Case: Honorary Secretary, South India Millowners Association &amp; Others Vs. Secretary, Coimbatore District Textile Workers' Union &amp; Others

2. The Honorary Secretary, The South India Millowners Association and other mills are the appellants in Civil Appeal No. 419/60. A dispute arose between 44 mills and their respective employees in regard to the bonus for the year 1956. The said dispute was referred for industrial adjudication to the Industrial Tribunal, Madras, by the State Government on the 13th March, 1958. To this reference, the different mills and three unions which represented the employees were made parties. It appears that for the four years prior to 1956 the question of bonus had been disposed of by a tripartite Board of Arbitration appointed for each year by the Government. For the year 1956, negotiations were held at governmental level to evolve a satisfactory solution by consent but since the said negotiations failed, the parties agreed on some interim payment leaving the rest of the dispute to be adjudicated upon by the Industrial Tribunal. That is the genesis of the reference3. On the 5th of September, 1958, the Tribunal made its award. It considered the several rival contentions raised by the parties in support of their respective claims and awarded bonus ranging from 7 months basic wages to 1 months basic wages according to its findings as to available surplus in respect of each mill. It is against this award that the appellants have come to this court by special leave5. Civil Appeal No. 159/61 arises out of a reference made by the State Government of Madras on the 3rd October, 1959, in respect of an industrial dispute for bonus for the year 1958 between 51 mills and their respective employees. The Industrial Tribunal which heard this dispute pronounced its award on the 11th of January, 1960. In dealing with this dispute, it naturally followed the same line of approach which it had adopted in dealing with a similar dispute for the year 1956 from which Civil Appeal No. 419/60 arises. As a result of its findings, the Tribunal has directed 24 mills to pay bonus to their respective employees, the rate for the same ranging from 6 months to half a months basic wages according to the available surplus in each case. It is against his award that the 23 mills have come to this Court by special leave in this appeal6. Civil Appeal No. 302/59 arises from an industrial dispute for bonus between the appellant, the Management of the Express Newspapers (Private) Ltd. and its employees, the respondents. The claim for bonus which has been referred by the State Government for adjudication to the Industrial Tribunal at Madras on the 19th August, 1957, relates to the years 1954-55 and 1956-57. The appellant in this case carries on the business of publishing certain newspapers and periodicals in English and in the vernacular from four centres in India, viz., Madras, Madurai Bombay and Delhi. After hearing the parties and considering the evidence adduced by them in support of their respective contentions, the Tribunal disallowed the respondents claim for bonus for the Year 195455 but allowed it for the year 1956-57. It has found that for the year 1956-57, the appellant had in its hands Rs. 1,60,000 as available surplus and so, it has directed that not less than 80 per cent of the said surplus should be made available for bonus; that is to say, it has held that Rs. 1.25 lakhs should be distributed by way of bonus which worked roughly @ half a months total wages including dearness allowance. It is against this award that the appellant has come to this court by special leave.

Reasoning:
We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties.What the Labour Appellate Tribunal did in the case of The Mill Owners Association was to adopt an ad hoc basis for allowing rehabilitation within 15 years because it was obvious, and indeed not disputed, that the textile machinery with which the Tribunal was dealing had become obsolescent and very badly needed rehabilitation. Indeed, it was because of this admitted position that the problem of rehabilitation assumed an important place in the discussion before the Tribunal when it evolved the formula. Therefore, from the decision in the case of The Mill Owners Association, no rule can be safely evolved as to the probable life of the textile machinery9. An attempt was then made to suggest that the rate of 15 per cent at which depreciation is allowed under S. 10(2)(vi) of the Income-tax Act for machinery which is used in multiple shift would approximate in the estimate of 15 years made by the experts in the present case. But when the actual calculations were made, it was conceded that the rate of 15% at which depreciation is allowed in respect of machinery used under multiple shifts works at 18 years and not 15 years. Therefore, even the argument based on the depreciation rate permitted by the Income-tax Act is of no avail. In conclusion, we confirm the finding of the Tribunal that the estimated life of the, textile machinery, in question should be taken to be 25 years,10. The next contention which has been seriously pressed before us is in regard to the finding of the Tribunal that some addition should be made to the estimated life of the machinery by reference to practical considerations as to when the employer would be able to make rehabilitation in fact. The Tribunal considered the financial position of the respective mills, the availability of the new textile machinery, the difficulty about the foreign exchange, and so it came to certain ad hoc conclusions while determining the divisor to be adopted. It held that in the case of machinery purchased before 1947 whose life expired by that year, the period for rehabilitation should be 15 years from 1947. In regard to machinery purchased prior to 1947 whose life does not terminate by that year, the period for carrying out modernisation would be fixed at 10 years after the expiration of the life and in the case of machinery purchased after 1947, that period will be 5 years after its normal life. In other words, the Tribunal decided that the rehabilitation requirement about the first category of machinery should be spread over 15 years, that for the second category should be spread over the remainder of its life plus 10 years and for the third category, the normal life of 25 years plus 5 years. Mr. Sastri contends that this ad hoc addition made to the life of the machinery determined by the Tribunal on hypothetical or practical considerations is not justified. In our opinion, this contention is well founded, It is now well settled that in determining the claim of the employer for rehablitation, two factors are essential to ascertain; first the multiplier and that has to be done by reference to the purchase price of the machinery, and the price which has to be paid for rehabilitation or replacement: the second problem is the determination of the division and that has to be done by deciding the probable life of the machinery. Once the probable or estimated life of the machinery is determined, there is no scope for making any additions to the number of years thus deterimined on any extraneous considerations as to the financial position of the employer or the availability of the machinery. If the amount awarded for rehabilitation for any given year is not utilised for that purpose, the same may be taken into account the next year-that is all. But when determining the divisor, it is not open to the Tribunal to add to the estimated life of the machinery on the ground that the employer may, in fact not be able to rehabilitate or replace his machinery. Therefore, there is no doubt that the Tribunal was in error in making further additions to the estimated life of the textile machinery. The divisor must be adopted on the basis of the finding that 25 years is the estimated life of the machinery and no more11. The next contention raised by Mr. Sastri is in regard to the rehabilitation allowed by the Tribunal, in respect of the second hand machinery purcased by Lotus Mills Ltd. one of the appellants before us. The Tribunal thought that in the case of old machinery purchased, only half the claim for rehabilitation should normally be allowed and it added that whether more or less should be allowed would depend upon the age of the machinery at the time of the purchase. Then it considered the evidence is respect of items I to M as disclosed in the rehabilitation statement Exhibit M. 47(B) furnished by the Lotus Mills Ltd. It appears that the items of machinery in question had all been purchased prior to 1910 and, so the Tribunal fixed the rehabilitation at 30%. In dealing with this question, however, the Tribunal has observed that full rehabilitation requirement cannot be allowed in respect of second hand machinery without the depreciation being deducted from cut of the total requirement. Acting on this basis, the amount has been fixed at 30%. Mr. Sastri contends that if the Tribunal proceeded on the basis that second hand machinery must be replaced only by second hand machinery, it was obviously wrong. We think this contention is well founded12. In our opinion, it would not be right to insist that an employer who purchases second hand machinery must rehabilitate it by purchasing second hand machinery in turn. That would be obviously unreasonable and unjust, for aught one knows second hand machinery may not be available. Besides, the employer is entitled to say that he wants to purchase new machinery by way of replacement. Therefore, if the Tribunal intended to lay, down a general rule that in dealing with the question of the rehabilitation of a second hand machinery purchased by an employer only 50 percent of rehabilitation amount should be allowed, that would be erroneuus. On the other hand, it is true that in determining the amount of rehabilitation and deciding the question of multiplier, the cost price of the machinery must be ascertained and this can be done only by enquiring for how much the machinery was originally purchased when new Depreciation amount accruing due after the first purchase must also be ascertained. If the purchase money is determined but it is difficult to ascertain the depreciation amount thereafter then at the highest the whole of the purchase money could be adopted as depreciation amount and then the amount of rehabilitation can be determined. Whatever relevant facts are required to be considered in dealing with this question must no doubt be ascertained. But if all re1evant factors are ascertained, then it cannot be said that because rehabilitation is claimed in respect of second hand machinery, therefore only half or one-thrid of the amount should be allowed. In the present case, the relevant material about the original price and subsequent, depreciation prior to the purchase by the appellant mills has not been adduced before the Tribunal and so, the Tribunal was justified in adopting some ad hoc basis. But grievance is made not so much against the particular ad hoc basis adopted by the Tribunal in the present case as against the general principle about which the Tribunal has made certain observations. As we have already made it clear, those observations do not correctly represent the true legal position in the matter13. That takes us to the last point raised in this appeal on behalf of Saroja Mills Ltd. which is one of the appellants. Saroja Mills Ltd. is a company which runs two mills, viz.. Saroja Mills Ltd., Coimbatore and Thiagaraja Mills at Madura. The latter has been started in 1956, while the former has been in existence for many years. It was urged on behalf of the appellant before the Tribunal that in dealing with the question of bonus payable to the employees in the two respective mills, the two mills should he treated as separate units and not as one. The Tribunal has rejected this contention and it has held that the two mills constitute one unit and the question of bonus payable to the employees working in the two respective mills must be considered on that basis. It is against his finding that Mr. Sastri has made a serious grievance before us. He contends that there are several factors which militate against the validity of the conclusion of the Industrial Tribunal that the two mills constitute one unit, The two mills are situated at two different places separated by a distance of nearly 150 to 200 miles; in starting the Thiagaraja Mills; the necessary cotton stores, and personnel were secured by the Company from Meenaksbi Mills at Madura; the workers working in the two mills are different and they are not transferable from one mill to the other; the two mills manufacture different counts of yarn and different equalities and the raw material required by them is different; they maintain different accounts and their Tax-marks are different; when the Thiagaraja Mills was started in 1956, the Co., borrowed an amount of nearly Rs. 32.50 lakhs from the Indian Finance Corporation and Pudukottai CO. Ltd, and the same was debited to the Thiagaraja Mills. Therefore, all these factors indicate that the two mills are different units, they work as such and should not be taken to constitute one unit for the purpose of determining the question of bonus14. On the other hand, Mr. Rama Murthy contends that there are several other considerations which justify the conclusion of the Tribunal that the two mills constitute one unit. He argues that it is important to bear in mind that the two mills are owned and conducted by one Company, the Saroja Mills Ltd. in fact the Thiagaraja Mills at Madura has no independent legal existence except as a concern run by the Company; ultimately, the profit and loss account for both the Companies is one consolidated account and dividend would be paid on the said account; separate accounts are no doubt kept for convenience because the two mills are situated in two different places; but the maintenance of separate cash book and ledger are not half as important as the maintenance of one profit and loss account which the Company as to keep as a whole; the borrowing on which the appellant relies is the borrowing of the Company and as such, the Company is the debtor and not the mills at Madura; the distance between the two mills can hardly be important because the features on which the appellant relies may well be present in the case of two mills owned and run by the same Co, though the mills may be situated side by side in the same locality; what is important in this connection is the fact that the business carried on by the two mills is of the same type and character though the quality of yarn produced may not be the same. Therefore, it is urged that the Tribunal was right in holding that the two mills constituted one unit16. Mr. Sastri, however, contends that functional integrality is a very important test and he went so far as to suggest that if the said test is not satisfied, then the claim that the two mills constitute one unit must break down.We are not prey pared to accept this argument. In the complex and complicated forms which modern industrial enterprise assumes it would be unreasonable to suggest that any one of the relevant rests is decisive; the importance and significance of the test would vary according to the facts in each case and so, the question must always be determined bearing in mind all the relevant tests and co-relating them to the nature of the enterprise with which the Court is concerned. It would be seen that the test of functional integrality would be relevant and very significant when the court is dealing with different kinds of businesses run by the same industrial establishment or employer. Where an employer runs two different kinds of business which are allied to each other, it is pertinent to enquire whether the two lines of business are functionally integrated or are mutually inter-dependent. If they are, that would, no doubt, be a very important factor in favour of the plea that the two lines of business constitute one unit. But the test of functional integrality would not be as important when we are dealing with the case of an employer who runs the same business in two different places. The fact that the rests of functional integrality is not and generally cannot be satisfied by two such concerns run by the same employer in the same line, will not necessarily mean that the two concerns do not constitute one unit. Therefore, in our opinion, Mr. Sastri is not justified in elevating the test of functional integrality to the position of a decisive test in every case. If the said test is treated as decisive, an industrial establishment which runs different factories in the same line and in the same place may be able to claim that the different factories are different units for the purpose of bonus. Besides, the context in which the plea of the unity of two establishments is raised cannot be ignored. If the context is one of the claim for bonus, then it may be relevant to remember that generally a claim for bonus is allowed to be made by all the employees together when they happen to be the employees employed by the same employer.We have carefully considered the contentions raised by the parties before us and we are unable to come to the conclusion that the finding of the Tribunal that the two mills run by the Saroja Mills Ltd. constitute one unit, is erroneous in lawIt is clear that the development rebate allowed is in part recognition of the claim for depreciation and the provision in question cannot, therefore, be treated as constituting a bar against taking the said amount into consideration in ascertaining the available surplus in the hands of the employer during the year in question. Therefore, the argument which has been urged before us in respect of the development rebate of Rs. 1,25,000 cannot be upheld25. In the two Civil Appeals Nos. 419/ 60 and 159/61 we have dealt with the general points raised before us not because the appellants wanted any relief in respect of their contentions which we have upheld but because they wanted that the points in question should be decided for the guidance of the Tribunal when it may have to deal with similar disputes between the parties in future. Therefore, these two appeals are, in substance, dismissed. Parties will bear their own costs26. That leaves Civil Appeal No. 302/ 59. In this appeal, as we have already noticed, the Tribunal has found the available surplus to be Rs. 1,60,000 and it has directed that out of it Rs. 1.25 lakhs should be distributed as bonus for the relevant year. One of the points which the Tribunal had to consider in dealing with the respondents claim for bonus in this case was in regard to the life of the machinery and it held that the normal economic life of the printing machinery can be easily fixed at 20 years. Then it proceeded to consider what should be the period of spread over after the total rehabilitation requirement is ascertained, and following its decision in the award from which Appeal No. 419/60 arises, it purported to divide the machinery into three categories and proceeded to make ad hoc additions to the normal life of 20 years already determined by it. We have already held that this ad hoc addition to the normal life of the machinery as determined by the Tribunal is not justified. It is conceded before us by the respondents that if the addition thus made by the Tribunal is set aside, then there would be no available surplus in the hands of the appellant for the relevant year. In that view of the matter it is unnecessary to consider the other points which the appellant wanted to raise before us in the present appeal. On the basis that the normal life of the printing machinery is 20 years, a divisor will have to be adopted and by the adoption of the proper divisor it world follow that there is no available surplus for the relevant year. That is why the award passed by the Tribunal directing the appellant to distribute Rs. 1.25 lakhs by way of bonus amongst its employees for the year 1956-57 has to be set aside.