Case: Burhanpur Tapti Mills Ltd Vs. Burhanpur Tapti Mills Mazdoor Sangh

The Burhanpur Tapti Mills Mazdoor Sangh (respondent) which represents the workers in the Company gave a notice of change under S. 31(2) of the Madhya Pradesh Industrial Relations Act, 1960 demanding a scheme of gratuity. The Company did not accept the demand and the Sangh forwarded under the Act to the Conciliator a statement of its case. The conciliation proceedings failed and the Sangh made a reference under S. 52 of the Act to the Industrial Court submitting its demand as follows :"(1) Whether there is a case for awarding the introduction of the Scheme of gratuity to the employees of the Burhanpur Tapti Mills Ltd., Burhanpur.(2) If so, whether the Scheme of gratuity as demanded by the representative union or some other adequate scheme of gratuity be granted. "The case of the Sangh was that the financial condition of the Company was quite sound, that the textile industry in general and this Company in particular, had good prospects and that the Company was in a position to give this retiring benefit. The Sangh suggested a scheme into which it is not necessary to go. The Company resisted the demand and submitted that it suffered heavy losses in previous years and its profits were small except in the years62 which were boom years for textile industry, that the financial condition of the Company was not sound and that it had nocapacity. The Company contended that the demand of gratuity in addition to the statutory retrenchment compensation and the statutory provident fund which already existed was not justified. The Company further contended that in this region schemes of gratuity were generally not in vogue. The rival parties filed many documents. Some oral evidence was also given on the side of the Sangh. The Industrial Court overruled the contention of the Company and framed a scheme for gratuity holding that the burden would not be more than Rs. 50,000 to Rs. 60,000 a year and that the financial condition and the stability of the Company justified the introduction of a scheme in common with the

Court's reasoning:
3. It is no longer open to doubt that a scheme of gratuity can be introduced in concerns where there already exist other schemes such as provident fund or retrenchment compensation.Now it has been laid down by this Court that there are two general methods of fixing the terms of a gratuity scheme it may be fixed on the basis ofor on the basis of units. Both systems are admissible but regard must be had to the surrounding circumstances to select the right basis. Emphasis must always be laid upon the financial position of the employer and hiscapacity whichever method is selected. In the present case there is a general scheme of gratuity in the textile mills of the region and no evidence has been furnished that there is any other textile mill in this region where the scheme does not exist. The mills situated at distant places like Rajnandgaon and Raigarh cannot furnish a true guide because conditions of labour and the prospects of industry vary in units far removed to a far greater extent than in units which lie dose together. This Company is not being singled out for in novation but is being made to follow the others in providing the scheme. In awarding the gratuity scheme the Industrial court was not going against the principle which requires that the matter should also be considered, where possible, on an. The Industrial court in this case properly looked into the finances going as far back usThe clear finding is that the gross profits during the period62 (before excluding amounts transferred to the depreciation fund) amounted to Rs. 93,73,441. It found four years in which there was loss but this loss totaled only Rs. 11,47,451. A portion of the profits in each year was transferred to the depreciation fund. The amount so transferred is over Rs. 37,00,000. The industrial Court, however, made a mistake for the yearand took Rs. 20,000 as transferred to the depreciation fund in that year whereas the correct amount was Rs. 2,90,000. The entry next below appears to have been read by mistake. This, however, makes only a slight difference because it does not depress the profits unduly. Even after deducting this extra amount, the net profits during this period stand at Rs. 67,00,000. It was contended before us that the Industrial Court had not taken into account a further sum of Rs. ll,84,629 in the yearwhich was set apart as depreciation for the years56 to make up for inadequate provision for depreciation in those years. Even if one were to take this further sum into account the profits still stand at Rs. 56 lakhs. It is obvious that in providing for depreciation to the tune of Rs. 37 lakhs the company has to that extent, made provision from its earnings. That is an amount gained because it provides for replacement of old machinery by new and this may eventually lead to increased income because improved machinery means greater production and more sales.The Company previously had issued debontures amounting to Rs. 12 lakhs and this fresh borrowing enables it to redeem the debentures. The net indebtedness is, therefore, not Rs. 67 lakhs but only Rs. 45 lakhs. The amount now borrowed is to be repaid in instalments and the yearly payments do not exceed Rs. 6 lakhs. The burden also becomes less and less as time passes because principal and interest get reduced. We have not been shown whether any repayments have been made. By reason of the loans the Company is in a position to renew at least 1/3rd of its machinery. The prospects therefore are not gloomy atis, however, dear that the Company was able to lay by a general reserve of Rs. 15 lakhs in addition to the depreciation fund and has paid handsome dividends. It has even paid a sum of Rs. 1,37,000 as donations. The burden of the gratuity is not likely to be too much. The payment each year is not likely to be as high as Rs. 50,000 to Rs. 60,000 a year which is the amount determined by the Industrial Court. This Company has no age of superannuation, and taking the age of 60 years as the age at which gratuity would ordinarily be claimable the burden cannot be in the neighbourhood of Rs. 50,000 to Rs. 60,000. The average wage is Rs. 54 per month and the number of workmen employed in the Mill is 3189. Of these, those above the age of 50 are only 385, i.e. about 8 per cent. It is unlikely that all these workmen would retire together. Workmen who normally retire per year are not more than 2 to 4 per cent of the entire personnel and looking to the proportion between 385 and 3189 it is reasonable to think that in this Company the average rate of retirement would not go beyond 3 per cent and would rather be nearer 2 per cent than 3 per cent. Applying the calculations adopted by the Tribunal the amount required for the gratuity scheme would not be more than 20 to 30 thousand rupees in any year. In our opinion, the fact that the company has a large general reserve, that it has been able to transfer nearly Rs. 37 lakhs to the depreciation reserve and that it is presently in a position to renew a great part of its old and worn out machines and that the indebtedness is likely to be dissolved by easy instalments and looking to the profits it has been able to make, we are satisfied that this Company must fail in line with similar industrial in this region in providing a scheme for gratuity. The Industrial court was, therefore, right in ordering this Scheme. We have seen nothing in the scheme which merits alteration.