Case: The Associated Cement Companies Ltd.,Dwarka Cement Works, Vs. Its Workmen &amp; Another

we now propose to make in regard to the item of rehabilitation should not be taken to be binding on the parties in subsequent years. If, in the light of our decision on the principal points raised before us in the present appeals, the parties decide to settle their disputes about bonus for subsequent years there would be no occasion for the tribunal to deal with them on the merits. If, however, these disputes have to be settled by the tribunal, it would be open to the parties to lead evidence in support of their respective contentions. The tribunal also would be at liberty to consider the matter afresh and come to its own conclusion on the merits. 89. Let us now proceed to make the relevant calculations. The first step to take is to correct the figures in Ex. C-2 by excluding the cost of buildings, roads, bridges and railway-sidings from the total cost mentioned in it against the several blocks. This cost has been supplied to us by the appellant in Ex. F (a). This is how the corrections work out. In our calculations all figures are expressed in lakhs: Chart I Period Original cost of block Less Cost of buildings etc Balance (1) (2) (3) (4) Up to 1939 486.89 132.98 353.91 1940-44 59.91 22.38 37.53 1945-47 208.93 68.15 140.78 1948-54 1144.81 333.47 811.34 90. In Ex. F(a) the appellant has shown the respective average ratios in col. 5 in regard to items of property mentioned in col. 2. We think, in making our calculations, it would on the whole be fair to adopt 3.5 as a suitable multiplier up to 1939, 2 from 1940-47 and 1 from 1948-54 (as in C. 2) for replacement by part A. C. C. machinery. We have not disturbed the divisors taken by C. 2 though we feel inclined to hold that Mr. Tongaonkar has underestimated the probable life of machinery. The amount of yearly requirement for rehabilitation for the total block minus buildings etc., would then work out at Rs. 229.39. This does not take into account the available reserves; that aspect is considered later on. Chart II Period Original cost of Multiplier Total Less breakdown as in Ex. C. 2 Balance Life of Machiery (in Yrs.) Yearly requirement (1) (2) (3) (4) (5) (6) (7) (8) (approx.) Up to 1939 353.91x 3.5 1238.68 65.92 1172.76 7 167.54 1940-44 37.53x 2 75.06 4.66 70.40 13 5.41 1945-47 140.78x 2 281.56 11.19 270.37 15 18.02 1948-54 811.34x 1 811.34 42.84 768.50 20 38.42 Total ... 229-39 Then we would deal with the buildings, roads, bridges and railway-sidings. These may be given an average life of 30 years for all blocks in order to compensate for cases where they have to be demolished on account of modernisation. According to the previous statements of the appellant the life of factory buildings was about 35 years and residential areas 50 years. Even so we propose to take the average life of 30 years in making our calculations in respect of these blocks. The multipliers may be taken as 2.25 for pre-1939 blocks, 1.5 for 1940-47 blocks, 1 for 1948-54 blocks. The Bombay block has been taken as in Ex. C. 2: Chart III Period Cost Multiplier Total Less breakdown valued at 5% of costs Balance Life Yearly requirement (1) (2) (3) (4) (5) (6) (7) (8) Up to 1939 132.98x 2.25 299.20 6.65 292.55 20 14.63 1940-44 22.38x 1.5 33.57 1.12 32.45 25 1.29 1945-47 68.15x 1.5 102.22 3.40 98.82 25 3.95 1948-54 333.47x 1 333.47 16.67 316.80 30 10.56 Bombay Office block 40.83 50.28 .73 49.55 69 .71 Total ... 31.14 91. Thus the total yearly requirement for rehabilitation of this block would come to 31.14 lakhs. 92. The appellants claim for rehabilitation can now be calculated on the basis of Ex. C. 23 as corrected in the light of the three charts prepared by us. As the calculations in the chart show, we would hold that the appellant is entitled to an allowance of 216.10 lakhs for rehabilitation in the relevant year: Chart IV Cost of machinery (Chart II) 1172.76 Deduct reserves 311.00 Balance 861.76 divided by 7: 123.11 Add for buildings (Chart III) 14.63 Total 137.74 Replacement cost of 1940-44 block including buildings etc. (5.41 plus 1.29) 6.70 do for 1945-47 (18.02 plus 3.95) 21.97 do for 1948-54 (38.42 plus 10.56) 48.98 do for Bombay Office .71 Total 216.10 93. Having decided that the total claim for rehabilitation admissible to the appellant is 216.10 lakhs for the relevant year, we must now proceed to determine whether on the working of the formula any surplus profit is available. We have made the following calculations in the light of the principles laid down by us in this judgment: Chart V Total profit excluding Bhupendra Factory … 428.71 Less notional normal depreciation (p. 428, Pt. I.) ... 100.22 Less income-tax payable @ 7 as in the Rupee as per Note A below ... 115.16 Less 6% on paid-up capital ... 76.06 Less 4% on working capital ... 26.10 Total … 317.54 … 317.54 Balance … … 111.17 Less provision for rehabilitation .. … 115.88 Balance ... (-) 4.71 94. This is how we have calculated the income-tax payable for the relevant year: Note A Gross profits … 428.71 Less Statutory depreciation … 165.49 Balance … 263.22 Income-tax @ 7 as: in the Rupee … 115.16 *Provision for rehabilation (Vide chart V) : Total from Chart IV … 216.10 Less Notional normal depreciation 100.22 Balance *115.88 We ought to add that in our calculations we have not taken into account the Bhupendra Factory because the relevant material for working out the figures in regard to this factory is not adequate or satisfactory. However from such material as is available it appears that if the profits made by the said factory are include in the calculations and rehabilitation required by it is worked out it would not materially affect the figure rehabilitation amount determined by us.

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

Explanation:
1[ds]It is for the first time since 1950 that, in the present appeals, we are called upon to examine the formula carefully and express our decision on the merits of its specific provisions. As we have already indicated, in dealing with the present dispute the tribunal has held that, in working out the formula, it could relax its provisions even though the proposed relaxation may mean a material variation of the formula itself22. It is true that, in the report submitted by the appellant before the Tariff Commission in April 1953, it had set out the details of its ten year programme which included, besides replacement, rehabilitation, modernisation and expansion, mechanisation of quarries as well as construction and improvement of houses for its labour staff. The report of the Tariff Commission (p. 30) shows that the cost of the programme was estimated at Rs. 18.36 crores, excluding the cost of a new plant at Sindri, or about Rs. 184 lakhs per annum. Subsequently in January 1954, when Mr. Tongaonkar gave evidence in the previous adjudication proceedings, he produced a statement (Ex. U. 8) according to which the appellants annual requirements for rehabilitation would be of the order of Rs. 192 or 193 lakhs, whereas in the present proceedings the said claim is made at Rs. 284 lakhs. A bare statement of these facts prima facie suggests that the appellants present claim for rehabilitation has been growing from stage to stage, and in its present form it is very much inflated; and that is what the tribunal has also assumed. In our opinion this assumption is not wholly correct. Mr. Tongaonkars evidence shows that in the report of the jobs submitted to the Tariff Comissission the appellant had not included all relevant items of rehabilitation, replacement and modernisation. The report merely gave a list of the jobs which the appellant had proposed to undertake during the ten year period ending July 31, 1962. It was in no sense an exhaustive statement about the appellants requirements in regard to the rehabilitation of all its blocks. In fact, having regard to the nature and scope of the enquiry before the Tariff Commission, the report made by the appellant had to be restricted to the urgent jobs which it wanted to undertake during the execution of its ten year programme; and so it would not be reasonable to hold that the figure of annual rehabilitation expenses which can be deduced from the said report has any relation to the claim for rehabilitation made by the appellant in terms of the working of the formulaEven so the Labour Appellate Tribunal found that the appellants contention that its workmen were not entitled to any additional bonus was not well-founded even if its claim for rehabilitation was confined to Rs. 192 or Rs. 193 lakhs. Besides, Mr. Tongaonkar has stated on oath that Ex. U. 8. was not among the documents originally submitted by the appellant to the tribunal in 1954. It was in fact prepared and submitted at a later stage at the instance of the tribunal itself. It is, therefore, clear that Ex. U. 8 was not intended to, and did not supply, the basis of the appellants claim in the earlier proceedings in accordance with the formulaIt is nevertheless clear that the items in Ex. U. 8 do not include a claim for rehabilitation for all the blocks of the appellant, and it is not surprising either, because a claim for the rehabilitation of all the blocks had been separately made by the appellant in the earlier proceedings under Ex. C- 3. Thus there can be no doubt that neither the report submitted by the appellant before the Tariff Commission nor the estimate given by Ex. U. 8 was prepared under the formula; and so any disparity in the amounts claimed in the two earlier documents cannot be seriously pressed into service against the appellant when it seeks to make a claim for rehabilitation strictly in accordance with the formula.We must, therefore hold that the tribunal was in error in coming to the conclusion that by reason of its previous conduct the appellant could not be allowed to place its claim for rehabilitation at a figure higher than Rs. 192 lakhs in the relevant year32. It may be conceded that there is some force in some of the arguments urged in support of the plea that the formula should be revised and its priorities should be readjusted and redefined; but, on the other hand, we cannot ignore the fact that on the whole the formula has worked satisfactorily in a large number of industries all over the country. Except for a few cases, particularly in Bombay, where some of the tribunals have taken the view that, in its rigid form, the formula has become unworkable from the point of view of labour, in a majority of cases industrial disputes arising between employers and their workmen in regard to bonus have been settled by tribunals on the basis of this formula; and it would not be unreasonable or inaccurate to say that by and large labours claim for bonus has been fairly and satisfactorily dealt with. The main source of contest in the working of the formula centres round the industrys claim for rehabilitation; but, as we shall presently point out, if this claim is carefully scrutinised and examined in the light of evidence which the employer has to produce in support of his claim, even the settlement of this item would, as it is intended to, invest the tribunal with sufficient discretion to make the working of the formula elastic enough to meet its two-fold object of doing justice both to industry and labour.