Case: Management, Chitavalsah Jute Mills Ltd Vs. Workmen Of Chitavalsah Jute Mills

The appellant concern is having about 500 loons. It has a subscribed capital of a little over 35 lakhs. It built up reserve is over thirty lakhs. In three out of the six years during the period 1960-65 it has suffered substantial losses. Out of the remaining three years in one year it made a profit of about Rs. 45,000 in another year about Rs.13,000 and in 1962 over rupees twelve lakhs. The annual expenses of the appellants concern under the head salaries, wages and bonus are nearly 47 lakhs3. It was found by the tribunal that the appellant concern and the Nellimarla Jute Mills are sister concerns. Both of them are under a single management, viz., M/s. Mcleod and Company, Calcutta. They are located in the same region, the distance between the two being about 25 miles. In Nellimarla lute Mills a gratuity scheme for the staff is in existence and that in addition to provident fund benefits. Our attention was not invited to any material on record to show that these findings are not correct. In the appellant concern also there is a provident fund scheme for the staff. The appellant in its counter affidavit filed before the tribunal admitted that it had always been the policy of the management to introduce identical terms of employment for the workmen at Nellimarla and Chitavalsah. From the material before us it is not possible to find out the financial position of the Nellimaria mills. We ascertained from the learned counsel for the appellant that the appellant concern had made a profit of over a lakh of rupees in 1966. The tribunal has found and that finding was not challenged before us that the additional burden to be borne by the appellant as a result of the gratuity scheme framed by it is about Rs. 3,000 per year.

Court's reasoning:
7. The appellant concern is-tan economic unit. Jute mills having 300 or more looms are considered as economic units. The appellant has 500 looms. Similarly the Nellimarla mills have also got 500 looms. As seen earlier, the appellant is a big concern. Its paid up capital is over 35 lakhs. Its reserve is nearly as much as its paid up capital. This shows that in the past the appellant was a prosperous concern. It is true that it did suffer losses in some years in the recent past.But the question is whether it is a temporary phase or not. The tribunal has come to the conclusion that it is a passing phase. It is well settled that in drawing up enduring schemes like gratuity schemes temporary losses or gains should not be taken into consideration. What is of the essence is the profit making capacity of the concern. In determining that question one has to take into consideration the paid up capital of the company, its reserves, its earning in the past and its future prospects. A practical view of the question has to be taken9. In Calcutta Insurance Co. Ltd. v. Their Workmen,2 SCR 596   = (AIR 1967 SC 1286  ) this court observed :"On the financial aspect of a gratuity scheme, we were referred to the case ofWenger and Co. v. Their Workmen, (1963) 2 Lab LJ. There it was observed by this court that the problem of the burden imposed by the gratuity scheme could be looked at in two ways. One was to capitalise the burden on actuarial basis which would show theoretically that the burden would be very heavy; and the other was to look at the scheme in its practical aspect and find out how many employees retire every year on the average. According to this Court, it was this practical approach which ought to be taken into account"In the light of the principles noted above and on the material placed before the tribunal it is not possible to hold that the tribunals conclusion was without any just basis.