Case: M/s. Ganesh Flour Mills Co. Ltd Vs. Employees of M/s. Ganesh Flour Mills Co. Ltd

The appellants company is a Joint Stock Company incorporated and registered at Delhi under the Indian Companies Act, 1913. It has three factories at Delhi, one Vegetable Ghee Factory, one Flour Mills and one Breakfast Food factory. It also runs a Vegetable Ghee Factory at Kanpur and a Vegetable Ghee Factory and a Flour Mill at Lyallpur in West Pakistan. For the accounting yearthe appellants employees claimed bonus equivalent to six months basic wages and annual increment in basic wages on the same scale as for the yearThe industrial dispute arising out of this claim was referred by the Chief Commissioner, Delhi, to the Additional Industrial Tribunal, Delhi on September 20, 1954. By this reference, two issues were raised for adjudication of the tribunal. In the present appeal we are concerned with only one of these two issues and that is in relation to the employees claim for bonus for the yearThe appellant urged before the tribunal that for the year in question the appellant had no surplus available in its hands for distribution by way of bonus. This contention was rejected by the tribunal and the tribunal awarded to the respondents bonus equivalent to 25 per cent of the basic wages subject to certain directions given by the award. This award was pronounced on January 31, 1955. Against this part of the award, both the appellant and the respondents preferred appeals before the Labour Appellate Tribunal. The Labour Appellate Tribunal confirmed the award of the industrial tribunal and dismissed the appeals preferred by both the appellant and the employees in that behalf. This decision was pronounced on July 16, 1955. It is against this decision that the present appeal has been filed by the appellant in this Court by special leave.2. The legal position in regard to the employees claim for bonus is no longer in doubt. The Full Bench formula evolved by the Labour Appellate Tribunal in the case of the Mill Owners Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, (1952) 2 Lab AC 433 (A), is accepted by both the parties. In the present case, after applying the Full Bench formula, the appellate tribunal has reached the conclusion that the available surplus is Rs. 9,61,371. This conclusion has been reached after providing for prior charges as recognized by the Full Bench formula. The appellants grievance is that adequate provision has not been made in respect of prior charges, no provision has been made at all for rehabilitation charges and the claim made by the appellant in respect of irrecoverable debts has been wrongly rejected. Besides, it is the appellants case that basically the tribunals erred in holding that the available surplus should be determined on the footing that the business carried on by the appellant in India as well as the business carried on in Pakistan should be taken to constitute one business and the consolidated account of profit and loss of this entire business should be taken into account. The appellants business in India during the relevant year has resulted in a loss and that, according to the appellant, is decisively against the respondents claim to any bonus during the relevant period.

Court's reasoning:
6.The question thus raised by the parties before us is no doubt of some importance; but we do not think it necessary to decide this question in the present appeal because we have reached the conclusion that even assuming that the business carried on by the appellant in India as well as in Pakistan is treated as one unit, and even if the consolidated statement of profit and loss account is taken as the sole guide for deciding whether the appellant holds in his hands net surplus available for distribution, it would be difficult to sustain the award passed by the tribunals below in favour of the respondents.e next point which is urged by the learnedis in respect of the failure of the Labour Appellate Tribunal to make allowance for any interest on the preference shares.shares.10. Then it is urged that the tribunals below erred in law in not taking into account bad debts shown in the accounts of the appellant. In the accounts of the appellant Rs. 1,47,289 are shown as bad and irrecoverable debts.On this point again, both the tribunals below have not held that the relevant entry in the books of account has been made with the intention of defeating the employees claim for bonus. The argument urged by the appellant in respect of these bad debts appears to have been misunderstood by the tribunals below. They appear to have assumed that the appellant claimed that bad debts should be treated as having a prior charge in determining the amount of surplus available for distribution and it is stated in both the judgments that no further addition can be made in the list of items which can be regarded as prior charges in determining the appellants surplus. It was not the appellants case that bad debts should be a prior chare at all. The appellants case was that, if the debts were irrecoverable they would, to that extent, reduce the gross profits. In our opinion, the failure of the tribunals below to appreciate correctly the contention raised by the appellant in this behalf has led to a finding which is erroneous in law and it needs to be corrected. If any of these debts are fortunately recovered in subsequent years they would no doubt be credited when they are so recovered. Indeed in the relevant year itself Rs. 12,028 which had been shown as an item of bad debt in the previous year has been credited because it has been recovered.We must accordingly hold that the tribunals below erred in law in not accepting the argument of the appellant that, for determining the gross profits, the amount of irrecoverable debts must be deducted.11. It would thus appear to be clear that, if the amount of gross profits found by the Labour Appellate Tribunal is reduced after deducting from it the amount of Rs. 1,47,289 as bad debts and if an allowance is made as a prior charge for Rs. 69,324 as interest on preference shares, it would be difficult to hold that there is any surplus worth the name which is available for distribution by way of bonus amongst employees.employees.13. There remain three more points which have been urged by the learnedbefore us and to which brief reference may be made. It appears that the appellant had claimed an allowance for Rs. 10,29,800 as a prior charge in respect of rehabilitation charges for the relevant year. The whole of this claim has been rejected by the tribunal below on the ground that sufficient material had not been placed by the appellant in support of its claim. The learnedconceded that it would have been much better if the appellant had led more satisfactory evidence in support of this claim; but he argued that it was not right to treat the evidence produced by the appellant as wholly insufficient and in any case, according to him, refusal to allow any amount in respect of rehabilitation charges was not justified. It is true that the present appellant company itself had been similarly penalised by the Labour Appellate Tribunal in Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills Staff Union, Kanpur, (1952) 1 Lap AC 172 (M) and that naturally makes the refault of the appellant in leading satisfactory evidence more glaring; but, on the other hand, reasonable rehabilitation charges have been consistently assigned the position of a prior charge in determining the available surplus in cases where claims are made by workmen for bonus. If it had been necessary to decide this point in the present appeal we might have had to consider whether, subject to such terms as to costs as we might have deemed fit to impose, an opportunity should not be given to the appellant to lead more satisfactory evidence in support of the item claimed by the appellant under the heading of rehabilitation charges.The position then would be that the cash available would consist of cash in hand Rs.and the amount with the bankers in India Rs. 1,52,285. This total comes to Rs.ral has also contended in this appeal that the appellate tribunal has erred in awarding interest at 5% on thel and at 2% on the reserves employed as working capital.We do not think it necessary to deal with these points also.15. The result is that the conclusion of the Labour Appellate Tribunal that a surplus of Rs. 9,61,371 was available for distribution during the relevant period or would have become available within a reasonable time thereafter cannot be sustained in view of their own appreciation of the evidence led in the case.