Case: Jabalpur Bijlighar Karamcharipanchayat Vs. Jabalpur Electric Supply Co., Ltd. &amp; Anr

The claim for bonus was made under two heads: the first was for bonus out of the profits quantified at 50% of the total earnings of the employees; and the second was for festival bonus at 10% of the said total earnings which was claimed as an implied term of the contract of employment and as an established practice, having been paid irrespective of profits or losses before Diwali every year continuously from 1940-41 without any break. The Tribunal found itself unable to hold in favour of the employees Union under either of the heads. The appeal to this Court is by special leave2. We propose to take the two heads under which bonus was claimed in the order in which the arguments were advanced before us. The first head of bonus canvassed for was the second mentioned above i.e. at 10% of the total earnings, So far as this claim is concerned, we are not on uncharted seas as the question cropped up in the past in numerous cases before this Court wherein certain well defined principles were formulated. But before we apply the principles, we have to take note of the relevant facts and circumstances relating to this claim3. It cannot be disputed that the employees had been receiving at least 10% of their earnings from the company from 1940-41 onwards. This period can be conveniently split up into several parts to mark off the claims made from time to time and the settlements by mutual agreement or payments under awards of Industrial Courts or even made voluntarily, The first period relates to the years 1940-41 to 1944-45. The Provincial Government made a reference arising out of a dispute which led to the award of the Labour Commissioner of C. P. and Berar in regard, inter alia, to (a) claim by the employees to a bonus equal to three months wages for the year ending 31st March, 1946, and (b) war bonus equal to six months wages. The adjudicator decided that"(1) The Company should pay to each of its employees 1/10th of his total earnings including dear food allowance during the year ending 31st March 1946 by way of bonus; and (2) The Company should also pay to each of its employees as bonus 1/10th of his total earnings including dear food allowance in respect of each of the years 1940-41, 1941-42, 1942-43, 1943-44 and 1944-45 against the claim for War Bonus."It has to be noted that there was no mention of any festival bonus at that time and so far as the years 1940-41 to 1944-45 are concerned, it was given on the footing that it was a War bonus4. The next period relates to the years 1946-47 to 1949-50. Admittedly, the payment for these years was made under an agreement between the parties as found by the Tribunal. The finding of the Tribunal is that a consolidated amount of Rupees 74,850/- was paid by the company on 25th January 1951. The Tribunal observed that there was"abundant documentary evidence (Exs. D-1/A to D-1/F) wherein workers agreed to accept the bonus offered as voluntary payment of bonus as a compromise of their claim of 25% of the Companys profits for the period ending 31st March, 1951."The claim for the years 1951 to 1956 was covered by an award conveniently described as Mujumdar Award. The opening paragraphs of the award show that the employees had claimed that payment of 10% of their total earnings by way of bonus had come to be included in their wages and had been paid for about 12 years in the past, that there had been agreement between the employees of the company to refer the dispute regarding bonus to Government and thereafter for subsequent years 10 per cent. of their total earnings of the year was accepted by the employees and finally on the failure of negotiations and conciliations, following service of notice under Section 32 of the Industrial Disputes Act, the matter had been referred by the Government, the employees having pressed for at least 33 1/8 per cent. of their total earnings for the year by way of bonus5. The concluding paragraph of that award, a copy of which has been placed before us, shows that in the view of the Majumdar Tribunal,"In addition to the 10% bonus already paid the party No. 1(the company) can easily pay additional 20% of the earnings of the year of each employee as bonus to him. Similarly for the year 1951-52 Party No. 1 can pay easily additional 10 per cent. of the earnings of the year as bonus to each of the employees. For the year 1952-53 no surplus amount is left with Party No. 1. According to the Full Bench formula and the bonus already paid i.e. 10 per cent. of the annual earnings of each of the employees was sufficient payment for that year. For the year 1953-54, 5 per cent. of the earnings of the year can easily be paid in addition to the 10 per cent already paid. For the year 1954-55, 20 per cent. of the annual earnings can easily be paid to each of the employee by way of bonus and for the year 1955-56 though I only have been able to get the account for the first six months I have absolutely no doubt that taking the average of all these years, the party No. 1 could be able to pay at least 10 per cent as additional bonus."The said Tribunal further recorded that as the employees had not received even the 10 per cent. usual bonus for 1955-56 the same should be paid in full before 31st October, 19566. For the year 1956-57 payment was made under an interim award of Mr. Kher, Judge, Industrial Court. For the years 1957-58, 1958-59 and 1959-60 payment was first made under an interim award of Justice Bhat who finally passed an award accepting the claim of the Union for payment of Diwali bonus. This award was the subject-matter of an appeal before this Court and on 11th March 1956 the parties to the appeal arrived at a compromise and it was agreed without prejudice to their respective contentions that the company should pay to the employees one per cent. in addition to the bonus already paid by it for the years 1956-57, 1957-58 and 1958-59 but the company should not pay any additional bonus for the year 1959-60. It was expressly recorded before this Court that as the point of dispute between the parties which had been decided by the said Tribunal had not been argued before this Court it would be open to them to raise their respective contentions in future should the occasion arise.

Court's reasoning:
7. The above statement of facts makes it amply clear that although the employees received at least 10% of their total earnings by way of bonus for the years 1940-41 to 1959-60 there was no consistency in the claim to bonus throughout this period, nor was there any uniformity either in the amounts paid or the grounds under which the several awards of bonus came to be made. The only award which indicated that the bonus was to be regarded as a Diwali bonus was that of Justice Bhat for the period 1957-58 to 1959-60. For the period 1940-41 to 1956-57 the company never paid bonus as a festival bonus on the occasion of the Diwali. The amount was mostly paid under awards but in between the awards there was a period when it was paid by express agreement between the parties14. The above decision all go to negative the claim of the appellant before us. The only fact about which there can be no doubt is that payment was made at the rate of 10 per cent. for a large number of years with an intervening period when it was made at the rate of 11 per cent. The facts do not warrant any conclusion as to the payment being related either to any festival or under an implied term of employment between the parties. It will be noted that for the very first period i.e. the years from 1940-41 to 1945-46 there was no claim for the payment of either customary bonus or a festival bonus. On the other hand the express claim was made for War bonus. The major part of the entire period was covered by awards and excepting in one of these awards there was no reference to any festival bonus. There was an intervening period which, as already noted, was covered by an express agreement between by an express agreement between the parties. The rate too, as already shown, was not uniform. Consequently the claim made by the appellants that they should be paid 10 per cent. either as festival bonus or under an implied term of employment cannot be acceptedBut this in our opinion cannot be accepted as the available surplus has to be found out by working on the Full Bench Formula of the Labour Appellate Tribunal. There can be no question that income-tax has to be notionally computed at 45% after deduction from the gross profits, the expenses shown in Ex. D-11 ending with notional normal depreciation and double shift depreciation. The Tribunal allowed Rupees 1,07,052 but the result of the addition to the gross profit of Rs. 8,88,598 (1) the difference in the value of the coal consumed, (2) the amount disallowed out of the furniture repairs and (3) the interest amount of Rupees 16,645/- the income-tax to be allowed in the working sheet would be Rupees 1,94,435/- in place of Rs. 1,07.052/-24. The last item disputed by the appellant was the return on working capital which was shown as Rupees 8,25,243/- in Ex. D-11. The evidence given on this head was that of Mr. B ChatterjeeHe referred to various exhibits viz., D-22 to D-27 in this connection Ex. D-32 was a statement complied for showing reserves available as working capital. Exs. D-24 and D-25 went to show that at the relevant period, the company was borrowing moneys from the United Bank of India Ltd. The Tribunal accepted the companys case that Rs. 8,25,243/- should be taken to be the working capital of the company for the relevant year and return at 6 per cent, should be deducted to arrive at the available surplus for distribution. The evidence on this head was furnished by B. Chatterjee who said that the sum had been calculated as shown in Ex. D-11 in accordance with Clause XVII (e) of the Sixth Schedule to the Electricity Act, and this sum being the lesser of the two was incorporated in Ex. D-11. The details of the requirement of liquid funds to run the undertaking was given in Ex. D-16 In his cross examination Chatterjee said that besides the items shown in Ex. D-22 (statement of reserves) and other funds which had been used as working capital, the company had to take the loan in spite of these reserves which were already employed in the business as working capitalIn our view, this is not the correct position in law. In T. T. E. Supply Companys case, (1960) 3 SCR 68  = (AIR 1960 SC 782  ) (supra) the question considered by this Court was whether the Full Bench formula should be applied to an electric supply undertaking in preference to the provisions of the different clauses of paragraph xvii of the Sixth Schedule to the Electricity Supply Act and this Court concurred with the view expressed by the Labour Appellate Tribunal that even in such a case the Full Bench formula should be applied. In the Ahmedabad Miscellaneous Industrial Workers Unions case, (1962) 2 SCR 934   = (Air 1962 SC 1255  ) (supra) where one of the questions before this Court was whether depreciation should be calculated according to the provisions of the Income-tax Act and the rules framed thereunder or according to the provisions contained in the Seventh Schedule to the Electricity Supply Act, it was held that the rates prescribed under the rules framed under the Income-tax Act lay down the proper measure of depreciation to be allowed as in the view of this Court the field of industrial relations in connection with which the Full Bench formula was evolved, it was not proper to inject therein the provisions contained in the Seventh Schedule to the Electricity Supply Act26. There can be no dispute that a good portion of the reserve must have been utilised in running the company inasmuch as it was obliged to borrow moneys from the bank and pay interest thereon. It is highly unlikely that a company which had reserves as disclosed by its balance-sheet and profit and loss account would borrow moneys from a bank unless it was utilising the reserves for some other and more remunerative purpose. The balance-sheet and the profit and loss account negative such a view and loss account negative such a view and no evidence which throws light on the question was recorded27. We are however not called upon in this case to come to a finding as to how much of the reserves were utilised as working capital in view of the fact that even without taking this item into account, there is no available surplus left in terms of the working sheet which forms the basis for determining the available surplus28. The working sheet according to us should be altered as follows: To the figure Rs. 6,88,905 shown as surplus in Ex. D-11 after the deduction of various items of expenses should be added three figures i.e. (1) coal and fuel Rs. 1,57,428/- (2) furniture account Rs. 20,612 and (3) interest Rs. 16,545/- making a total of Rs. 8,83,490/-as gross profits. From this will have to be deducted Rs. 4,51,011 being the sum of notional normal depreciation of Rs. 3,55,755 and double shift depreciation Rupees 95,256/-. This leaves a balance of Rs. 4,32,439. From this will have to be deducted the income-tax of 45%which in view of the addition of the items regarding coal, furniture and interest should be Rs. 1,94,615 in place of Rs. 107,052 as shown in Ex. D-11 Deducting this from Rs. 4,32,479 the balance left is Rs. 2,37,864. From this has to be deducted the statutory contingencies reserve and the statutory development reserve and 6 per cent. on the share capital of Rs. 22,49,850/- there being no dispute as to these figures. The result in that from the figure of Rs. 2,37,364 there has to be deducted a sum of Rs. 2,38,585 which leaves a negative balance of Rs. 721.The case of the appellant for showing an available surplus for distribution therefore disappears.