Case: Anil Starch Products Limited Vs. Ahmedabad Chemical Workers' Union And Others

The dispute arose over the demand made by the workmen for payment of six months wages as bonus for that year. This dispute was referred to the Industrial Tribunal by the Government of Bombay by its order dated July 15, 1955. The company had already paid one months months basic wages as bonus to its workmen and the real dispute was thus only about the remaining bonus for five months2. The case of the workmen was that the company had made substantial profits during the year. The wages-cum-dearness allowance paid by the company was low and therefore, profit bonus at the rate of six months wages should be granted to fill the gap between the wages paid and living wage. The company on the other hand contended that it was giving high wages and had already paid one months basic wage as profit bonus and there was no scope for further payment of bonus as the available surplus, according to the Full Bench formula did not justify it3. The main dispute before the Tribunal related to three items, namely -(i) Depreciation, and how it should be calculated for the purposes of the Full Bench formula ?(ii) Whether any return should be allowed on the money in the depreciation reserve fund used as working capital; and if so, what ?(iii) What should be the amount to be provided for rehabilitation ?4. The Industrial Tribunal took into account the total statutory depreciation even though this was against the decision of the Labour Appellate Tribunal in the U. P. Electricity Supply Co., Ltd. v. Their Workmen, 1955-2 Lab LJ 431 (LATI- Bom.). The Tribunal also disallowed any return on depreciation fund, even if any part of it has been used as working capital. Lastly, it reduced the amount claimed for rehabilitation from Rs. 5.16 lacs to Rs. 2 lacs. After making the relevant calculations on this basis it came to the conclusion that there was surplus available for giving bonus at the rate of two months basic wage. It may be mentioned that bonus at the rate of one months basic wage works out at Rs. 18,000. The company thereupon applied for special leave to appeal which was granted; and that is how the matter has now come before us for decision.

Reasoning: The Tribunal, in our opinion, was in error in not allowing any return on the depreciation reserve used as working capital.The reasons given by it for this view are, in our opinion, untenable and unsatisfactory. Method of accounting has nothing to do with the question whether a return should be allowed on depreciation reserve or such part of it as may have been actually available and used as working capital.We also cannot understand why if money is available in the depreciation reserve and has actually been used as working capital during the year, as explained in Tata Oil Mills Co., Ltd. v.Its Workmen, C. A. No. 31 of 1958 : (AIR 1959 SC 1065  ) no return should be allowed on it, simply because provision for depreciation out of which depreciation reserve is accumulated is made from year to year in the accountsWe have considered this matter at length in the appeal, C. A. No. 321 of 1958: (AIR 1959 SC 1065  ) (supra), judgment in which is delivered today, and for reasons given there we are of opinion that if there is in fact money available in the depreciation reserve and if that money is used actually as working capital as explained there, a return should be allowed on the sameIt is enough to say in that connection that an affidavit was filed by the manager of the company to the effect that all its reserves including the depreciation fund had been used as working capital. The manager appeared as a witness for the company before the Tribunal and swore that the affidavit made by him was correct. He was cross-examined as to the amount required for rehabilitation, which was also given by him in that affidavit; but no question was put to him to challenge his statement that the entire depreciation reserve had been used as working capital. The Tribunal also did not go into the question whether any money was available in the depreciation reserve fund and had been actually used as working capital. It dismissed the claim for return on the depreciation reserve on entirely different grounds7. As to the question of rehabilitation, we do not think it necessary in this appeal to go into that; for even accepting the sum of .71 lacs allowed by the Tribunal, there will be nothing left to justify the grant of any further profit bonus beyond that given by the company. This matter may be gone into again in any future adjudication that may arise8. We now come to the calculations in accordance with the Full Bench formula, subject to what we have saidIn lacs Rs