Case: Voltas Ltd Vs. Its Workmen

The dispute between the parties was referred to the adjudication of the Industrial Tribunal, Bombay. The appellant, it appears, had already paid 4 1/2 months basic wages as bonus for the relevant year but the respondents claimed it at the rate of six months basic wages subject to the minimum of Rs. 250/- per employee. The tribunal went into the figures and after making the relevant calculations came to the conclusion that the available surplus worked out according to the Full Bench formula justified the grant of bonus equal to five months basic salary; it therefore ordered payment of this amount excluding the amount already paid. The appellant in its appeal claims that the tribunal should have allowed nothing more than what the appellant had already paid; the respondents in their appeal on the other hand claim that they should have been allowed six months  bonus.

Court's reasoning:
It is urged that this is a permissible item of expense and therefore the tribunal should not have added it back in arriving at the gross profits. We are of opinion that the tribunal was right in not allowing this amount as expenditure. In effect this payment is no different from any amount given in charity by an employer, and though such payment may be justified in the sense that it may not be against the Articles of Association of a company it is none the less an expense which need not be incurred for the business of the company. Besides, though in this particular case the donation considering the circumstances of the case was not much, it is possible that permissible donations may be out of all proportion and may thus result in reducing the available surplus from which low paid workmen are entitled to bonus. We are therefore of opinion that though the law or the rules of the company may permit the appellant to pay such amounts as donations to political funds, this is not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. The tribunals decision therefore on this point must be upheldIt is urged that this is a permissible item of expense and therefore the tribunal should not have added it back in arriving at the gross profits. We are of opinion that the tribunal was right in not allowing this amount as expenditure. In effect this payment is no different from any amount given in charity by an employer, and though such payment may be justified in the sense that it may not be against the Articles of Association of a company it is none the less an expense which need not be incurred for the business of the company. Besides, though in this particular case the donation considering the circumstances of the case was not much, it is possible that permissible donations may be out of all proportion and may thus result in reducing the available surplus from which low paid workmen are entitled to bonus. We are therefore of opinion that though the law or the rules of the company may permit the appellant to pay such amounts as donations to political funds, this is not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. The tribunals decision therefore on this point must be upheld5. Two other points have been urged on behalf of the appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed the usual six per cent, on capital and four per cent, on working capital. The appellant claimed interest at a higher rate in both cases. We agree with that tribunal that there is no special reason why any higher rate of return should be allowed to the appellant5. Two other points have been urged on behalf of the appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed the usual six per cent, on capital and four per cent, on working capital. The appellant claimed interest at a higher rate in both cases. We agree with that tribunal that there is no special reason why any higher rate of return should be allowed to the appellant5. Two other points have been urged on behalf of the appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed the usual six per cent, on capital and four per cent, on working capital. The appellant claimed interest at a higher rate in both cases. We agree with that tribunal that there is no special reason why any higher rate of return should be allowed to the