Case: Management Of Central Coal Washery Vs. Workmen &amp; Anr

The Hindustan Steel Limited owns three steel plants at Rourkela, Durgapur and Bhilai. Since large quantities of the metallurgical coal are need ed in the manufacture of steel, the Hindustan Steel Limited set up three coal washeries at Dugda, Bhojudih and Patherdih. These three coal washeries were started one after the other, the first to start being the Dugda Coal Washery which commenced functioning from June 1962. The management of these three coal washeries was vested in the hands of the Central Coal Washeries Organisation which was set up as an independent Organisation separate from the Hindustan Steel Limit ed. This Organisation which is the appellant before us maintained separate accounts in respect of its establishment which consisted of these three coal washeries and also prepared a separate Balance Sheet and Profit and Loss Account showing the aggregate financial result of the operation of these three coal washeries. Though the establishment of the appellant was set up in June 1962, the provisions of the Act did not become applicable to it until the year5 in view ofsubsection(4) of section 1 of the Act. There could, therefore be no question of payment of bonus to the workmen of the Bhojudih Coal Washery under the Act until the year. The workmen of the Bhojudih Coal Washery, accordingly, pressed their claim for payment of bonus only from the year. The appellant disputed the claim of the workmen and contended that by reason ofsubsection(1) of section 16, the workmenwere not entitled to be paid bonus under the Act for the years5 to. The industrial dispute arising out of the claim of the workmen was referred for adjudication by the Government of India and by an award dated 29 July, 1970, the Industrial Tribunal took the view that the appellant derived profit from its three coal washeries in the year5 and the workmen were, therefore, entitled to be paid bonus under the Act from that year under clause (a) ofsubsection(1) of section 16,but since the profits were inadequate to warrant payment of a larger bonus, the workmen were entitled to receive the minimum bonus of 4 per cent of the wages as provided in section 10. The Industrial Tribunal accordingly awarded minimum bonus at 4 per cent of the wages to the workmen of the Bhojudih Coal Washery for the years5 toe appellant being aggrieved by the award of the Industrial Tribunal, preferred an appeal to this Court after obtaining special leave. Whilst the appeal was pending, a settlement was arrived between the appellant and the Hindustan Steel Coal Washeries Workers Union on 28th August 1973 in regard to various demands which had been made by the Union on behalf of the workmen employed in the Bhojudih Coal Washery. One of the demands related to payment of bonus and this demand was adjusted by the following provision in the settlement"Without prejudice to the respective contentions of the parties and specially with regard to the law point on which the management has filed an appeal to the Supreme Court, the management and the workmen agree that ana amount equivalent to 4% of, the wages earned by the eligible employees during the respective years of7 and8 (less amounts to those employees already paid for the year) shall be paid. This settles satisfactorily the outstanding demand on this point"Pursuant to this settlement, the appellant paid to the workmen in the Bhojudih Coal Washerya amount equivalent to 4 per cent of the wages earned by them for the years7 and. Not only did the workmen who were members of the Hindustan Steel Coal Washeries Workers Union received payment under the settlement but workmen who were not members of that Union also accepted payment of bonus in terms of the settlement. The appeal thereafter came up for hearing before this Court on 2nd January, 1978, and since the dispute in regard to payment of bonus was settled, the appellant did not press the appeal and it was dismissed by this Court Subsequently, however, another Union called the Hindustan Steel Coal Washeries Employees Union, which is a minority Union, filed Civil Mise. Petition No. 3382/78, claiming that the workmen represented b y it were not party to the settlement, since the settlement was arrived at only between the appellant and the Hindustan Steel Coal Washeries Workers Union and the settlement was accordingly not binding on them. Strangely enough, though the appeal was dismissed and the award of the Industrial Tribunal which was in favour of the workmen, stood intact, the Union for some inexplicable reason submitted that since the appeal was dismissed in view of the, settlement and the settlement was not binding on the workmen represented by it, the order dismissing the appeal should be set aside and the appeal should be. This Court by an order dated8 acceded to this application and directed the appeal to be. That is how the appeal has now come up for hearing before us.

Court's reasoning:
The determination of this question depends on the true interpretation of section 16, subsection (1) and its applicability to the case of the appellant. Section 1 6,It is clear on a plain reading of this section that where an establishment is newly set up, the workmen employed in such establishment are entitled to be paid bonus under the Act only from the accounting year in which the employer derives profit from such establishment or from the sixth accounting year following the accounting year in which the employer sells goods produced or manufactured by him from such establishment, whichever is earlier. So long as the employer does not start deriving profit from the establishment, he is exempt from liability to pay bonus to the workmen under the Act. But, even if lie is not able to derive profit from the establishment, he does not enjoy perpetual immunity, because in any event from the sixth accounting year following the accounting year in which he starts selling goods produced or manufactured by him, be becomes liable to pay bonus to the workmen. Now the contention of the workmen was, and this contention found favour with Industrial Tribunal, that the appellant started deriving profit from the three coal washeries in the year5 and the workmen, therefore, became entitled to be paid bonus from the year5 onwards under clause (a) ofsubsection(1 ) ofsection 16.The workmen relied on the Ba lance Sheet and Profit and Loss Account of the appellant which showed that the appellant had made a profit of Rupees 23, 60, 000/during the year. The Balance Sheets and Profit Loss Accounts of the appellant for the subsequent years6 to9 also showed profit during each of those years. If, therefore, the claim of the workmen were to be decided on the basis of the Balance Sheets and Profit and Loss Accounts of the appellant there can be no doubt that the appellant would have to be held to be liable to pay bonus to the workmen of Bhojudih Coal Washery from the yearIf depreciation calculated in accordance with the provisions ofsubsection(1) of section32 of thex Act were taken into account, not only there would no profit but there would be actually loss in each of the years5 to196869. The appellant in fact produced, through its Accounts Officer Raja Ram,x return s showing the depreciation claimed in respect of the assets of the three coal washeries in accordance with the provisions of subsection (1) ofsection32 of thex Act as also statements Exhibit 9, working out the figures showing that if depreciation were adjusted as provided in(1) ofsection32 of thex Act, there would be losses to the appellant in the years