Case: Muir Mills Co., Ltd Vs. Suti Mills Mazdoor Union, Kanpur

2. During the year 1948 the appellant made a profit of Rs. 11, 97,It paid 24 3/4 per cent. dividend on ordinary shares, being the maximum that could be paid under the Public Companies (Limitation of Dividend) Ordinance of 1948 and also paid to the workers their full share of bonus at annas 4 in a rupee of their basic earnings. During the year 1949 the selling rates for cloth and yarn were controlled by the Government and were approximately 4 per cent. below those obtained in 1948. The basic wages were increased from 1st December, 1948, by order of the Government of Uttar Pradesh and total wages paid were therefore higher than those in the previous year. There was moreover indiscipline amongst the workers and production suffered. There was a strike in the month of October and the mills were closed for nearly a month. Further the management were unable to secure cotton which resulted in the curtailment of the working hours. As a result of all these circumstances the appellant suffered a trading loss of Rs. 5, 02,A sum of Rs. 2, 50, 000 being the excess reserve for taxation was written back and a sum of Rs. 10, 01,being the amount of reserve transferred from the investment account was also brought in. An aggregate sum of Rs. 12, 51,was thus brought into the balance sheet by these two transfers. The trading loss was deducted from this amount leaving a credit balance of Rs. 7, 49,and that amount was shown as the profit for the year 1949 in thefor that year. The balance which had been brought forward from the previous year was added thereto and a dividend of 24 3/4 per cent. was paid to the ordinary shareholders. The appellant also paid ex gratia to the workmen bonus at the rate of annas 2 per rupee of their basic earnings making it clear by their notification dated the 7th April, 1950, that the directors had sanctioned the payment at that rate in spite of the appellant having suffered a trading loss for the year, that is was being paid entirely at the discretion of the appellant and was not related to or connected with any contract of employment of any worker.On the 4th May, 1950, the Secretary of the respondent Union petitioned to the Provincial Conciliation Officer (Textile) that there was more production in 1949 than in 1948, that there was no reason to hold that the profit in 1949 was less than in the previous year and that the rate of bonus was wrongly reduced and asked that bonus for 1949 should also be paid at the rate of 4 annas 4 per rupee. The industrial dispute which thus arose was referred for enquiry and recording of an award to the Regional Conciliation Board (Textile), Kanpur. The Conciliation Board by a majority decision repelled the contention of the appellant and awarded the payment of bonus at annas 4 per rupee. On an appeal taken by the appellant to the Industrial Court (Textiles and Hosiery), Kanpur, the Industrial Court accepted the contention of the appellant, allowed the appeal and set aside the award. The respondent thereupon appealed to the Labour Appellate Tribunal which substantially agreed with the industrial Court on questions of fact as well as the general position in law but imported considerations of social justice and treating this as a special case "where social justice would demand that labour should have bonus for the year where for that very year capital had not only a reasonable return but much in excess of that", allowed the appeal and directed the appellant to pay to the workmen bonus at the rate of annas 4 per rupee within six weeks of their decision. The appellant filed this appeal against that decision after obtaining special leave from this Court.

Court's reasoning:
4. It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits. If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus. Bonus is not a deferred wage. Because, if it were so it would necessarily rank for precedence before dividends. The dividends can only be paid out of profits and unless and until profits are made no occasion or question can also arise for distribution of any sum as bonus amongst the employees. If the industrial concern has resulted in a trading loss, there would be no profits of the particular year available for distribution of dividends, much less could the employees claim the distribution of bonus during that year. This has been clearly recognised even in the various decisions of Labour Appellate Tribunal, e.g., Nizam Sugar Factory, Ltd., Hyderabad v. Their Workmen ((1952) 1 L.L.J. 386), Textile Mills, Madhya Pradesh v. Their Workmen ((1952) 2 L.L.J. 625) and Famous Cine Laboratory v. Their Workmen ((1953) 1 L.L.J. 466).The considerations of social justice imported by the Labour Appellate Tribunal in arriving at the decision in favour of the respondent were not only irrelevant but untenable. Social justice is a very vague and indeterminate expression and nodefinition can be laid down which will cover all the situations., the learned counsel for the respondent, attempted to give definition in the following termse connotes the balance of adjustments of the various interests concerned in the social and economic structure of the State, in order to promote harmony upon an ethical and economic basis, " and he stated that there were three parties concerned here, viz., the employers, the labour and the State itself, and the conception of social justice had to be worked out in this context.Without embarking upon a discussion as to the exact connotation of the expression "social justice" we may only observe that the concept of social justice does not emanate from the fanciful notions of any particular adjudicator but must be founded on a more solid foundation.Without committing ourselves to the acceptance of the above formula in its entirety we may point out that the Labour Appellate Tribunal did not apply its own formula to the facts of the present case. It is also significant to the note that even while importing considerations of social justice the Labour Appellate Tribunal was oblivious of the fact that it was by their own acts of indiscipline and strike that the workers of the appellant company themselves contributed to the trading losses incurred by the appellant and it hardly lay in their mouth then to contend that they were none the less entitled to payment of bonus commensurate with the dividend paid to the shareholders out of the undistributed profits of the previous years. The Labour Appellate Tribunal also overlooked the fact that put for the Public Companies (Limitation of Dividend) Ordinance of 1948 the whole of the profits of 1948 could have been distributed after paying the workers bonus in that year of four annas in the rupee.9. We may before concluding refer to an argument which was addressed to us by Mr.Isaacs, the learned counsel for the respondent, that this Court under article 136 should not interfere with the decisions of the tribunals set up by the Industrial Disputes Act, 1947.This contention can be shortly answered by referring to our decision in Bharat Bank Ltd., Delhi v. Employees of the Bharat Bank Ltd., Delhi ([1950] S.C.R. 459), where we held that the Industrial Tribunals were tribunals within the meaning of Article 136 and further that article 136 and further that article 136 has vested in this Court exceptional and overriding power to interfere where it reaches the conclusion that a person has been dealt with arbitrarily or that a Court or tribunal within the territory of India has not given a fair deal to litigant. (Vide Dhakeswari Cotton Mills Ltd. v. Commissioner ofWest Bengal ([1955] 1 S.C.R. 941).The result therefore is that the decision of the Labour Appellate Tribunal appealed against must be reversed and that of the Industrial Court (Textiles and Hosiery), Kanpur, restored.