Case: Workmen of Hindustan Machine Tools &amp; Another Vs. Presiding Officer, Nationaltribunal, Calcutta &amp; Others

1. This appeal by special leave by the workmen of the Hindustan Machine Tools Unit IV, Kalamassery, is directed against the award dated April 16, 1969, of the National Tribunal at Calcutta in Reference No. NIT, 6 of l967, holding that the appellants are not entitled to any bonus for the years 1964-65 to 1966-67.2. By order dated October 17, 1967, the Central Government made a reference for adjudication of the disputes to the National Tribunal in the following manner:"Whereas the Central Government is of opinion that an industrial dispute exists between the employers in respect of the establishments specified in Schedule I and their workmen in respect of the matters specified in schedule II hereto annexed and that the said dispute is of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by, such dispute;And, whereas the Central Government is of opinion that the dispute should be adjudicated by a National Tribunal;And, whereas the Central Government is of opinion that the said dispute is of such a nature thee the Hindustan Machine Toots at Pinjore and the Hindustan Machine Tools at Hyderabad are likely, to be interested in, OF affected by, such disputes;Now, therefore, in exercise of the powers conferred by Section 7-11, and sub-ss. (1-A) and (5) of Sec. 10 of the Industrial Disputes Act, 1947 (14 of 1947), the Central Government hereby constitutes a National Tribunal of Calcutta of which Shri S. XL Son shall be the presiding Officer, and refers the said disputes to the said National Tribunal for adjudication and includes in that reference, the Hindustan Machine Tools at Pinjore and the Hindustan Machine Tools at Hyderabad.SCHELUDE I(1) Hindustan Machine Tools, 1 Bangalore.(2) Hindustan Machine Tool II, Bangalore.(3) Hindustan Machine Tools IV, Kalamassery, KeralaSCHEDULE II(1) Whether the demand of the workmen in the Hindustan Machine Tools I and II at Bangalore for payment of Bonus at the rate of 20 per cent. of their salary for the year 1966 67 is justified? If not, to what quantum of bonus are they entitled?(2) Whether the workmen of the Hindustan Machine Tools at Kalamasseri, Pinjore, and Hyderabad are entitled to any bonus and if so, what should be quantum of such bonus?(3) Whether the demand of the workmen of the Hindustan Machine Tools I and II of Bangalore and of the Hindustan Machine Tools E and1 at Kalamasseri that the bonus should be calculated on the basis of a consolidated Profit and Loss Account for all the units and all activities and not on the basis of profit and Loss Account of the separate units and separate activities is justified?"3. Although in Schedule l of the order of reference only the units at Bangalore and Kalamassery were referred to, nevertheless, copies of the reference were sent by the Central Government to the Labour union of the Hindustan Machine Tools Limited, Unit No. III at Pinjore (Haryana State) and Unit No. V at Hyderabad as also to the H. M. T. Watch Factory at Bangalore. The unions representing the workmen of the five units as well as the Watch Factory had filed statements before the National Tribunal. The managements of these different Units had also filed statements opposing the claims of the Unions.4. Before the proceedings commenced the National Tribunal appears to have felt certain difficulties regarding the scope of the reference. In respect of item 1 of Schedule II, the Tribunal felt a doubt whether it should also consider the question of bonus for any other year in respect of Units I and II at Bangalore. Similarly the Tribunal felt a doubt as to what was the particular year for which the claim for bonus is to be considered under item 2 of Schedule II. This doubt arose because no year had been mentioned in the reference under this item. For the purpose of getting clarification, the Tribunal invited the views of all the unions as well as the management. AU parties agreed that when the reference was ambiguous or doubtful, the scope of the reference can be gathered from the pleadings of the parties. Accepting the agreement of the parties, the Tribunal found from the pleadings that the workmen of the Hindustan Machine Tools, Units I and II at Bangalore, had been paid bonus at the rate of 20 per cent. for the years 1964-65 and 1965-66. Therefore, it held that the claim of these two units under item 1 of Schedule II has to be considered only for the year 1966-67. Similarly in respect of item 2 of Schedule II of the reference, the Tribunal found that the workmen of Unit No. III at Pinjore claimed bonus for the years 1963-64 and 1964-65 according to the Full Bench Formula and for the years 1965-66 and 1966-67 under the provisions of the Payment of Bonus Act, 1965 (hereinafter to be referred to as the Act). Similarly the workmen of Unit No. IV at Kalamassery claimed bonus from the year 1963-64 onwards on the basis of bonus paid and payable to the Bangalore workmen. The workmen of Unit No. V at Hyderabad claimed bonus at 20 per cent. for each of the years, 1965-66 and 1966-67. The workmen of the Watch Factory, who were getting bonus at the maximum rate of 20 per cent. did not require any further bonus to be paid. But that Unit took up the position that the contention of the various unions who were claiming annual bonus on the basis of the consolidated balance sheets and profit and loss accounts, should be rejected.5. Having crystallised the actual scope of the reference in the manner indicated above, the Tribunal proceeded to consider the question. that arose for consideration. At this stage it may be stated that the workmen of Unit No. IV at Kalamassery, the appellant before us, claimed bonus for the year 1963-64 and onwards on the basis of bonus paid and payable to the Bangalore workmen. It must also be stated that the claim of the appellants, as well as that of the workmen of Unit Nos. I and II at Bangalore was for payment of bonus on the consolidated profit and loss account of all the units of the Hindustan Machine Tools Limited situated in Bangalore, Pinjore, Kalamassery and Hyderabad as well as of the Watch Factory.6. In respect of item 1 of Sch II, the Tribunal held that the workmen of Units Nos. I and II at Bangalore arc entitled only to the minimum bonus at 4 per cent. under the Act and that their claim for payment at 20 per cent. of their salary for the year 1966-67 has to be rejected. The Tribunal answered items Nos. 2 and 3 of Schedule II as follows:"My answer to item No. (2) is:The workmen of the Hindustan Machine Tools at Kalamassery and Pinjore arc entitled to the same rate of bonus as is paid to the Watch Factory and H. M. T. I and II workmen during the year 1963-64. The factory at Hyderabad not having been started by March 31, 1964, becomes disentitled to the provisions of pre-Bonus Act Since during the Bonus Act period by virtue of the maintenance of separate accounts no branch or undertaking becomes entitled to the prosperity of the company, the Hyderabad is not entitled to any bonus at all under the provisions of the Payment of Bonus Act.My answer to item No. 3 is:The demand of the workmen of the Hindustan Machine Tools Ltd. I and II at Bangalore and of the Hindustan Machine Tools Ltd. No. IV at Kalamassery that bonus should be calculated on the basis of consolidated profit and loss accounts for all the units and for all the activities and not on the basis of the profit and loss accounts of the separate units and separate activities is justified, for the year 1963-64 only and not for the years 1964-65, 1965-66 and 1966-67."It may be stated that none of the workmen aggrieved by one or other or all the findings of the Tribunal on items 1, 2 and 3, excepting the workmen of Unit No. IV at Kalamassery, have come up in appeal. The net result of the above finding so far as unit No. IV at Kalamassery, which is the appellant, is that its workmen are eligible for bonus for the year 1963 64 at the same rate of bonus that has been paid to the workmen of the Watch Factory and Units Nos. I and II at Bangalore for the said year. The workmen of Unit No. IV are not entitled to claim bonus for the years 1964-65 to 1966 67 on the basis of the consolidated profit and loss accounts of all the Units of the Hindustan Machine Tools but only on the basis of the separate profit and loss account maintained for unit No. IV. After a consideration of the evidence, oral and documentary, the Tribunal held that the said unit was not entitled to any bonus at all for these three years.7. The workmen of Unit No. IV challenged the disallowance of bonus for the year 1964-65 to 1966-67. At the time of granting special leave, the counsel for the management respondents 2 to 7 heroin, appears to have represented that there are certain findings recorded in the award which are challenged by the management. In view of this representation, this Court passed an order on February 24, 1970, permitting the management to bring to the notice of the learned Judges hearing the appeal the various findings which the management proposes to challenge provided notice has been given to the statement of case. Accordingly the management has raised in its statement of case, by way of cross-objections, its grounds of attack on certain findings. Mainly two matters have been referred, namely-(1) the finding of the Tribunal that there was functional integrality of all the units for the period 1963-64 and the award in consequence of bonus to all the units at the rate that has been paid to units Nos. I and II; and(2) the statement made by the Tribunal in paragraph 25 of the award about payment of bonus to the Watch Factory employees.These points have been pressed before us by the learned counsel for the management.8. We will first take up the point regarding the disallowance of bonus for the years 1964-65 to 1966-67 arising in the unions appeal.

Court's reasoning:
12. A reading of Section 10 isolated from the other provisions of the Act, may appear to lend Support to the contention of Mr. Nair that an employee, if he satisfies the requirements of Sections 8 and 13, will be entitled to get the minimum bonus. No doubt, Mr. G. B. Pai, learned counsel, has pointed out that employees of Unit No. IV do not even satisfy the requirements of sections 8 and 13. That apart, though sec. 10 has not been made subject to Section 16, in our opinion, the two provision will have to be read harmoniously so as to give effect to the purpose of the Act Section 10 will apply to all those units, which are otherwise, bound to pay bonus, irrespective of the fact whether the units make profit or incur loss. Section 16, in our opinion, has to be read as an exception to Section 10.In particular it will be noted that Section 16 (1), after referring to an establishment newly set up, whether before or after the commencement of the Act, states that " the employees of such establishment shall be entitled to be paid bonus under this Act only......." It cannot be controverted that payment of even the minimum bonus under Section 10 or bonus upto the maximum of 20% as per S. 11, will both be "payment of bonus under this Act," as contemplated by Section 16. Similarly, eligibility for bonus under Sec. 8 "in accordance with the provisions of this Act" can be related only to those cases where the bonus is payable either under Section 10 or under Section 1l. Section 16 (1) gives a total exemption to the establishments in the circumstances mentioned therein from payment of bonus which include the minimum bonus also. When the section says that an employee of the establishment referred to in Section 16 shall be entitled "to be paid bonus under this Act" only if the conditions mentioned therein are satisfied, it is idle to contend that, notwithstanding the exemption granted under S. 16, the establishment referred to therein is still bound to pay a minimum bonus. No doubt that liability to pay the minimum bonus, at any rate, will certainly attach itself to the particular establishment, if one or other of the conditions mentioned in sub-clause (a) or (b) of Section 16 (1) come into play. Under such circumstances, it will be open to an employee to claim not only the minimum bonus but also bonus at a higher rate upto the maximum of 20 per cent., if circumstances permit. Mr. Nair is no doubt right in his contention that Section 10 has not been referred to by this Court, when dealing with S. 16. The reason for such non-consideration is because no such argument, as is now placed before us, appears to have been raised before this Court. Now that such a contention has been raised, we have dealt with it. According to us, if Section 16 (1) applies, however, hard the result may be, Section 10 will not entitle an employee to get even the minimum bonus under Section 10. Therefore, the contention of Mr. Nair that in any event the minimum bonus under Section 10 should have been awarded, cannot beis no doubt true that there is not reference in this decision to Section 10. That is why we have stated earlier that a contention, similar to that advanced by Mr. Nair, was not raised before thishave already extracted Section 3. It is to be noted that the principal part of Section 3 lays down that different departments or undertakings or branches of an establishment are to be treated as parts of the same establishment for the purpose of computation of bonus under the Act. From the main provision an exception is carved out by the proviso and there is a further exception to the proviso itself. The sum and substance of Section 3 is that an establishment initially takes in all establishments, undertakings and branches for the purpose of computation of bonus. But if, in respect of any department, undertaking or branch separate balance sheet and profit and loss account are prepared and maintained for any accounting year, then for that particular year computation of bonus shall be by treating it as a separate establishment. But this will be subject to a further exception that immediately before the commencement of that accounting year, namely the accounting year in which a separate balance sheet and profit and loss account is prepared and maintained, such a department or undertaking or branch has not been treated as part of the establishment for the purpose of computation of bonus. In this case Units I and II alone have been always treated together for the purpose of computation of bonus. All the other three units and the Watch Factory at Bangalore have each been treated separately and each of them has been having a separate balance sheet and profit and loss account. This is the evidence on record, which has been accepted by the Tribunal. We see no reason to differ from thisevidence of M. W. 1, which has been accepted by the Tribunal, is to the effect that Unit No. 1V was started in July, 1963 and production and sale commenced only from 1965-66. Section 16 (1) grants exemption from payment of bonus to establishments newly set up for a period of six years following the accounting year in which the goods produced or manufactured are sold for the first time and, in the alternative, upto the year when the new establishment results in profit, whichever is earlier, Unit No. IV is to be treated as an establishment newly set up, as contemplated under Section 16 (1). If so, the exemption claimed would be fully justified because the contingency contemplated under sub-clause (a) or (b) of Section 16 (1) has not happened during the relevant years, 1964-65 to 1966-67. Even if Unit No. IV is considered to be a new department, undertaking or branch set up by the existing establishment, namely, the Hindustan Machine Tools Ltd., Section 16 (2) makes the provisions of sub-s. (1) apply to such units. The proviso to sub-section (2) of Section 16 does not stand in the way of the managements claim for exemption because there is no evidence that for any year, after Unit No. IV was set up, bonus was paid to the employees of all the Units on the basis of consolidated profits of all such Units. In fact the evidence as we have already stated, is contra. No doubt it is in evidence that the employees of the Head Office have been treated at par with the employees of Units I and II at Bangalore. In the case of the Head Office, calculation of bonus on the basis of consolidated account is justified; but that does not affect the principle to be applied to the separate units for which separate accounts, separate balance-sheets and separate profit and loss accounts are maintained. The proviso to sub-section (2) of S. 16 will come in the way of the management only if bonus is paid in any year to the employees of all the Units on the basis of the consolidated accounts. That is not the evidence in this case. We may also state that the evidence in this regard has been very elaborately considered by the Tribunal and we agree with the conclusions arrived at by it. Therefore, the exemption claimed under Section 16 (1) by the management for the years 1964-65 to 196667 in respect of Unit No. IV, the appellant, has been correctly accepted by the Tribunal. This disposes of the points raised by the appellant in the appeal.17. We have already referred to the permission granted by this Court by its order dated February 24, 1970, to the respondents to attack certain findings. Accordingly the respondents have attacked two of the findings recorded by the Tribunal which we have set out earlier. For the accounting year 1963-64 which is the pre-Bonus Act period, the direction of the Tribunal is that Unit No. IV, the appellant is to get bonus on the basis of the consolidated profit and loss accounts of all the Units in the same manner as was paid to the Watch Factory and H. M. T. Units Nos. I and II for the said year. The Tribunal has recorded a finding that during this period there was unity of ownership, management and control and also functional integrity and, therefore, all the Units as well as the Watch Factory have to be termed as one establishment and bonus will have to be calculated according to the Full Bench formula on the consolidated profit and loss accounts of all thethe evidence of this witness it is clear that no profit bonus was paid to the above units prior to 1964-65 and what was paid was only production bonus based on individual performance. Apart from the evidence of this witness, there is also an agreement Ext. Q dated August 10, 1962, between the management and the workmen of Units Nos. 1 and II at Bangalore. That agreement provides for payment of deferred annual bonus. The quantum of such. bonus as well as the circumstances under which it is to be paid to each worker, has also been detailed in the said agreement. The Tribunal, unfortunately, missed these items of evidence and has proceeded on the assumption that profit bonus for the year 1963-64 was paid to the workmen of these units on the basis of the Full Bench Formula. This reasoning is erroneous. Hence the direction of the Tribunal that profit bonus is to be paid to Unit No. IV, as was paid to the Units at Bangalore, is clearly erroneous, as it is totally unworkable. Even otherwise the finding of the Tribunal that all the units were treated as part of one establishment for purpose of bonus for the year 1963-64, is also erroneous. For the above reasons, the direction of the Tribunal for payment of bonus for the year 1963-64 to Unit No. IV has to be set aside.18. The second finding that has been attacked by Mr. Pai is the statement, contained in paragraph 25 of the award that, "it appears from Ext. A (2), the balance-sheet and the profit and loss account for the yea 1963-64, an amount of Rs. 18,80.902/- was paid as bonus to the employees of the Watch Factory and Units Nos. I and II at Bangalore. A perusal of the entry in Ext. A (2) shows that the particular entry regarding this amount relates to payments made to Units Nos. I and II and not to the Watch Factory. It will be seen that no claim whatsoever was put forward before the Tribunal by the workmen of the Watch Factory. We have already referred to the stand taken by the workmen of the Watch Factory, who were getting bonus at the maximum rate, that they wanted the claim of the other unions for bonus on consolidated balance-sheets and profit and loss accounts to be rejected.