Case: All India Voltas &amp; Volkart Employees' Federation Vs. Voltas Limited and Another

The award was made on 19th April, 1968 and published in the Gazette on the 25th of May,1968. It is concerned with disputes between Messrs voltas Limited, Bombay and their workmen represented by the All India Voltas and Volkart employees Federation, Bombay. The parties had arrived at settlements for referring voluntarily the issue as to bonus for the years66 and consequent upon those settlements a reference was made to the Tribunal by two separate orders of Government dated 20th December, 1966 and 17th April, 1967. Originally the references were to Mr. Salim Merchant but were later on transferred to Mr. Kamal Sahai on 2nd November, 1967. Both the references came to be heard together by consent of parties and were disposed of by an order of the Tribunal passed on 6th March, 1968. The reference were upon three points mentioned in the schedule to the references with two of which we are concerned so far as the present petition isot; (a) Whether the quantum of bonus paid to the employees is what they are entitled to under the payment of Bonus Act, 1965  If no, what should be the quantum  (b) Whether the salesmen employed by the company are entitled to bonus for the yearunder the Payment of Bonus Act, 1965 "With the third item under reference we are not concerned in the present petition. The Tribunal found in favour of the employers on both the points of reference and the petition has been preferred against that order at the instance of the union on behalf of the employees.

Reasoning:
( 6 ) IN the first place we do not think that the company had any such motive as was sought to be attributed to it because though no doubt the letter of 14th January, 1966 was written after the bonus Act came into force, the scheme itself was in force in the company long before the Bonus act was brought into force or even contemplated. The scheme is contained in the printed pamphlet issued by the company the gist of which is given in a circular letter No.dated 19th February, 1959 which the company issued. That scheme, therefore, could never have been proposed in contemplation of the Bonus Act, much less in order to defeat any of its provisions. The circular letter datedon which so much reliance has been placed to suggest such a motive on the part of the company was written pursuant to the need to dovetail the provisions of the old scheme which was already extant in the company with the provisions of the new status and that is why the following sentence on which great emphasis was just put on behalf of the employees by Mr. Kulkarni finds place in the letter of 14th January, 1966the Bonus Act permits an employees to come to an arrangement with the employer different from the one provided under the Bonus Act, and, therefore, we could continue our present arrangementsin order that the present arrangement should continue unaffected, the consent of each and every employee had to be obtained and that is why the letter came to be written. There is not the slightest indication that the company wrote this letter or did anything else in order to circumvent the provisions of the Bonus7 ) TURNING then to the provisions of the Act an the scheme it is clear that there is nothing in the provisions of the Act to bar bonus being paid by an agreement with the workers by the company subject of course to the minimum bonus being payable in any case as prescribed by the Act and subject to the other limitations which the Act prescribes. In entering into an agreement, therefore, to implement the bonus scheme which was already in force in this company, we cannot see that the company in any manner contravened any provision of the Bonus11 ) WE are unable to accept this contention. In the first place despite this scheme every employee of the company continues to get bonus still. Secondly it seems to us that there is nothing in the Act which prevents an employee from surrendering his right to bonus or to a part of bonus payable to him, and since the payments which the company made to the Life Insurance corporation under the scheme would ultimately be of greater benefit to the employees than if they were to receive the regular bonus paid to them by the company year after year the employees agreed to accept the scheme. In the case of the higher paid staff the high rates of income and super tax would leave very little out of the bonus if it were paid to them annually. It is, therefore, understandable that the higher paid staff was agreeable to forego their right to receive the yearly bonus because it would be considerably to their advantage if they could be better safeguarded financially when they have to retire and it was therefore an advantage to contribute to the retiring gratuity scheme. We can see nothing improper or illegal in this arrangement. It is permissible under the Act and in any event was permissible when the scheme was first adumbrated and put into force in 1956 long before the Act came into force. We must, however, add that no part of the scheme touches the minimum bonus prescribed under the Act which every employee entitled under the Act continues to receive nor does it in any way legally affect the right of the rest of the employees to receive bonus under the Act. The scheme is thus primarily a scheme for provision for superannuation. There are various rights and privilege recognised in favour of the employee under the Industrial Law such as right to bonus, free housing, leave, overtime allowance etc. These are all distinct heads of payments or benefits which the employee may normally receive under the Industrial Law. Two such heads which are also recognised are superannuation benefits and retirement gratuity benefits. If superannuation and gratuity benefits are recognised heads of the rights and privileges to which an employee may be entitled, the terms of the scheme cannot be held to be illegal or improper. It seems to us that the scheme which the company launched upon was primarily and mainly for providing these latter benefits to its employees. All the employees were entitled to that benefit if they so chose to take it. It could not therefore be said that it was a scheme to provide a bonus either immediately or in future to any of its employees. Any payment made under the scheme can hardly be said to be bonus paid to employees in respect of previous accounting years as mentioned in item 3 (a) of the Second Schedule.( 12 ) THE word "bonus" is surprisingly enough not defined in the Bonus Act and that prompted an argument that it should be given a wide connotation as used in items 2 (a) and 3 (a) of the Second schedule. Bonus which was originally intended to be purely an ex gratia payment by an employer to his employee has, however, with the passage of time and the arising of the idea of social justice and equality, undergone a major change, so much so that today bonus is recognised as a right in an employee and does not depend upon the volition of the employer. Originally also the word "bonus" implied a reward or a gratuitous payment of the profits earned by an employer, but with the development of the idea of social justice that idea of bonus has also undergone a change and today according to the provisions of the very Act with we are dealing the payment of bonus does not depend upon the making of profits by an employer. The minimum bonus under the Act is payable irrespective of whether he makes a profit or not. Some of these shades of meaning of the word "bonus" have been dealt with and pronounced upon by the Supreme Court itself. One of such cases is to be found reported in Associated Cement Companies Ltd. v. Their workmen, [1959I L. L. J. 644]; A. I. R. 1959 S. C. 967, and that is what the Supreme Court said after considering their previous decision in Muir Mills Co. Ltd. v. Suti Mill Mazdoor Union, kanpur, [1955I L. L. J. 1]; (1955) 1 S. C. R. 991, in paragraph 5 at page 980judgment in that case indicates that without committing itself to the acceptance of the formula in its entirety, this Court in general accepted as sound the view that since labour and capital both contribute to the earnings of the industrial concern, it is fair that labour should derive some benefit if there is a surplus after meeting the four prior or necessary charges specified in the formula. It is relevant to add that in dealing with the concept of bonus this Court ruled that bonus is neither a gratuitous payment made by the employer to his workmen nor can it be regarded as a deferred wage. According to this decision, where wages fall short of the living standard and the industry makes profit part of which is due to the contribution of labour, a claim for bonus can be legitimatelythis pronouncement the concept has further changed by virtue of the provisions of the bonus Act itself as we have indicated above. But giving it the widest possible connotation we cannot find that any payment to be made under this scheme framed by the company is a payment of bonus to its employee in present or as a deferred payment. When item 3 of the Second schedule says "bonus paid to employees in respect of previous accounting years" it necessarily means bonus paid as bonus to the employees, and not a retirement gratuity even though in receiving it or becoming entitled to it the employee may have in the past given up partially his right to bonus. In this view we are unable to accept the contention. We think that on this point the Tribunal came to a correct15 ) WE are not here really concerned with the general provisions of theAct or the normal principles of accounting adopted by a company. What is to be deducted, and what is not to be deducted is statutorily prescribed in the Act and we must go strictly in accordance with the provisions of that Act. The company has claimed to deduct the total amount ofunder the provisions of S. 6 (c) of the Act. Under theAct and other special laws the declaration of dividends is now severely controlled by the law and it is not possible for a company to keep on declaring higher and higher dividends to any extent. One such provision is the one to which we have already referred in the Finance Act, 1966. Therefore, it is very doubtful if a company can use its discretion to declare dividend as an instrument to defeat the employees rights under the Bonus Act. There is moreover nothing to show that this company declared the dividend in question with that object in view. We have no evidence of any such intention on the part of this company. It also appears to us that the Act did not intend to further fetter the discretion of the company to declare such dividends as the company in a general meeting may decide to declare and it is not permissible for one of workers, taking advantage of the provisions of the Act to say that another of workers shall not be given a certain benefit, so long as the company acts fairly and in a bona fide manner as in the present16 ) IN the accounting yearthe company issued 7% depentures redeemable insecured by a mortgage of its assets and a floating charge on other assets upon certain conditions. The total debentures issued were of the order of one crore of rupees and in connection with that issue the company incurred certain expense. This the company deducted in arriving at its figure of gross profits. The expenses amount to Rs. 4,41,528 and are to found debited under the head "expenses" item 4 (d) in thefor the year ending 31st August, 1966. It was urged that this amount is really in the nature of a capital expenditure and, therefore, must be added back having regard to the provisions of items 3 (d) of the Second Schedule which defines the item as followsexpenditure (other than capital expenditure on scientific research which is allowed as a deduction under any law for the time being in force relating to direct taxes) and capital losses. . . . . . . . . . . . . "There is aadded which says "if, and to the extent, credited to Profit and Loss account". The item here has been credited to the profit and loss account but the question whether this is an expenditure of a capital nature. We are quite unable to see how expenditure incurred by a company in negotiating and settling a loan to it albeit upon the security of its assets could possibly partake of the assets of a capital nature. On behalf of the company a statement showing theof this figure of Rs. 4,41,528 has been given and theshows the following payments of expenditure; Underwriting commission, brokerage, legal charges, stamp duty, printing charges and advertising charges. Every one of these charges are normally and in business practice always considered as revenue expenditure. It is hardly necessary to elaborate upon this. We may only refer to one decision of the Supreme Court in India Cements Ltd. v. Commissioner of60 I. T. R. 52, In that case the assessee had obtained a loan of Rs. 40 lakhs from the Industrial Finance Corporation secured by a charge on its fixed assets, and in connection with the obtaining of that loan it had spent a sum of Rs. 84,633 towards stamp duty, registration fees, lawyers fees etc. , and it claimed that amount as business expenditure. It was held that it was allowable under S. 10 (2) (xv) of the oldAct and that the amount spent was not in the nature of capital expenditure but was laid out or expended wholly and exclusively for the purpose of the assessees business and therefore was allowable as a deduction. The Supreme Court also observed that the act of borrowing money was incidental to the carrying on of business, and that the loan obtained was not an asset or an advantage of an enduring nature. The expenditure was made for securing the use of money for a certain period, and it was irrelevant to consider the object with which the loan was obtained. That is precisely the case here. The company did not acquire any asset of an enduring nature or, in other words, any capital assets, when it borrowed moneys on the issue of debentures. It was a simple transaction of loan albeit secured by its immovable property but the company did not acquire any asset which was in the nature of a capital asset. Any expenditure, therefore, which was incurred in securing the loan was rightly allowed to be deducted as a business expenditure. We do not think that there is any difference in the expression "capital expenditure" in item 3 (d) and the accepted connotation of that term in business and under the IndianAct. This item, therefore, cannot be ordered to be18 ) THESE were all the items which were disputed and which go to make up the figure of gross profits on the basis of which the available surplus is to be computed under S. 5 of the Act for the purposes of giving of bonus under the Act. We are unable to allow any one of these amounts to be added back and, therefore, we must hold that the figure of gross profit is a correct computation. The figure of available surplus and the bonus awarded on that basis will, therefore, beit is no doubt true that the decision of the supreme Court cannot directly be relied upon here as a matter of res judicata between the parties because conditions may have changed and since almost 10 years have elapsed since that decision it will be difficult to hold that those findingsare today binding, but the Tribunal has gone further and come to the conclusion that "the facts continue to be the same and this point cannot, therefore, be allowed to be reagitated". On this question we think that the Tribunal was not right because even assuming that the facts continued to be the same, the point raised is not the same as it was when it was raised before the Supreme Court. In the case before the Supreme court they were concerned only with the provisions of the then operative Industrial Disputes Act and in fact then the Bonus Act was not even in force, whereas in the present case we are only governed by the provisions of the Bonus Act. Therefore, we do not think that much support can be gained from the decision of the Supreme Court to which we have referred. We, however, notice that in the present case it is urged that salesmen are employees and do the same work as employees because they do some sort of technical or clerical work. There is hardly any evidence in this respect before us beyond the statements in the affidavits to which we have referred and the contrary averments in the affidavit on behalf of the company. The Tribunal has found that these salesmen are not employees within the meaning of the Act. In dealing with this question certain broad principles have to be borne in mind. In almost every sphere of human activity different skills must exist and are called into play. Even a manual worker occasionally writes down specifications andEven a clerk sometimes does manual work. He lifts up a typewriter or a load of books or files from one place and keeps it at another place and thus does some manual work. But it is not the casual or occasional work which a particular employee does which is decisive of what is the nature of his employment nor decisive of the question whether he is an employee at all falling within a particular definition. The test is what is the substance of the work which he does and what he was in substance employed to do. It is not in dispute in the present case that these particular employees, with whom we are concerned, were substantially employed as salesmen and it may be that in the course of their duties as such salesmen they were required to show some special knowledge of the products which they sell. It may be perhaps that the more technical their knowledge the better for them in order to earn their commission but it is not for the technical knowledge that they were employed because they go from business to business and canvass orders and that is the main and substantial part of the work which they have to do and for which they were engaged. It cannot, therefore, be held that they were employed to do clerical or technical22 ) THAT this is the light in which questions of this kind ought to be decided is laid down by the supreme Court in a recent decision in Burmah Shell Oil Storage and Distributing Co. of India ltd. v. The Burmah Shell Management Staff Association, [1970II L. L. J. 590]; A. I. R. 1971 s. C. 922. The Supreme Court laid down the following as the guiding principles (vide paragraph 6) : "the next aspect that has to be taken notice of is that, in practice, quite a large number of employees are employed in industries to do work of more than one of the kinds mentioned in the definition. In cases where an employee is employed to do purely skilled or unskilled manual work, or supervisory work, or technical work, of clerical work, there would be no difficulty in holding him to be a workman under the appropriate classification. Frequently, however, an employee is required to do more than one kind of work. He may be doing manual work as well as supervisory work. He may be doing technical work as well as supervisory work. In such cases, it would be necessary to determine under which classification he will fall for the purpose of finding out whether he does or does not go out of the definition of workman under the exceptions. The principle is nowthat, for this purpose, a workman must be held to be employed to do that work which is the main work he is required to do, even though he may be incidentally doing other types of work. " the Supreme Court in this respect relied upon an earlier decision of its own in May and Baker (India) Ltd. v. Their Workmen, [1961II L. L. J. 94]; A. I. R. 1967 S. C. 678. In the latter case several categories of workmen were before the Supreme Court, one such category being Sales engineering Representatives, and a Perusal of paragraphs 24 and 25 and the evidence discussed therein would show that the nature of the work of those workmen was similar to the salesmen in the present case, or perhaps it would be true to say that in those cases more technical knowledge was found to be required. None the less the Supreme Court said in that case, (see page 938 at the end of paragraph 25) that "the amount of technical work that a Sales Engineering Representative does is all ancillary to his chief duty of promoting sales and giving advice. As we have held earlier, the mere fact that he is required to have technical knowledge for such a purpose does not make his work technical work. The work of advising and removing complaints so as to promote sales remains outside the scope of technical work. Consequently, the Tribunals decision that the sales Engineering Representative is a workman is set aside". In that case the Tribunal had been impressed by the evidence given as to the quantum of technical knowledge required by a Sales engineering Representative and, therefore, it held that they were doing technical work. In the present case, as we have said, there is hardly anything to show that any of these employees called salesmen were actually doing clerical or technical work. Even assuming the affidavit of dsouza to be true, we still do not see that the technicalto which he refers or the clerical work which he did, was the main part of his duties as a salesman. On the other hand, it seems to us that all these salesmen on commission were originallypersons who in the course of their work as salesmen did acquire some technical knowledge of the goods that they were daily selling and now claim that they are principally required to display the technical knowledge. It seems to us that, technical knowledge forms an infinitesimal part of their qualities as salesmen. As regards the alternative submission that they were doing some sort of supervisory or administrative work, there is not even an iota of evidence. There is nothing to show that there was anybody to supervise or anything to administer. In fact it does not appear that in the course of salesmens work he has to supervise anything or anybody nor has he any administrative duty in regard to any personnel in the company.( 23 ) AN earnest plea was made on behalf of these employees that their case has gone by default and that although they pleaded that there was considerable evidence of technical knowledge involved in the discharge of their duties as salesmen, no evidence has been led and that, therefore, an opportunity should be given to them to lead that evidence. In short it was urged that the matter should be remanded to the Tribunal for further evidence. We are unable to accede to this request because we do not find that there was any grievance made before the Tribunal or even a request that either party should be allowed to lead evidence. On the other hand, both the parties chose to go to trial upon the affidavits which they had filed. It does not also appear that any request was made on the part of either party to be allowed to lead evidence in support of their affidavits. We cannot, therefore, without any valid grounds send back the case for fresh24 ) THESE were all the arguments advanced to show how the award has been vitiated. We are unable to accept them.