Case: Sangam Press Limited Vs. Workmen

1. This appeal by special leave is directed against the award of the Industrial Tribunal, Maharashtra. Several items including the claim of 30 per cent wage rise were referred to the Tribunal for adjudication. The Tribunal granted all the reliefs except with regard to two demands which were not pressed. The Tribunal granted 25 per cent increase in wages. Hence this appeal.

Reasoning: 4. The Tribunal was conscious of its duty to ascertain the financial capacity of the company but in doing so adopted an absolutely wrong approach resulting in erroneous conclusion. The Tribunal seems to have computed the profits of the appellant for each year on the assumption that the capital expenditure incurred in a particular year must have come out of the profits of that year and, therefore, to arrive at the correct trading result, the amount of the capital expenditure must be added back. This assumption, with great respect, betrays ignorance of the true function of the profit and loss account and fails to take note of the basic principle of accountancy that capital expenditure does not go into the profit and loss account. There can, therefore, be no question of adding back the amount of the capital expenditure to the profit and loss appearing in the profit and loss account for the purpose of arriving at the correct trading result. Equally patent is another error committed by the Tribunal, namely, of adding back the carried forward loss of the previous yearson the footing that is not genuineto the profit or loss appearing at the foot of the profit and loss account in order to determine the true profit or loss of the particular accounting year. This exercise on the part of the Tribunal is based on the assumption that the carried forward loss of the previous years is taken into account in arriving at the profit or loss appearing in the profit and loss account of the particular accounting years, and, therefore, it must be excluded in computing the profit or loss of the particular accounting year and to that extent, the real profit or loss would stand enhanced. But this assumption is clearly wrong. The profit and loss account of a particular accounting year never includes the carried forward loss of the previous years. It merely reflects the trading result of the year in question. In any particular item debited in the profit and loss account is wrong, it may be added back, but the carried forward loss of the previous year not being an item of debit in the profit and loss account, it is impossible to see how it can be added back to arrive at the true profit or loss. The Tribunal was, therefore, clearly in error in taking the view that the gross profit of the appellant for nine years from72 was Rs. 10, 55, 361.75, or that the average annual gross profit was Rs. 1, 33, 928.83 and basing its award on these erroneous figures.We, therefore, declined to permit the learned counsel to sustain the award on other grounds in this appeal. But while so doing we would like to make it clear that ordinarily a party to a reference should be entitled to justify the award of the tribunal on other grounds, so long as he does not travel outside the material or record.8. We are clearly of opinion that there was no proper adjudication of the dispute referred to the Tribunal.