified and was intended for the benefit of the members of the cooperative society and resulted in showing of a Paper Los s. We are unable to agree with the conclusion of the High Court that this payment is unjustified and is for the purpose of benefiting its own members. It is submitted on behalf of the factories that the sugar factories pay an extra amount t o the growers to induce them to cultivate sugarcane for a profit and thereby preventing them from cultivating other crops and reducing the area under sugarcane cultivation. The finding of the High Court that this extra payment is to benefit the members of the society itself is also not borne out as there are members who are not growers of sugarcane. The benefits by way of giving fertilizers at a discount etc. will not profit members who are not growers. The High Court has not estimated the likely increase in profits due to increase in the price of sugar levy along with the increase in expenditure due to the revision of the wage structure which it has estimated at about Rs. 5 lakhs. Further as pointed out by us earlier the High Court erred in adding back the depreciation and other reserves without determining as to what extent such allowances are permissible on the facts of the case. For the reasons stated we feel that the financial capacity of the industry has not been determined in the manner in which it ought to have been done.The wages are normally fixed on the basis of industry-cum-region. The U.P. Pattern was fixed by the Uttar Pradesh Government on an agreement between the parties under section 3(b) of the U.P. Industrial Disputes Act, 1947(U.P. Act No. 18 of 1947). The order under sec. 3 (b) is provisional in character. Section 3 (d) provides for fixing the wages after proper adjudication. No such adjudication took place in U.P. after the passing of the order under sec. 3(b). Even though normally the wages are fixed on the industry-cum-region basis it is open to the industry to plead that it has not the financial capacity to bear the increased burden. When such a plea is specifically raised it is the duty of the Industrial Court to determine whether the increased burden could be borne by the particular industry. The reason given by the Industrial Court and the High Court for following the U.P. Pattern is that it has been accepted by various sugar factories in the southern region and a neighbouring factory Kodinar Sugar Factory and hence there is no reason for not applying the same rates to the appellant factories. On behalf of the appellant it was ple aded that it is not admitted that all the sugar factories in the southern region have accepted the U.P. Pattern. It was submitted that the case of the Kodinar is different because it was established long time ago and is a flourishing concern. 22. In view of the order we propose to make we do not feel called upon to examine in detail the financial capacity of the various factories or to remit it to the Industrial Court for that purpose. We have found that the order of the Industrial Court and the High Court relating to the provision for variable dearness allowance of more than 100% neutralisation is not sustainable in law and will have to be set aside. Regarding the award relating to the retention allowance of the unskill ed workers at 10% of the basic wage and the dearness allowance payable during the crushing season, it was not challenged before the High Court. The only question therefore which is in dispute is the increase of graded dearness allowance from R s. 21 to Rs. 40 with effect from the date of the award. We do not think that the increase in burden under this head would be beyond the financial capacity of the factories especially as we are satisfied that the claim for depreciation is highly exaggerated. Taking all the circumstances relating to the financial capacity of the factories we are satisfied that the increase in the burden due to the increase in the graduated dearness allowance will be within the capacity of the industry. We therefore find no reason for remitting the matter back to the Industrial Court.

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

Explanation:
1[ds]This plea cannot be accepted for the award of equalisation of more than 100% in these cases is not based on seasonal employment. To mitigate the hardship of unemployment during the off-season a retention allowance has been provided for the seasonal workers. The plea that the neutralisation of more than 100% is based on seasonal employment was not taken in the pleadings or raised before the courts below.Demand No. 7 relates to claim for payment of retaining allowance for the unskilled seasonal employees in the off- season at the rate of 10% of their basic wage and dearness allowance payable during the crushing season 1974-75. The Industrial Court as regards demand No.7 directed that the unskilled seasonal employees be paid retaining allowance for the season 1975 at the rate of 10% of t he basic wage and dearness allowance payable during the crushing season 1974- 75. The claim regarding the variable dearness allowance is demand No. 2(c) and 5(1) (a) (b). There is no reference in the proceedings before the Industrial Court or the High Court that the variable dearness allowance of more than 100% equalisation was awarded due to the seasonal employment of the workers. In the result we accept the contention of the appellants that variable dearness allowance cannot be more than 1 00% neutralisationRelying on the provisions of the section which requires that taxes and depreciation should be deducted from gross profits for arriving at net profits, it was submitted that in determining the financial capacity of the industry the net profits as prescribed in the section would have to be determined. We do not read the section as meaning that wages and dearness allowance could only be determined after the net profits are arrived at. The sub-section itself provides that contributions towards provident fund and g ratuity fund of its employees should all be deducted from the gross profits for arriving at the net profits. The provision for deducting depreciation occurs after providing for contribution towards provident fund and gratuity. The determination of the net profits under the section is for a different purpose, namely for appropriation of the net profits as provided for in the Act and does not in any way support the contention of the appellantsIt is settled law that in fixing fair wages or dearness allowance or for making contribution to provident fund or providing for gratuity the financial capacity of the industry to bear the additional burden will have to be taken into account. On principle of social justice with the development of industrial law it has now been accepted that when the industry can bear the burden provision should be m ade for provident fund and gratuity scheme. In determining the financial capacity of an industry all relevant facts will have to be taken into account. The principles followed in arriving at the profit and loss account for income-tax and other purposes may not be conclusive. The claim of the employer to a reasonable profit, that of the shareholders for a fair dividend and the interest of consumer and other relevant factors and circumstances will have to be taken into account. It is necessary to take into account all the facts and circumstances relating to the industry for determining the financial capacity of the industry to payIn view of the order we propose to make we do not feel called upon to examine in detail the financial capacity of the various factories or to remit it to the Industrial Court for that purpose. We have found that the order of the Industrial Court and the High Court relating to the provision for variable dearness allowance of more than 100% neutralisation is not sustainable in law and will have to be set aside. Regarding the award relating to the retention allowance of the unskill ed workers at 10% of the basic wage and the dearness allowance payable during the crushing season, it was not challenged before the High Court.The only question therefore which is in dispute is the increase of graded dearness allowance from R s. 21 to Rs. 40 with effect from the date of the award.We do not think that the increase in burden under this head would be beyond the financial capacity of the factories especially as we are satisfied that the claim for depreciation is highly exaggerated. Taking all the circumstances relating to the financial capacity of the factories we are satisfied that the increase in the burden due to the increase in the graduated dearness allowance will be within the capacity of the industry. We therefore find no reason for remitting the matter back to the Industrial Court.