Case: The Tinnevelly-Tuticorin Electricsupply Co. Ltd., Vs. Its Workmen

1. The appellant, the Tinnevelli-Tuticorin Electric Supply Co., Ltd., Tuticorin, is an electric supply undertaking, and it carries on its business as a licensee under the State Government of Madras subject to the provisions of the Indian Electricity Act, 1910 (Act 9 of 1910) and the Electricity (Supply) Act, 1948 (Act 54 of 1948). This latter Act will hereinafter be called the Act. The business of the appellant consists of buying electric supply from the State Hydro-electric Projects and of supplying the same to consumers within the areas specified in its licence; this area is in and around Tinnevelli and Tuticorin Municipalities. The appellants workmen (hereinafter called the respondents) made several demands in respect of their terms of employment. These demands gave rise to an industrial dispute which was referred by the Madras Government to the Industrial Tribunal at Madurai for adjudication under S. 10(1)(c) of the Industrial Dispute Act, 1947 (XIV of1947). Amongst the items thus referred for adjudication was included the respondents claim for additional bonus for the year 1952-53. Without prejudice to its contention that the appellant was not liable to pay bonus it had in fact voluntarily paid two months basic wages by way of bonus to the respondents. The respondents, however, claimed additional bonus and this claim was one of the items of dispute referred to the tribunal for its adjudication2. Before the industrial tribunal the appellant contended that since it was working as a licensee under the Act no claim for bonus was admissible outside the provisions of the Act. In support of this plea the appellant relied on the scheme of the Act which restricted the profit-making of the electricity concerns to a prescribed limit with a possibility of a surplus only in cases of overcharging provided for in the rules. The appellants case was that, having regard to the scheme, object and the background of the Act under which the appellant was carrying on its business, the respondents claim for additional bonus was wholly misconceived. No claim for bonus can be entertained, it was urged on behalf of the appellant, without reference to the provisions of the Act which governs the business of the appellant3. The tribunal, however, rejected the appellants contentions and held that the appellant was liable to pay two months basic wages as additional bonus to the respondents. This award was passed on March 4, 19554. Against this award the appellant preferred an appeal, No. 56 of 1955, to the Labour Appellate Tribunal, and contended that no additional bonus should have been awarded in the absence of proof of an excess of clear profits over reasonable return ; it was the appellants case that it was only from excess of clear profits over reasonable return as defined by the Act that bonus can be legitimately awarded to the respondents. It appears that about this time a number of appeals raising the same question were pending before the Labour Appellate Tribunal, and decisions given by the Labour Appellate Tribunal showed divergence of opinion on the question about the effect of the Act in respect of the claim for bonus made by employees of electricity concerns and undertaking. That is why the Chairman of the Labour Appellate Tribunal issued an administrative order that all appeals which raised the said question should be grouped together and posted for hearing before a specially constituted fuller bench of five members. The Chairman thought that a decision by a fuller bench would finally resolve the apparent conflict disclosed in several decisions pronounced thereto, and give proper guidance to the tribunal in future5. The special bench of the appellate tribunal then heard the group of appeals including the appeal preferred by the appellant. It held that bonus could be ordered to be paid notwithstanding the limitations of the Act, and that the quantum of bonus should be determined even in the case of electricity concerns or undertakings by the application of the Full Bench formula laid down in that behalf. Having decided the question of law in this manner, the appeals were remanded to the respective benches of the Labour Appellate Tribunal for disposal in accordance with law. The appeal preferred by the appellant was in due course taken up by the Industrial Tribunal at Madras, the Industrial Tribunal at Madurai having been in the meanwhile abolished and the appeals on its file transferred to the Industrial Tribunal at Madras. This latter tribunal considered the merits of the contentions raised by the parties, applied the Full Bench formula, and ultimately passed an award on April 9, 1956, directing the appellant to pay an additional bonus of two months basic wages to the respondents6. Thereupon the appellant preferred another appeal to the Labour Appellate Tribunal, and it was numbered as Appeal (Madras) No. 96 of 1956. Certain contentions were raised before the appellate tribunal on the merits, and it was urged that the direction to pay an additional bonus of two months basic wages was improper and unjustified. The appellate tribunal negatived most of the contentions raised by the appellant, but it was satisfied that the calculation made by the tribunal in regard to the quantum of available surplus was erroneous, and so, after rectifying the said error, it held that the additional bonus which the appellant should pay to the respondents was one months basic wage. It is against this decision of the appellate tribunal that the present appeal by special leave has been filed by the appellant before this Court.

Reasoning:
The Act is a self- contained code intended to regulate the business and affairs of electricity concerns including the claim of their employees for bonus, and as such an industrial dispute between such concerns and their employees in regard to bonus must be determined solely by reference to the provisions of the Act and not by the application of the Full Bench formula, As to the quantum of bonus which should be awarded it would depend upon the circumstances in each case;12. It would thus be clear that the provisions of the Act in general and those of the Sixth Schedule in particular, are no doubt intended to control and regulate the rates chargeable to consumers and to provide the method and the machinery by which the electrical system of the country could be properly co-ordinated and integrated. The rates chargeable are fixed, so is a reasonable return provided for. But it is not as if the Act intends to guarantee a minimum return to the undertaking. What it purports to do is to prohibit a return higher than the one specifiedThere is really no conflict between the Act and the principles of industrial adjudication. In fact they cover different fields and their relevance and validity is beyond question in their respective fields14. As we have just indicated the method of accounting required by the Act in preparing the working-sheet is substantially different from the commercial method of accounting which yields the gross, profits in the form of profit and loss account.Determination of gross profit is the first step which industrial tribunals take in applying the Full Bench formula. Such gross profit cannot be ascertained from the working-sheet prepared under the Act. It is not denied that the appellant has to keep accounts under the Companies Act on a commercial basis. That being so, in dealing with the respondents claim for bonus, it is the balance-sheet and the profit and loss account prepared by the appellant that must be taken as the basis in the present proceedings, and that is precisely what the tribunals below have done.Therefore, we are satisfied that the Labour Appellate Tribunal was right in coming to the conclusion that the respondents claim for bonus must be governed by the application of the Full Bench formula. In our opinion, it is difficult to accept the appellants argument that the construction placed by the appellate tribunal on the latter part of this clause is not reasonably possibleAfter the insertion of this clause there can be no doubt that the amount paid by the employer to his employees by way of bonus would definitely be admissible expenditure under paragraph 17 (2)(b). In our opinion the insertion of this clause can be more reasonably explained on the assumption that the Legislature has thereby clarified its original intention. Even when cl. (xi) was enacted the intention was to include claims of bonus under expenses covered by the said clause, but in order to remove any possible doubt the Legislature thought it better to provide specifically for bonus under a separate category. Otherwise, it is difficult to appreciate how contributions to Provident Fund were treated as admissible expenditure all the time since they were covered by cl. (xii) and bonus could not have been treated as admissible expenditure under cl. (xi). That is why we are on the whole prepared to agree with the construction put upon cl. (xi) by the appellate tribunal.If that be the true position then bonus has always been an admissible expenditure under the scheme of the Act, and as such there is no conflict between the scheme of the Act and the claim made by the respondents in the present case.Incidentally, we may add that this point appears to have been conceded by the appellant before the appellate tribunal.We must accordingly hold that the appellate tribunal was right in coming to the conclusion that the Full Bench formula applied in adjudicating upon the respondents claim for bonus against the appellant in the present proceedings.As we have already indicated, before the fuller bench reached this decision there was a conflict of opinion in the decision of the Labour Appellate Tribunals, but in view of our conclusion it is unnecessary to refer to the said earlier decisions. In our opinion, the appellate tribunal was right in holding that the adoption of a factor of 2.7 for all assets purchased before 1945 was not justified, and that the adoption of the figures of the estimated life of the assets from the Schedule to the Electric Supply Act without even deducting the respective portions of the life of the assets which had already expired was equally unjustified. In that view of the matter we do not see how the appellant can make any grievance against the finding of the appellate tribunal on the question of rehabilitation. The appellate tribunal has fairly observed that, in future if a dispute arises between the appellant and its employees, the appellant may substantiate its claim for rehabilitation by leading proper evidence18. The claim of the appellant for the triple shift allowance in respect of the mains has been allowed by the appellate tribunal and there is no dispute in respect of it. There are two provisos to this rule which it is not necessary to set out. The appellant makes a claim under IIIE (1) which deals with electric plant, machinery and boilers, whereas, according to the respondents, the appellants case in this behalf falls under IIIC (4) and (5) which respectively deal with underground cables and wires and overhead cables and wiresThere is no doubt that these letters are to be found against item in IIIC (4) and (5). Therefore, the point which arose for decision before the appellate tribunal was whether the appellants claim falls under IIIE (1) or IIIC (4) and (5). The appellate tribunal has observed that the appellant made no attempt to show that any such claim for shift depreciation in respect of its cables and wires had been put forward by it before the income-tax authorities, or that it was held to be admissible by them. It has also observed that if the appellants case was true that the cables and wires fell under IIIE (1) it was difficult to understand why separate provision should have been made in respect of depreciation of cables and wires under IIIC (4) and (5). Besides, the appellate tribunal was not satisfied that such cables and wires would depreciate in value to a materially greater extent when electrical energy is allowed to pass through them for more than one shift. That is why, on the materials as they were available on the record, the appellate tribunal saw no reason why the appellant should be allowed any extra shift depreciation in respect of under ground and overhead cables by way of a prior charge. The appellants claim for the provision of Rs. 23,516 in that behalf was, therefore, rejected. It would thus be seen that the appellant seeks to claim this amount by way of prior charge ; and in substance this claim has been rejected by the appellate tribunal on the ground that sufficient material has not been placed before it by the appellant on which the claim could be examined and granted. In such a case we do not see how we can interfere in favour of the appellant. The present decision will not preclude the appellant from making a similar claim in future and justifying it by leading proper evidence.