P. B. ROY

UNION OF INDIA

Fbruary 11, 1972

[S. M. S1KRI, C.J., A. N. GROVER, A. N. RAY, D. G. PALEKAR

AND M. H. BEG, JJ.]

. Civil Servantllolding temporary post-Constitution of New service -'Departmental candidate' holding temporary post appointed to pernza. nent post but of a lower grade-If violative of Art, 311.

The appo:llant was holding a temporary post of Editor in the Publi cations DiVIsion of the Department of Information and Broadcasting. The

teml"!rary post was sanctioned upto 28-2-1957.

On 16-2-1959, tho PreS1dent of India, in exercise of the powers conferred by the proviso to Art. 309 of the Constitution, promulgated the Central Information Service Rules, 1959. These Rules were meant for the creation of a Cen tral Information Service with prescribed grades and strengths. and entry into the service was open to departmental candidates according to r. S for the initial constitution of the service. The appellant was chosen by the Selection Col)lmittee and was posted as an Assistant Editor. He challenged the order,

A single Judge of the High Court allowed the petition.

On uppeal, in the course of arguments, the question arose whether the post of Editor was abolished or had ceased to exist and the respondent was allowed to file an affidavit stating that the post of Editor had ceased to exist.

The Division Bench then held that there was no question of demotion or reduction in rank and hence that Art. 311 was not appli .. cable.

In appeal to this . Court, it was held :

(I) The additional affidavit filed by the respondent did not introduce anything new but only clarified the po; ition. [455 E]

(a) There was nothing to show that the temporary post of Editor in which the appellant was initially appointed had been continued beyond 28-2-1957 for any period. [455 CJ

(b) The question whether the constitution of the Central Information Service involved fresh appointments to new posts or its effect was merely to transfer existing employees to corresponding posts with new desig11ations was already before the court. [455 D-E] . ( c) The appellant himself never sked for any opportunity to meet any allegation in the additional affidavit. [454 F-G]

(2) There is nothing to indicate that on the face of the impued . order, that the appellant had been demoted as a measure of purushment. [455 F-GJ

(3) It could not be held that the order, which had the effect of terminating an officiating appointmet in which the. appellant. had i:io right to continue-and which gave him a fresh appomtment wit~ a different designation, -Out 11trmanent tenure and prospects, constituted a

violation of either Art. 14 or 16, simply because the process which resulted in such an order did not have a similar effect upon the position or rights of any other person in the Department; especially when, after taking into account the appellant's individual case, the Selection Com mittee recommended the maximum pay in the class and grade of the post given to him. [456 ACJ

(4) (a) The new rules had the effect of constituting a 11ew service with a fair and reasonable procedure for entry into it.

Such a procedure could not be characterised as a device to defeat the provisions of Art. 311 or a fraud upon the Constitution simply because the result of. subjection to the proeess of appraisement of the merits of each candidate may not meet the expectations of some candidates. [457 F-G]

(b) Article 311 affords a reasonable opportunity to defend against threatened punishment to those already in GQvernment service.

Rule 5 of tho Central Information Service Rules provides a method of recruit

ront or entry into a new service of persons who, even , though they may have been serving the Government had no right to enter the newly constituted se\'Vice before going through tho procedure prescribed by the rule. The fields of operation of Art. 311 and r. 5 are quite different and '°istinct. [457 GH; 458 A-Bl

(c) The definition of 'departmental candidates' in r. 2(b) was meant only as an aid in interpreting r. 5 and was not intended to operate as a fetter on the functions and powers of the Selection Committee. It does not require that all persons falling within the definition of 'departmental candidate' should be placed in a single class. Under r. 5 the Selection Committee could assign different grades to the departmental candidates.

The post actually held by the appellant before his selection for appointment to the newly constituted service did not automatically or wholly determine the position of a departmental candidate . who offered himself to the proeess of appraisement of his merits by the Selection Committee to be made on the totality of relevant facts.

That Committee was presid ed over by the Chairman or a Member of the Union Public Service Com . mission and had officials Of the Department on it who were in a position to correctly evaluate the appellant's merit's and the weight to be attached to his confidential records. [459 BHl

(S) The appellant's allegations of mala {ides and tliat he was the victim of the prejudice and machinations of an (unnamed) officer in the Transport Ministry, could not properly be tried in writ proceedings and "ithoot impleading that official. [460 F-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2172 of 1968.

Appeal from the judgment and order dated August 10, 1967 of the Delhi High Court in Letters Patent Appeal No. 97-D of 1965.

Frank Anthony, K. B. Rohatgi and P. Parameswara Rao, for the appellant.

Jagadish Swarup, Solicitor-General df India and S. P. Nayar, for the respondent.

The Judgment of the Court was delivered by

Beg, J, 'Dtls is an appeal by grant of a Certificate of the Delhi High Court under Article 132 read with Article 133(1)(b) and (c) of the Constitution.

8 The Appellant had filed a petition under Article 226 of the Constitution for quashing an order dated 10-3-1960 and had prayed for a consequential order also in the nature of a mandamus. Information of tl)e impugned order (Annexure 'C' to the petition), given to the petitioner, reads as follows :

"The Union Public Service Commission have in pur suance of Rule 5 of the Central Information Ser\'.ice Rules, 1959, recommended Shri P. B. Roy, at present officiating as Editor in the Pul.ri.:ations Division, for appointment, in a substantive capacity, to Grade III of the service at its initial constitution. Shri Roy is informed that the President has been pleased to post him as an Assistant Editor in the Publications Division with immediate effect".

Those relevant facts, preceding and following the impuJ!ned order, which are admitted by both sides. may now be mentioned.

In 1955, the post of Editor, Publicatiions Division, in the E _ Department of.Information and Broadcasting of the_Government of

- India (hereinafter referred to as 'the Department'), was advertised.

The appellant, who had applied for the post, was selected by the Union Public Service Commission, and, on its recommendation, wl!S offered a temporary post of Editor in the Publications Division of the Department on an initial salary .of Rs. 720 per month in the F scale of Rs. 720-40-1000 together with the usual allowances. The material terms and conditions of this employment were :

(i) The post is to be gazetted Class I;

(ii) The temporary post was sanctioned upto 28-2-1957 but was likely to continue;

(iii) Shri Roy (the Appellant) will be governed by the Central Civil Services (Temporary Service Rules) and other Rules applicable to temporary Govt. servants of his category; ·

(iv) He was to be on probation for 6 months which may

be extended at the discretion of the appointing autho- H rity.

The Appellan~ had reported for duty on 1st August, 1956, as directed. On 27-3-1957, the Appellant's probation was extended

by three months. Immediately thereafter, on 28-3-57, the Appel- A lant's services were terminated under Rule 5 of the Central Civil Services (Temporary Service) Rules 1949, (Annexure 'D' to the Rejoinder Affidavit of 20th February, 1964). On 5-3-1957, the Appellant made a representation against this termination of his service (Annexure 'B' to the Rejoinder Affidavit). On 27-4-1957, in response to this representation., the above-mentioned termination B tio the Appellant's service was rescinded (Annexure 'F to the Re• joinder Affidavit).

On 28-4-1958, the President was pleased to terminate the probationary period of the. Appellant and permitted him to continue in his post in a temporary capacity (Annexure 'B' to the Affidavit supporting the Petition)

On 16-2-1959, the Presidentoflndia, in exercise of powers con- C ferred by the Proviso to Article 309 of the Constitution of India, promulgated the Central Information Service Rules, 1959 (hereinafter referred to as the Rules), whicl) came into force on 21-2-1959.

These rules were mean~ for the creation of a Central Information Service with prescribed grades and their strengths. Entry into this service was open to "departmental candidates" by a procedure laid D down in Rule 5 for the initial constitution of the service. In accordance with this procedure, 1ihe Appellant was required to appear before a Selection Committee on a given date, and, after selection, he was posted by the impugned order as indicated above. On 11-3

1960, the Appellant assumed charge of the. post thus assigned to him on the recommendation of the Union Pnblic Service Commis- E sion. The Appellant then made a representation, dated 11-3-1960 (Annexure 'E' to the Rejoinder Affidavit), against his appointment in Class II grade III post. He made other similar representations after that. His last representation was made. on 25-8-1962. The/ Appellant received a communication dated 10-12-1962 forwarding extract of an order dated 26-11-1962 which said :

"The representation from Shri P. B. Roy has been carefully considered in the Ministry. All relevant facts were fully en into account, by the Departmental Promotion Committee, before drawipg up the recent panel of Grade III officers considered suitable for promotion to

Grade II. Shri Roy may be informed accordingly".

The Appellant, treating this as the rejection of his last representation, filed his petition on 11-1-1963 which was allowed by a learned Judge of the Punjab High Court, sitting on the Circuit Bench at Delhi. A Letters' Patent Appeal against this decision had been allowed by a Division Bench of the Delhi High Court which then granted a ccate on 12-8-1968 for leave to Appeal pri- , H marily because it held that the required test relating to valuation of . the subject matter had been satisfied.

A The learned Judge who had initially heard the petition had pointed out that the representation of the Appellant was first rejected on 29-7-1960 and that it did not matter that the petitioner had

continued making subsequent representations. The learned Judge had noticed the explana(, ion that the petitioner could not approach the Court as he was admitted to a Tuberclulosis Clinic in June, B

1961. The learned Judge, having found that this was not sufficient to explain the dell!)' between 29-7-1960 and June 1961 was disposed to reject the petition on the ground of !aches. But, in view of the decision of the majority of the Full Bench of the Punjab High Court in S. Gurmej Singh v. Election Tribunal, Gurdaspur('), the delay in filing the petition was overlooked on the ground that, after c the admission of a Writ Petition and hearing of arguments, the rule that delay may defeat the rights of a party is relaxed and need not be applied if his case is "positively good".

The learned Single Judge had come 1io the conclusion, on the facts stated above, that the petitioner's case would b~ governed by the decision of this Court in Moti Ram Deka & Ors. v. Generlil D Manager, North East Frontier Railway('), as the petitioner's prospects and emoluments were adversely affected by the impugned order. The learned Judge thought that the mere fact that the Department was reorganised and that the petitioner was to be fitted into an appropriate category by the procedure laid down in Rule 5 did not take away the effect, that is 1!0 say, the loss of his emolu- E ments, of the procedure to which the petitioner had been subjected.

This view implied that Art. 311 of the Constitution was attracted by the case despite the above mentioned creation of the Central Information. Service by the rules.

The Division Bench which heard the Appeal of the Union of F India was not inclined to interfere with the discretion of the learned Single Judge in rejecting the objection to the petition on the ground of delay. We too will not enter into this question which was not argued before us.

The Division Bench, after reviewing facts leading to the absorption of the Appellant into a newly constituted Central In- G forniation Service, in accordance with the procedure laid down in Rule 5 mentioned above, held that the "News and Information Cadre" of the Department, in which the Appellant was initially appointed, had been superseded by the cadres and grades constituted by the rules of the ne.w service. It overruled the contention of the Petitioner that the effect of the rules was merely to transfer employees in existing posts to corresponding posts with new designa- H tions. It held that the Rules did create an altogeer new service.

It pointed out that the process of entry into the new service was of

(I) [1964] P.L.R. p. 589.

(2) A.I.R. 1964 S.C, p. 600.

selection of each individual candidate after an examination of his A individual record and qualifications by a Selection Committee before which he appeared so !halt there could be no automatic fitting into some corresQ011ding appropriate post of a pre-determined class and grade. The rules and process for the constitution of the new service did not guarantee the class or grade or emoluments enjoyed by any candidate in a cadre in which he served prior to the setting B up of the new service. It, therefore, held that no question of demotion or reduction in rank, without observing the procedure laid down in Art. 311 of the Constitutio11.. arose at all in the instant case.

Mr Anthony, appearing on behalf of the Appellant, has assailed the correctness of the decision of the Division Bench of the Delhi C High Court on five grol!nds. We will take up and consider each of these seriatim.

Firstly, it is contended that !he Division Bench had erred in allowing an affidavit to be filed on 26-6-1967 before it, without affording an opportunity to the Appellant to repel its contents by filing a counter-affidavit. It was urged that the result was that an D altogether new case, neither argued before nor referred to by the learned Single Judge, had been allowed to be raised. This ground is no doubt mentioned among the grounds on which a certificate of the fitness for an appeal to this Court was sought. The Judgment of the Division Bench mentions that, in the course of arguments, the question arose whet.her the post of Editor in the Publications E Division was abolished or had ceased to exist. It appears that an affidavit was then allowed to be filed before the Division Bench on behalf of the Union of India in which it was stated that two 'posts of Editors in the scale of Rs. 720-40-1000 in the Publications Division had ceased to exist as a consequence of the inclusion of two posts in the revised grade of Rs. 700-40-1100-50/2-1250 with- F effect from 1-7-1959 in the Central Information Service constituted from 1-3-1960. There is nothing in the Judgment or anywhere else

to show that the petitioner had asked for any opportunity to controvert any statement made in the affidavit dated 26-7-1967 and had been denied that.

The case and the contention on behalf of the Appellant have G been that the new posts in the services are really old posts in a new garb. This raised what was primarily a question of law, depending for decision upon an interpretation of the relevant rules of which the Court takes iudlcial notice. The rules certainly did not provide for the continuance of any ex-cadre posts outsitk the new service introduced by the rules. Facts stated in the Aft!- H davit of 26-7-1967 could have some bearing on the question wh"her there were two posts in the revised scale which could be considered as corresponding posts. They could, if they had

any ellect on the respective stands, perhaps help the Appellant's case that there was nothing more than a re-designation of J>Osts with same dll'lies and corresponding scales.

And, this seems to explain why there is nothing to show that the Petitioner-Appellant asked for an opportunity to meet any allegation made in the affidavit of 26-7-1967 filed on behalf of the Union.

Moreover, what the fresh affidavit contained about the disappearance of the remporary post given to the Petitioner in 1956 before the Rules came into force flowed logically from the order of Petitioner's initial appointment in a temporary post which was to continue only upto 28-2-1957, unless its life was shown to have been extended for some definite or indefinite period.

The Petitioner had not averred anywhere that the post was continued beyond 28-2-1957 for any period by any order or rule.. Indeed, the very argument advanced on behalf of the Appel.Ian!, that bis i, nitial post merged in another corresponding post, implied that the post to which he was initially appointed at least rost its identity or could not be deemed tO continue without a transmutation. The question whether the constitution of the Central lnformation Service did or did not involve fresh appointments to new posts but was simply an automatic process of transmutation It' the pooling together of existing incumbents of certain posts to form a new service, as the appellants allejled, was already the subject matter of assertion made in the Rejoinder Affidavit of the PetitiQner and counter-assertions in. a reply filed to the Rejoinder on 2-4-1964.

The affidavit of 24-6-1967 did not introduce anything new but only clarified the position still more.

We find no force in the first objection.

Secondly, it is contended thalt the impugned order constitutes. on the face of it, a reducon in rank of the petitioner.

Lookin~ at the unication dated 10-3-1960; set out above, we find nothing there to indicate that the petitioner bad been demoted as

a measure of punishment. To hold, as it was sugp; ested/that we should, that the procedure laid down by Rule 5 was adopted as a cloak to cover up an intended reduction in rank and emoluments of an o:fficiting Editor, by appointing him in a permanent substantive capacity of a grade carrying lesser emoluments in the new service, would necessitate JP; Oing behind the order bf 10-3-1960. At any rate, on the face of it, the order discloses no such devious action against the Appellant.

Thirdly, it was contended that the impugned order violates ff Art. 14 and 16 of the Constitution inasmuch as it places an employee who was serving as an Editor in a post of lower ade with less emolumen'ls whereas no such result bad followed in tbe case of any other employee in the Information and Broadcasting

Departnwnt.

We are unable to see how an order which has the effect of terminating an officiating appointment,. in which the petitioner had no right to continue, and which gives him a fresh appointment,' with a different designation but permanent tenure and prospects, constitutes a violation of either Art. 14 or 16 of the Constitution simply because the process which resulted in such an order did not have a similar effect upon the position or rights of any other servant in the Department.

Incle¢, the Selection Committee had, apparently after taking into account the special features of the petitioner's individual case, recommended the malt.imum pay, in the class and grade of the post given to him, and the petitioner _got this exceptional pay.

Even his prospects improved to the extent that from the precarious position of a temporary servant he had moved into a permanent service.

It could not be definitely stated that his position had worsened on the whole.

He was at least no longer subject to the hazards of temporary employment which could be terniinated by a month's notice at any time.

The results of applying Rule 5 to the faots of individual cases could not be expected to be identically similar in all cases.

All candidates were subjected to the same process or procedure conmplated by Rule 5. It is not the Appellant's case that the Selection Committee did not function honestly or that its proceedin>,~ were vitiated by any defect in its constitution or

of any bias on its part or any unifairness or inequality of the test E applied in judging the merits of the Appellant as against other candidates The a:llel!,~ defect with the material said to have been used by the Committee is another matter which we will consider last.

Fourthly, it was ur_ged that Rule 5 mentioned above is itself void for conflict with the provisions of Article 311 and 14 and 16 F of the Constitution.

It was urged that Rule 5 permits violation of Art. 311 of the Constitution inasmuch as it enables that to be done indirectly Which could not be done directly.

The Rule reads as follows :-

5. INITIAL CONSTITUTION OF THE SERVICE:- G

(1) The Commission shall constitute a Selection Committee with the Chairman or a Member of the Commission as President and not more itban three representatives of the Ministry of Informa;

tion and Broadcasting as members, to determine the suitability of departmental candidates for H appointment to the different grades and to prepare an order of preference for the initial constitution of the service;

A (2)

(3)

On receipt of the Committee's report the Commission shall forward its recommendations to the

Government and such recommendations may in-· cludct a recommendation that a person considered silitable for appointment to a grade may, if a sufficient number of vacancies are not available in that grade, be appointed to a lower. grade;

Vacancies in any grade which remain unfilled after the appointment of departmell'lal candid11tes selected under sub-rules

(1) and (2) above shall be filled by direct recruitment. through the Commission.

Rule 3 indicates that appointmen1s to the newly created ser-· vice could take place either by selection under Rule 5 or by direct recruitment with which we are not concerned here.

The grades and the fixation of an authorised sirength of each grade D '!l"e provided for by Rule 4.

Only posts in the first 3 grades are classified as Class I (Gazetted) posts.

Rule 5(2) enables the Selection C9mmittee to recommend :hat a "departmental candidate" consideI'd suitable for appointment to a post of a particular grade be actually appointed in even a lower grade if sufficient number of vacancies are not available in the grade for which he may be found fit In other words, even between candidates found fit for E a particular grade, the recommendation may be for an appointment to a lower grade.

As between those found fit for a particular grade, the preferences had to be and were, presumably, determined by fair and honest appraisements of their merit. Such preferences due 1o honest assessments, which are not above possi- . bilities of error, have never been held to cast any reflection which F could be equated with punishment If the view of the Division Bench of the Delhi High Court is correct, as we think it is, that the rules had the effect of constituting a new service, with a fair and reasonable procedure for entry into it, the procedure could not be characterised as a device to defeat the provisions of Art. 311 or a fraud upon the Constitution simply because the results .G of subiwtion to the process of appraisement of the merits of each candidate may not meet the expectation of some candidates.

Article 311 affords reasonable opportunity to defend against threatened PJ111ishment to those already in a Government service.

Rule 5 provides a !Mthod of recruitment o~ entry into a new service of persons who, even thoull:h they may have been servinir H the Government, had no right to enter the newly constituted serviee before going through the procedure prescribed by the Rule. If the petitioner had already been appointed a permanent Government servant; there may have been some justification for

.contendin11: that Rule 5 could not be so applied as to deprive him of a permanent post without complying with Article 311 . as such deprivation would have been per se a punishment. The mere possibility of misuse of Rule 5 could not involve either its

confilct with or attract the application of Art. 311.

The fields of operation of Rule 5 and Art. 311 of the Constitution are quite different and distinct so_ that the two do not collide with each . other.

The learned Counsel for the Appellant then contended that each person placed in the category of Departmental candidat.es

by Rule 2 had to be treated alike, but Rule 5 enables the Selection Committee to treat them differently by assigning different grades to them. In other words, the contention was that Rule 5 gives too wide a power of selection to the Selection Committee.

It was also submitted, though not quite so clearly, that Rule 5 must itself be so interpreted as to operate automatically and place all persons falling within the definition of Departmental candidate" in a single class if Rule 5 is to be upheld as valid.

It was urged that the interpretation placed on Rule 5 by the Division Bench involved not merely its conflict with the definition -of a "departmental candidate" in Rule 2 (b) but also with Articles

14 and 16 of the Constitution, as it meant that those treated equally by Rule 2 (b) could be treated unequally by the Selection Com mittee. This argument rests on a misconstruction of Rule 2(b).

The definition of a Departmental candidate given by Rule 8 (b) is : ·

2(b) "departmental candidate" means-- ( i) a person in the Ministry of Information & Broadcasting or any of its attached and subordinate offices who was holding or would have held, but for his absence on deputation, a duty post, on the 1st November, 1957, and who is holding, or has a lien on a duty post in a substantive capacity at the commenc:em.ent of these rules; or who has been declared quasi-pennarient in a duty

post, on, or prior to, the 1st July 1957; or who was eligible to be declared quasi-permanent fu

a duty post, on, or on any date prior to, the 1st July 1957; or who was appointed to a duty post on the basis of selection by the Commission or whose 11PPOintment thereto was approved by the Camitission, before the commencem.mt of these rules;

E • '

(ii) any other person in the Ministry of Infomation

and Broadcasting or any of its attached and subordinate offices whom the Government may _d119lare as such on the basis of his qualification and experience"; .

It is clear that this definition of a "departmental candidate" is meant only as an aid in interpreting Rule 5 and was not intended to operate as a fetter on the functions and powers of the Selection Committee.

We may add that the validity of Rule 5 does not appear to us to have been assailed in arguments before the High Court. And, in any case, the attack on it must fail on merits.

Fifthly and lastly, it was urged that the action against the Petitioner was visited by mala (ides. We find no such ground taken either in the Writ Petition or argued at any stage in the High Court or mentioned in the grounds of appeal taken in the application for certifying the case as fit for appeal to this Court.

It was, however, a ground taken by the Petitioner Appellant in his Rejoinder affidavit in attempting to reply to the affidavit filed in opposition to the Writ Petition.

It had been stated in the affidavit filed on behalf of the Union of India that the Appellant's work was not found to be up to the mark even during the period of his probation which had to be extended thrice by two months on each occasion before the probationary period was at last teminated. It had also been pointed out that the Appellant had been given a warning that he should improve his work. Furthemore, it was stated that all the facts of the Appellant's case were C¥efully examined, from the point of view of his merit, by the selection Committee. The case of the Union of India was that the post actually held by the Appellant before his selection for appointment to the newly constituted service did not automatically or wholly determine the position of a departmental candidate who offered himself to the process of appraisement of his merits by the Selection Committee to be made on the totality of relevant facts.

That Committee had to be presided over either by the Chairman or a Member of the Union Public Service Commission and had officials of the Department on it who must have been in a position to correctly evaluate the petitioner's merit and to know the weight to be attached to such entries as the Appellant's confidential records contained.

In reply to the case of the Union of India, that the Appel lant's merits were duly considered by the Selection Committee, the Appellant had characterised what had happened as an 'attempt to create prejudice against the Petitioner and to justify its

mala fide reduction of rank of the Petitioner".

He also said that this amounted to "raking up the past" which had no relevance to "the admitted case of the Appellant" that he was holding the temporary substantive rr.nk of Editor when he was reduced to the rank of an Assistant Editor.

Th.is assertion was incorrect if it implied, as it seemed to, that it was admitted that the petitioner was being punished.

The Appellant had also referred to assertions made by him, in his representation dated 5-4-57 (Annexure 'B' to the Rejoinder) to the Minister of Information and Broadcasting against the termination of his service by notice dated 23-3-57, and also to those contained in another representation dated 11-3-1960 (Annexure 'E' to the Rejoinder Affidavit) against the impugned order. In these representations, the petitioner had complained that he was a victim of the prejudice and machinations of an Officer in the Transport Ministry (not named by him) whose mistakes, in the publications of the Transport Ministry, had been pointed out by the Appellant. He had also referred to a number of his own publications. Thus, the Appellant's case on ma/a fides rests on allegations which had been examined by the Department and may also have been considered by the Selection Committee.

The petitioner had assumed that there were some malicious reports "against him which, according to him, he had no chance to meet. and on which he thinks that the recommendations of the Selection Committee about him were based. The reply of the Union of India to this case of ma/a /ides was that it was an after thought and that the assessment of the Selection Committee was based on the results of the interview given to the Appellant and a total assessment of all the facts concerning the Appellant which were before the Selection Committee. ' Even if we were to assume that the Appellant had thus taken up a case of action vitiated by ma/a fi(ies at its foundations and had supported it with necessary particulars and averments, it is evident that such a case could not be properly tried upon the materials on the record before us, without even impleading the official who was alleged to be the architect of his misfortunes. 1t could not, as it has been, argued seriously for the first time before us.

The fatal weakness in the Appellant's case arises from the fact that he was holding only a temporary post so that he could have no right to continue in it after it had ceased to exist.

We think that the necessary effect of setting up of the Central In- . formation Service, together with the determination of its classes and grades and their strengths was that the temporary posts in the Department which were not shown to have been continued, automatically came to an end. The Appelant was offered a new

Post altogether after going through the process of selection i11 ai:cordance with Rule 5 to which he subjected himself.

Indeed. the Appellant had no option, if he wanted to continue in the service of the Department, except to go through the procedure provided by the rules. We are unable to hold that the procedure contemplated by Rule 5 either automatically fixed the Appellant in any particular grade or post or could be held to be void for any reason wha'!soever. Therefore, if the Appellant was selected fot a particular post, by a process which, for the purpos::s of lhc case before us, must be assumed to have been fair, honest, and

legal, he cannot complain that he was entitled to a better one.

We, therefore, dismiss this appeal.

But, in the circumstances of the case, ,;, e leave the parties to bear <their own costs throughout.

V.P.S.

Appeal dismissed.

ROY

UNION OF INDIA

A. N. GROVER

A. N. RAY

D. G. PALEKAR

M. H. BEG, JJ.

Art. 309

Central Information Service Rules, 1959

Art. 311

Art. 14

Art. 311

Article 311

Central Information Service Rules

Art. 311

Union Public Service Com

CIVIL APPELLATE JURISDICTION

Frank Anthony

K. B. Rohatgi

P. Parameswara Rao

Jagadish Swarup

S. P. Nayar

Beg

Article 132

Article 133(1)(b)

Article 226

Union Public Service Commission

P. B. Roy

Roy

Roy

Temporary Service Rules

Presidentoflndia

Article 309

Constitution of India

Central Information Service Rules, 1959

11-3

1960

Punjab High Court

Delhi

Delhi High Court

Art. 311

Union of F India

Art. 311

Anthony

Union of India

Art. 14 and 16

Art. 14

Article 311 and 14 and 16

Art. 311

INITIAL CONSTITUTION OF THE SERVICE:-

Art. 311

Article 311

Article 311

Art. 311

Art. 311

Articles

14 and 16

Ministry of Information & Broadcasting

Ministry of Infomation

and Broadcasting


)INNYLTD.

THEIR WORKMl!:N

February 15, 1972 [C. A. VAIDIALINGAM, I. D. DuA AND G. K. MITTER, 1J.]

The Payment of Bonus Act, 1965. $1'. 17 and l~Direcll'o# to' pay half yearly bonus-If justified-Payment of additional bonus-Metliod of calculation.

The appellant company was making two payments of bonus every year one for too half year ending 30th June and the other for the half year c ending 3 !st Dece111ber, The payment wao on the basi• of profits earned by it and the payment was not a condition of service and had nothing to do with any custom or festival.

When the Payment of Bonus Act, 1%5 came into force, the appellant issued a circular that as bonus was payable under Jaw only within a period.of 8 months from the endof the accounting year (the appellant's accounting year was the calendar year), no bonus was payable for the accounting year 1965 until the accoun!S for the year are closed, and the announced payment of one month's basic D wages as advance against wages for the half year endig. 30th June 1965.

The questions, (l) whether the appellant was justified in.announcing the payment as advance against wages iiistead of as advance bonus, and

(2) whether the respondents were justified in claiming bonus for the years 1962 and 1963, in addition to what had already been paid by the appellant were referred to the Industrial Tribunal.

On the first question the Tribunal held that the appellant was not justified ln anncunc1ng the payment towards advance wages and directed

the appellant to pay profit bonus in .two instalments-one as advmce against the final declaration of bonus, and the balance; if any, as the second instalment.

On the second question the Tribunal held that the question of bonus payable was to be calculated in accordance with the Labour' Appellate Tribunal Full Bench Formula approved in AS30Ciated Cement Companies Ltd. v. Workmen, [19591 S.C.R.25; that in calculating the re~ on Reserves the claim of the appellant to iJtclude in the working C84>ltal the amounts sunk in \a) fixed assets and (b) capital work in progress should be disallowed; and that the claim of the appellant for a provision for rehabilitation should be rejected:

In apeal to this Court. ·

HELD; (I) (a) Under the Act, bonus for a particular accoiJnting'year will have to be computed in accordance with the provisions of the Act (Ill the basis of the gross profits determined at the close af the accounting year. . The Act makes prvision as to how the gross profits, available and allocable surplus are to be calculated, and s, 19 prescribes 8 montha from ll>c close of the accounting year as the period within which the , bonus was to be normally paid., The scheme of the Act shows that a claim for llonus can be made only after the close of the accounting year, because, groa profits and the vailable and allocable surplus can be worked out only at the end of the accounting year and not earlier, whereas the direction'

given by the Tribunal requires the employer to make two computati~ at the end of each half yar. /469 E-H; 470 A-Bl

BINNY LTD. 1'. WORKMEN 463

(b) The direction given by the Tribunal making it obligatory on the ntanagement to make half yearly payments of bonus apart from being .. ipposed to the scheme of the Act. runs counter to s. 19. Under the section, whether it is the minimum bonus of 4% under s. 19 or the maximum bonus of 20% under s. 11, they have to be paid only within a period 'bf 8 months from the closing of the accounting year. [470 C-E]

( c) Section 17 (b) is an enabling section in favour of the employer in that it visualises a situation when he may have paid during the accounting year a part of the bonus payable under the Act, before the date on which such bonus becomes payable. lf the payment was by way of profit bonu8,

he is entitled to deduct it from the final amount that may be payable under the Act.

But that provi:; ion does not give a right to an emplo)'ee to claim payment of bonus by way of part payment during the currency of the accounting year. Therefore, the mere fact that the appellant has heen making payments on previous occasions half yearly, does not confer a right on the employee to 'have such payments by way of bonus in the same manner after the Act has come into force.

Hence, the Tribunal had r:io jurisdiction to give a direction to he appellant to pay bonus at the end of each half year. [471 A-CJ

(2) (a) In coa.idering the claim for return on workins capital two questions have to be kept in viev.·: (i) whether Reserve,, were available, and (ii) \Yhether they were used as working capital, and if $0, what was 1heatnount used. 1477 GJ

In the present case, the Tribunal has correctly kept the two principles in view in arriving at the amount of Reserves used as working 'capital and on which a return is to be allowed. The balance sheets of the appellant do not have any figures from which the Tribunal would be able to draw a conclusion. The Tribunal, therefore, while acceptin1 the sents of account filed by the appellant for the two years, for showing how it had calculated the amQunt , of Reserves utiliz.ed as working a.pita], held~ that t_he two items should be deducted; because, working capitil represents the funds required for day-to-.day work of the company and carinot include~

fixed assets, and the capital works in progress. r477 G-H; 478 A'Cl

. Workmen of M/s. Hindustan Motors Ltd. v. M/s. Hindustan Moiors Lid. & Anr. [1968] 2 S.C.R. 311 and M/s.'A/uminium Corpn. of India v.

Therefore, the contention that the Tribunal had committed a mistake Jn calculating the amount of Reserves used as working capita.I cannot be accpted. [478 D-EJ

(b) A company should build up rehabilitation reserve takinr into consideration the increase in price in plant and machinery which bu to be repJaced at a future date.

But since it is a substantial item which goes bl: reduce the available surplus and as a resul~ affects the right of the employees to bonus, the employer will have to place all .relevant material, before the Tribunal for its scrutiny.

The burden of proof is on the employer to prove the price of the plant and machinery, its age, the period during which it requires replacements, the cost df replacemen~

\he amount standing in the Debunture and' Reserve Funds and to what extent t.he funds at its disposal would meet the cost of replacement. If the employer fails to lead satisfactory evidence on these points his claim for rehabilitation will be rejected. Also. if a company has no scheme for rehabilitation then its claim on that head must he rejected. r 479 A, E'

481 B-C]'

In the present case, the averment in the written statement of the respondents,· that the appellant's machinery was among the most modern and .. no provision for rehabilitation was necessary, was not controverted by the appellant.

The balance sheets for the two years showed that some amounts were spent on machinery. But when the respondents were contesting the claim of the appellant on the ground that it had no scheme of rehabilitation and that it had not spent any amount by way of replaooment, it was the duty of the appellant to have made a proper claim and to adduce evidence regarding that aspect.

Mere production of balance sheets , and profit and Joss accounts and adding a note in the statements -0[ account filed that the figure is 'subject to claim for rehabilitation' will not entitle the appellant to sustain its claim for rehabilitation. More<>Yer, lhe appellant had large Reserves to meet rehabilitation expenses. It had also floated a debenture for buying new machinery. r481 G-H; 482A- C, Dl Further, in determining the claim of an employer far rehabilitation, two factors are essential to be ascertained, namely, (i) the multiplier, which

has to be done by reference to the purchase price of the machin!"Y and the price "hich has to be paici for replacement; and (ii) the divl'IOr, which has to be done by deciding the probable life of the machinery. [479 E~FJ

Ho110rary Secretary, South India Mil/owners' Assn. v. Secretary Coimbato,.. District Textile Workers' Union, [1962] SUpp. 2 S.CR. 926 and M /s. Gan110n Dunkerley &. Co .. v. Their' Workmen, A.I.R. 1971 S.C. 2567, re!erred to.

In the present case no material was placed before the Tribunal by the appellant from which the multiplier and divisor can be properlyworked <mt. [481 E-P) "

lberefore, the Tribunal was justifiOd in bplding that the appellant had not made out its claim for making provision for rehabilitation. [411'2 C-Dl

( c) The equitable method of aDocating the available surplus between the company and its workmen is to distribute (,()% as bonus to the w<>rlan"1 leaving the remaining 40% to the company. In the pr.sent case, the method of calculation adopted for 1962, by the Tribunal, shows that the amount of 'bonus awarded by the Tribunal together with the amount already paid by the appellanr exceeded (,()% and the award of the excess was not justified. [484 A-CJ Ml s. Ganncn Dunkerley &. Co. v. Their Workmtn, A.I.R. 1.9'11 S.C.

2567. referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1291

and 1292 of 1967 ,, G Appeals by special leave from the awatd dated June 30, 1967 of the Addi1ional Industrial Tribunal, Bangalore m A.I.D. Nos. 6 and 8 of 1966.

0. P. Malhotra and D. N. Gupta, for the appe11ant.

l. N. Keshava and K. Rajendra Chowdhary, for respondents H Nos. 2 and 3.

Vineet Kumar, for respon'dents No5. 4 to 10.

The Judgment of the Court was delivered by

V aidialiDgam. 1. These two appeals, by specal leave, are directed against the common Award, dated June 30, 1970 of the Additional Industrial Tribunal, Bangalore, in two References, A.I.Ds. 6 and 8 of 1966.

On December 8, 1965, the Government of Mysore referred to the Industrial 'tribunal for adjudication the following question :

 . "Is 1the Management of the Bangalore Woollen, Cotton and Silk Mills C!)mpany Limited, Bangalore,

justified in announcing payment of one month's basic wages as advance against wages for the half-year ending June 1965 instead of declaring this' payment as an advance against payment of bo1Vi~ as was being done all these years ?

If not, what other relief the workers are entitled to?"

This was numbered as Reference No. A.I.D. 6 of 1966.

Civil Appeal No. 129'1 of 1967 is directed against that part of the order of the Tribunal regarding ithis Reference. · .

On March 5, 1966, the Government of Mysore referred to E the same Tribunal for adjudication the following question :

"Whether. the demand. of the workers of Bangalore Woollen, Cotton and Silk Mills Co., Ltd., Bangalore, for additional bonus for the year 1962 and 1963 at the rate of 2 months additional bonus and 4 months additional bonus on total wages respectively is justified.

F If not, to what other relief or reliefs a:re the workmen c; ll'titled ?"

This Reference was numbered as A.J.D. 8 of 1966. Civil Appeal No. 1292 of 1967 is directed against that part of the order of the Tribunal regardinjl this Reference. Both the appeala are G by the Company.

We will first take up Civil Appeal No. 1291 of 1967. The appellant was making two 1>8ymetl'!S of bonu8 every year, one.for the half-year ending 30th June and half-year ending 30th De. cember. The accounting year is the Calendar year. The balf H yearly payments were unilaterally declared by the appellant and not on the basis of any aJU"eemell'I: between the pal'lies. The quantum of bonus that was paid for each half-year was also not cbostant.

Half-yearly payments were made at the end of the half-year when

the working result of 'the said year was known and if there was sufficient profit to pay bonus. The payment of bonus for the halfyears also depended upon the approximate estimate that the Directors used to make about their prospective future earnings for the net half-year. According to the appellant the bonus amounts were paid out of profits. As the Payment of Bonus Act, 1965 (hereinafter to be referred as the Act) had come into force on August 28, 1965, the appellant issued a circular to 1he efP>..ct that for the half-year ending June 30, 1965, payments will be made a' advance of wages equivalent to I/ 6th of the basic earnings of the. employees. In this circular there is a reference to the Payment of Bonus Ordinance 1965, promulga~.!d on May 29, 1965 and that under the terms of the Ordinance, bonus is payable only within a period of 8 months from the end of the accounting year. The circular futher states that no bonus is payable for the accounting year 1965 unti) the accounts for the year are closed. It was further mentioned that the amounts are paid as advance wages in view of the representations made by the employees. The circular further mentioned that the amounts paid as advance wages will be set off against the bonus that may be found payable for the accounting year 1965 and that if no bonus is payable, the amount paid will be adjusted against the wages due for any month after March, 1966.

The issue of the above circular led to the Unions concerned raising a dispute with the Management that the payment of bonus

irt the end of each half-year has become a condition of service of the workmen as the same was being paid for several decades without any relation to profits.

The appellant was charged by the Unions of having changed the conditions of service by offering to make payments as advance against wages instead of payment by way of bonus.

As conciliation proceedings failed, the workmen resorted to a strike in December 1965, which led to the Reference being made by the State Government on December 8, 1965, No. A.I.D. 6 of 1966.

The short stand taken by the appellant before the Tribunal

was that the payments were being made as bonus 11'1 the end of each half-year on the basis of the profits earned by the Company.

G Such payment was a voluntary act of the appellan!t and related to profit and it had not become a condition of service of the employees. The further case of the appellant is that as the Act had CO!lJe into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965.

The Unions pleaded that the payment of bonus at the end of each half-year, which was being done for a long number of years,

A has become .ll. condition of serviee and too amounts paiq were not related to the profits earned by the Company. The Unions furtller contended that the Act has not in any manner afiected the right of the employees getting bonus in the manner paid by the appellant namely, at the end of every half-year.

The Tribunal has recorded the following findings : The pay ment of bonus was not a settled condition of service, but is de pendent upon the profits earned during the halfyGar. Payments made by the appellant at the close of the half-year cannot be con sidered as customary or festival bonus and that the appellant has made no change in the conditions of service of rthe workmen by altering the quantum of bonus. Though bonus was paid at the close of each half-year, the quantum of such bonus varied depending upon the profits earned by the Company. The Company has no doubt been paying for a long time profit bonus in two instalments, namely, in the month of August for the half year end

ing 30th June and in the month of March or April of the succeed ing year for the half-year ending 31st December. The coming D into force of the Act has not created any right in the appellant to withhold the payment for each half-year as it used to do.

The appellant will be entitled to deduct the amount of bonus paid for the first half year from the amount of bonus payable to its em

p!oyees under the Act in respect of the accounting year and the employees will be entitled to receive only the balance for th" £ second half-year. On these findings the Tribunal held that the appellant was not justified in announcing the payment of the amount. towards advance wages under the circular dated August 28,

1965. In the end <the Tribunal gave a direction to the effect that the ai>Pellant is liable to pay profit bonus in two insta!ments--Olle

as advance against the final declaration of bonus to oo paid dur-

F ing the last week of August or first week of September and the balance, if any, was to be paid in the month of March or first week of April of the succeeding year. It further gave a direction that the first payment that is to be paid is to be as advance against payment of bonus and not as against wages.

Mr. Malhotra, learned counsel for the appellant, has cha!· G Ienaed . t, be above directions given by the Tribunal. The counsel pointed out that after the OOllling into force of t'he Aot, the rights and liabllitiOBof the parties, reg bonus, are governed by its provisiODI. Under the Act, the compurtalions of the available and allocable rplus have to be made on the basis of the gross-profits .asceitained e.t the end of the relevant accounting year and the.pay H ment of bqnus has to be made within eight months of the close of the 11ccou, ntin11; year. As the Act envisages payment of only one. bonus, at the end of tho aci:ountiug year, .after computation qf the amount as per llhe Act, the on given by the Tribunal

regarding paymell"t of half-yearly bonus is illegal and contrary to A the provisions of the Act. This direction, the counsel pointed out. given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years.

On .the other hand, Mr. H. K. Puri, learned counsel for the respondents Nos. 2 and 3, whose contentions have been.accepted B by the counsel for the other respondents, urged '!hat the Act does not prohibit an employer from paying bonus at the end of each half-year.

The appellant has been paying bonus in two instal ments, nan1ely, at the end of each half-year. It is always open !O the appellant, both by virtue of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus c at the end of the accounting year. any amounts that may have been paid for the first half-year.

Therefore, accordinit to Mr. Puri. the directions Jtiven by '!he Tribunal are neither illegal nor con trary to the provisions of the Act.

We are not inclined to accept the conntion of Mr. Puri. We D have already referred to the findings of '!he Tribunal to the effect that the amount that was paid by the appellant as bonus at the end of each half-year was on the basis of the profits earned by i't.

The Tribunal has re.iected the claim of the Unions that the pay mcnt of bonus, in the manner claimed by them, was not a condition of service and th:it the payment had nothing to do with any custom or festival. These findings have not been and in fact could E not be challenged by the respondents. There is also no controversy that payment of bonus for the accounting year 1965 is governed by the provisions of the Act. If so, the question is whether the directions given by the Tribunal and referred to above. can be supported by the provisions of the Act.

The Act has come into force with effect from August 28.

1965. As provided under sub-section ( 4) of seotion 1, it applies to all accounting years commencing on any day in the year 1964 and in respect of every subsequent accountinl!: year. Section 2 defines amongiit others the expressions, "accounting year", "al!o cable surplus", "available surplus" and "ross profits" Section 4 deals with •the computation of gross-profits. So far as the appellant is concc; ned, under s. 4, cl. (b) the gross-profits are to be calculated in the manner specified in the Second Schedule. Section 5 provides for computation of available surplus. It is to be ascertained after deducting from the gross-profits the various

items, referred to in s. 6.

Section 6 deals with the items to be deducted as prior charges from the gross-profits.

Section l O H makes it obligatory on an employer to pay minimum bonus to the employees in an accounting year of 4% of his salary or wages or Rs. 40/- whichever is higher. This payment is irrespective of the

fact whether a Company has or has not earned profits in an ac countinl!; year. But this provision is subject to ithe provisions of ss. 8 and 13. Section 11 provides for payment of bonus subject to a maximum of 20% of the salary or wages, if the conditions mentioned. therein are satisfied. Section 17 enables an employer, who has paid .during any accounting year Puja Bonus or other customary bonus or a part of the bonus payable under the Act before the due date, to deduct the amount so paid from the amount of bonus payable by him to an employee under the Aot in respect of that accounting year. It further provides th!!t under such cir cumstances the employee will .be entitled to receive only the balance. Seotion 19 fixed the tinie limit for payment of bonus.

If there is a dispute regarding payment of bonus pending before any authority, the .bonus will have to be paid within a month from the date, on which the Award becomes enforceable or ithe settlement comes into operation. In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year. Under ithe proviso to s. 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein. Section 34 provides that the Act exoopt as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965.

We. have referred to some of the relevant provisions of the Aot. From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross-profits which are determined at the close of the accounting year. The Act itself provides as to how the gross-profits are to be calculated and the available and allocable surplus arrived at.

The Act also provides the outer limit, the period within which bonus has to oo paid. It further gives the employer a right to deduct any amount that any have been paid during the accountil).g

year as part of .the bonus payable under the Act.

G It will be seen from the scheme of the Act that the claim f6r bonus can be made only after the close of the accouttting year and in accordance with the provisions of the Act. The gross-profits can be calculated only at the end of the accountirig year' and the available and allocable surplus can also be worked out only at the end of the. accounting year. There is no question of an employer H computing the gross-profits, available and allocable surplus in the middle of an accoilnting year or at any time before the close of the relevant accountinl!; year. The direction l!; iven by the Tribti nal really amounts to the employer having to make two .2-1031 Sip CI/72

470 SUPREME COUl!.T REPORTS

computations at the end of each half-year. No doubt, the Tribunal A ha.s given a direction to the effeet that any amount paid for the first

halfyear can be deducted when the final bonus is paid at the end of t]je accounting year. Even without any such comideration be in!f shown by the Tribunal allowing an employer to so deduct, section 17 iiself clearly gives such a right to an employer. We are not impressd with the contention of Mr. Puri that as there is no B prohibition .in the Act against an employer making the paymel1t by way of bonus at the end of a half year, the direction given by the Tribunal can be sustained.

Mr. Puri referred us particularly to the provisions contained in s. 17 of the Act. He pointed out that though a time limit is fixed bys. 19, the Act itself as is evident from s. 17, clearly en C visages payment of bonus at the end of each half year. We are not inclined to accept this contention of Mr. Puri. The direction given by the Tribunal making !t obligatory on the Manage- D!ettt to make half yearly payment of bonus, apart from being opposed to the scheme of the Act, also runs counter to the provisions of s. 19. Whether it is the minimum bonus of 4% under D s •. 10 or t}te maximum bonus of 20% under s. 11, they have to be paid, as is made clear by s. 19, only within the period mentioned therein. It may be that an employer voluntarily pays amount during the accouating year by way ofpart bonus which he is en

titled to take into account and adjust when making final payment at the close of the accounting year. It is one thing to say that an E 1'11lployer can make voluntary paY1Dent, but it is a different thing for the Tribunal to give a direction to that effect.

Section 17 on which reliance is placed by Mr. Puri is as follows :

"Where in any acC®nting year-

(a) an employer haS paid any puja bonus or other

cu&to.mary' bonus to an employee; or

(b) an emploJ'Cl' has d a part of !lie . qonus pay

able under this Act to an employee before the date on which such bonus becomes PllYl!ble, then, the cnployer shall be entitled to deduct the lllllOUllt ofbo11119 so Paid froni .the"'3101Jnt of bonua pay-· able by bbil to'the eniplilyee undu tbl1 'Act in resiieot of

that aee<>i.illlim vear 'lilld 1he em,, loyee atrall be' entitled to 1'ecei\re aniy'llbe balance."

Clallse (.&) Ids po "1Jlllica~ as 1hlJ :Tribunal has catejClriff ·~ ~~ that~ u :!10 qu.esaoo of .Hr paymeat by way.ill pWJa bonus Or• otller cuatlllilarr Even thein, if uy SllCll bon'os

A has been pd, the employey is entitled to deduct the same om the amount of bonus payable under the. Act. Clause (b) JS an enabling section in favour of the emplo}'er in that it visualises a

situation or contingency where he may have paid during the accountin11: year a part of bonus payable under the Act "before tbz date on which such bonus becomes payable". If an employer has B paid any amount during an accounting year by way of part of the bonus he is entitled to deduct the same from the final amounts that n:ay be payable under the Act. That provision does not give a riJ?ht to an employee to claim payment of bonus even by way of part payment during the currency of tlie accounting year. If so, the Tribunal has also no jurisdiction to give a direction to an c employer to pay bonus at the end of each half-year.

In tl!is case, it is no doubt, seen tha't the appellant has been paying bonus at the end of each half-year. But the Tribuna1 has found that such payment has not become a condition of service.

Therefore by the mere fact that the appellant has been making payments on previous occasions every half-yearly, does not confer D a right on the employee to have such payments by way of bonus in the ame manner even after the Act came into force,.

From the above discussion it follows that the directions given by the Tribunal in A.I.D. No. 6 of 1966 have to be set aside. __

Now coming to Civil Appeal No. 1292 of 1967, as mentioned E earlier, it is a2ainst that part of the Award of the Tribunal in

A.J.D, No., 8 of 1966. The question 1that was referred to !he Tribunal has also been extracted in the earlier part of the judgment. That relates to a claim for additional bonus for the years 1962 and 1963. There is no controversy that 'the appellant has already paid for the year 1962, three months basic wages as bonus.

F Similarly for the year 1963 also four months basic wages as bonus has already been paid. The claim was for two months total wap, cs as additional bonus for 'the year 1962 and four months' total wages as additional bonus for the year 1963. The findings

recorded by the Tribunal in A.I.D. No. 6 of 1966 regarding the nature of bonus paid to the employees have been adopted for thi~ reference also. The respondents-Unions do not challenge those G findings. Therefore, even in respect of .!Pe years 1962 and 1963, what is P., ayable is only profit bonus .. JJ:'here is also no controversy 'Iha~ for thele two years the quantum of bonus payable has to be calculated in accordance with what is known as the Labour Appellate Tribunal Full Bench :Formula, which has been approved by this Court in The Associated Cement Companies Ltd., H Dwarka Cement Works, Dwarka v. Its Workmen and Another(!).

BOth the parties have filed statements of calculations according to

(I) [19'9J S.C.R. 92S.

the said Fonnula. The statements Bxs. M.1 and M.2 filed by the A Management represent the c0mputation of available surplus for the years ended December 31, 1962 and 1963 respectively. Ex.

M.l is as follows: ·

"THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD.

Statement showing the computation of available surplus for the B year ended 31st December,' 1962 (Under L.A. 'T, Formula/

Profit as per profit and loss Ac.count '.

68017S6 Add:

Provision for Bonus 1614000 Depreciation on Fixed As°sets 1696481 c Donations 107362 .Additional Bous fo; l 96i 146000 3563843

Liss:

Profit on sale of asaets 1745426

8620173 D Leis:

Normal Depreciation and Shift Allowance • '1465812-

715,4361

Less:

Tax Liability :

7154361 E Profit as aobove ..

Liu Devolopment Rebate 586415

Inc<im .. tax Liability at 6553408 .3276704 . '°" oo Rs.

Jnco111&-Taxat

1•538 3635 15" on Rs:

:Supor Proftt1 Tu on Rs. • rsf,= mYW

3689497.

-G '.Return on Capital employed :

Pt.rorenoe Share Capital

46800 . 7 •8 Y, on RI. 600000 Oidlnary hare Capital 729000 . '" oa lbd2150000. • . . • llolerV11 J:lploye~ in business durlns the

r en 31·12·1962

178733 . 2554533. 62M030 4" 011 b. #46831' • • . • H Availalilo $urp).us.

Rs.

'91°'3J

•3ubjoct to claim for rehabilitation.

We have preparod the above statement from the audited accounts of the Company and is in accordance therewith. The return on Capital and Re!cJvt>S is as claimed by the Company.

Sd/- lllegible Chartered Accountants." Similarly Ex. M2 regarding the year 1963 is as follo\\'S :

"THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD.

Statement showing the computation of available surpJus for the year ended 31st December 1963

(Under L A. T. Formula) Profit as per Profit and Loss Accont 5239220

ADD:

Provision for Labour Bonus Depreciation on Fixed Assets Donations ' Provi'iion for Taxation

LESS:

Profit on Sale of Assets . • • Excess Provision of Electricity charges

written back , . . • •

LESS:

1°nd interest ....

2245000 1733719

8804 8110000 12097523

Normal depreciation and Shift Allowance .

16'78466

. 1647555

LESS: Tax Liability Profit as above

USS Development Rebate

Income-tax Liability at

SO"On Rs. 2!1 /0 tOD Rs.

Dividend-tax . . • Companies (Profit) Surtu

Liability on Rs. 14455825

Return on Capital Empioyed':

Preference Share eapitat

7 8 % on Rs. 600000 Ordinary Share Capital

6% on Rs.12150000 Reoerves employed in the busiMss

4 % on Rs. 46937947 •

Available srpl¥•·

Subject to claim for rehabilitation.

7290oo

14455825 7227912

14538 3635

1786212 -.--.-. 9111784'

1877518 2653318 11835102

We have prepared the above statement from tht; audited accounts of .the co1npany and c'rtify that it is in accordance therewith. The return n capital and reserves is, as claimed by the company.

Sd. Illegbile Chartered Accountants.

B The Tribunal has accepted as correct the gross-profits as given by the appellant in these two exhibits for the two years in question. Even though the Unions contested the return on Preference Share Capital at 7 .8 % , the Tribunal has rejected their objections. It has held that under the Preference Share Regulations Act, the Company is bound to pay 7.8% on Preference Share C Capital. The Workmen did not raise any coll'lroversy regardi11g the return on Ordinary Share Capital at 6%. The Tribunal, therefore, accepted the figures given in both Exs. M. 1 and M. 2 and to the return of Ordinary Share Capital. But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years. It will be noted that D neither in Ex. M. 1 nor in Ex. M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement

that they &re subject to a claim for rehabilitation.

The two points in controversy between the parties regarding these two :years were : ( 1) The claim for Return on Reserves E and (2) Provision for. Rehabilitation.

We will first take up the question regarding the claim of the appellant for return on Reserves. In Ex. M. 1, the appellant has claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00

being the amount employed in business.

Similarly in Ex. M.2, F for the year 1963, it had claimed Rs. 1877518.00, being 4% return on Reserves on Rs. 46937947.00, employed in the business.

The Unions contested the claim of the appellant on the ground that they are not entitled to any return on Reserves. The appellant had filed two statements Exs. Ml(a) and M.2(a) for the years 1962 and 1963 respectively, showing how the amounts claimed as Reserves employed in business have been arrived at.

G Ex. M.1 (a) for the year 1962 is as follows :

,, THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LID.

Year ended 31st December 1962.

Reconciliation of c.apital employed in the business during the year ended 31st December. 1962.

A "As at 31-12-1961:

Fixed Assets and Capital Works 43139570 in Progress Investments ' ' ' 595216 Interest accrued on Investments 17477 Stores and spare parts 6179042 Raw Materials 6886058 B Process Stocks 5053558 Finished Stocks 1381082 Sundry Debtors 2473722 Advances . 2768233 Balance with Railav and Excise Authorities • 292529

Dposits 18993 6880fi470 ---- c

LESS:

Sundry Creditors 7077709 Due to Directors 63744 Unclaimed Dividends 18257 Provision for Taxation 1057850 Proposed Dividends 1481400 Provision for Gratuity 1860431 D Officers• Retiring Fund 26764 (Fund loss investments) 11588155

LESS.-

E Share Capita] 12750000 ---- Rs. 44468315" ---

Exhibit M.2(a) for the year 1963 is as follows :-

"THE BANGALORE WOOLLEN, COITON & SILK MILLS CO. LTD.

Year ended 31st December, 1963.

Reconciliation of Capital employed during the year ended 31-12-1963.

As at 31-12-1962 Investments . . . .

Interest accrued on Investments Stores and Spare Parts Raw Materials Process Stocks Finished Stocks Sundry 'Debtors Advances . . . . • .

Balances with Rai'lway a11d Excis.e Authorities Deposits . • . . . .

45229453 548575

8703 6553343 4701434 7285534 1688931

3429299 3165324

LESS:

Sundry Creditors Due to Directors .

Unclaimed Dividends Provision for Taxation Proposed Dividends Provision for Gratuity Officers Retiring Fund (Fund less investments)

Less Share Capital

7686123 65278 22837 2305645 1481400 1706251

25799

13293333 ---- 59687947

12750000 ---- Rs. 46937947'" ---

It will be seen that the last figures: shown in both the state• ments have been clalined by the appellant as Reserves employed in business for each of these two years.

The Tribunal after a reference to the evidence of the Char~ tered Accou..!ltant, M.W.l, has held that the amounts which. should have been used as Working Capital are those mentioned in Exs.

D M.l(a) and M.2(a), less the fixed assets and capital works in progress. The Tribunal has further held that the working capital cannot .include fixed assets nor the capiial works in progress,. as they represent the funds required for day to day work of the Company. According to the Tribunal these fixed assets have been accumtilated over years and they cannot form part of the E working capital.

However, the Tribunal accepted the claim of the appellant that the other items in Exs. M.l(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc. are the amounts available to be used as working cataj. On this reasoning the Tribunal held. that in cal- F culating the return on working capital, the amounts mentioned in Ex.M.1(1!) and M.2(a) less the amount sunk in fixed assets and working capital in progress1 have to be deducted. On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570,'and fixed a sum of R~. 1328745, as Reserves employed in business during the year ended December 31, 1962. On this amount it allowed a sum of Rs. 53150/- as return on Reserves at 4 % for the year G 1962.

Similarly, for the year 1963, it deducted from Rs. 46937947, a sum of Rs. 45229423, and fixed a sum of Rs. 1708524/- as Reserves employed in business during that year. On this amount it a'llowed ~· 68340/- as return on Reserves at 4 % .

Mr. Malhatra, learned counsel for the appellant, while accepting that the principle adopted by the Tribunal in this regard is.

A correct, contended that it had made a mistake in calculation.

According to the learned counsel, the claim must have been allowed in the manner calculated by the appellant. In this connection, the learned counsel pointed out that e\-en in cases where the evidence regarding the utilisation of Reserves as Working Capital as cla.imed by the Company, is not very satisfactory, this B Court, on the bas\s of the balance sheets, which indicated that

some amount must have been used as working capital has allowed such a claim. In this connection, he relied on Workmen.of Mis: Hi1u/11s1an Motors Ltd. v. Mis Hindustan Motors Ltd., and Another(') and Messrs. Aluminium Corporation of India v. Their Workmen('). c We may straightway say that these decisions do not assist the appellant.

In the case before us it is not necessary to do any guess work as the appellants wants us to do. The appellant has filed g1atements showing how it has calculated the amount of Reserws utilised as working capital and we have to find out whether the calculations made by it are. correct. In fact, Mr. Malhotra has D not been ab]!l to point out from he balance sheets, as to what amount, according to the appellant, can be considerd to have been used as working capital. In the two decisions, relied on by him, the company concerned was llble to refer to ithe figures in the balance sheets from which this Court was able to draw a conclusion regarding the approximate amount that would have been utilised as working capital. The position before us is el}tircly E different.

On the other hand, Mr. Puri, learned counsel for the respondents, referred us to the balance sheets for the years in question regarding tb_e share capital of 1the company being shown as Rs. 12750000/-. The counsel further pointed out that the said share capHal must have been sunk in acquiring the fixed assets F and for capital works in progress and, therefore, the Tribunal was justified in deducting the amount of fixed assets and capital works in progress shown in Exs. M.l(a) and M.2(a) from the totaI shown by the appellant in those statements. The counsel further urged that in considering the claim for return on working capital two questions have to be kept in view: ( 1) Whether the Reserves G were available, and if they were (2) whether they were used as working capital and if so what is that amount.

The Tribunal in our opinion, bas c9rrectlv kept these two principles in view in arriving at the amount of Reserves used as working capital and on which a retui; n is to be allowed. We see no error committed by the Tribunal in the calculation made for arriving at the Reserves. which must have been used as working capital, especially as the H evidence on the side of the appellant was very unsatisfactory. Even the appellant has deducted the amount of share capital before

(2) [1969] 3 s.c.c. 832:

arriving at the final figures mentioned in Exs. M.l (a) and M.2 (a). But the appellant was claiming Ute whole of the. final amount shown..in these two statements as Reserves. used as working capital, which it was not certainly entitled to in law.

We have :Jready pninted out that the Tribunal has held that the working capital cannot include fixed assets nor tlr~ capital works in progress as i'I represents •the funds required for day to day running of the Company. The Tribunal has further held that the appellant is entitled to deduct investments, interest accrued on investments etc. which have been shown in Bxs. M.1 (a) and M.2(a) on the ground that they must be considered to be the amounts available to be used as working capital. These findings have .not been challenged by the learned counsel for the appellant. The appellant has also filed d•!tails of Reserves employed in the busin.ess during the years ended 31st December, 1962 and 1963 as shown in Exs. M.l(b) and M.2(b) respeotively. Even there the appellant has deducted the share capital before giving final figures."'

Therefore, the contention of Mr. Malhotra that the Tribunal has committed a mistake in calculating the amount of Reserves

used as working capital for these two years, cannot be accepted.

If so, i'I follows that the amount fixed. by the Tribunal as return at 4% an Reserves used as working capital for these two years, is correct

The second question that arises for consideration is the claim made by the appellant for provision for rehabilitation for the two years and which claim has been re.iected by the Trib~. The claim made by ¢he appellant for provision for rehabilitation for 1he year 1962 was Rs. 18030871.00 and for the year 1963 Rs. 18062336.00. 'Thus the appellant was claiming for each year provision being made of more than a crore of rupe.-..s for rehabilitation. . The ; ippellant has filed a chart Ex. M.8 giving the calculations for the year 1962, its claim for rehabilitation for Rs. 18030871.00. If the claim for rehabilitation is accepted, then the result will .be that there will be no profits at all from and out of which any bonus can be paid for the years in question.

'The claim of the appellant has been opposed by Mr. I. N.

Keshava, learned counsel for the first respondent and His conten tions have been adopted by the counsel appearing for the other respondeIYts--Uriions. The claim of the appellant is opposed mainly on two grounds, namely, (1 ) that the appellant has no scheme for .rJ:habilitation for the relevant years and (2) in any event there were huge Reserves available from which the claim for rehabilitation can be easily met. The Tribunal has rejected

Che claim for rehabilitation both oh the grounds that the appeTiant

has no scheme for rehabilitation and that the rehabilitation claim can be adequately met .with from the hul\e Reserves of nearly four crores of rupees that the appellant had.

It must be noted that Rehabilitation Reserve is a substantial item which goes to reduce <the available surplus and as a result affects the right of the employees to receive the bonus. Hence the

emplor will have 'IO place all relevant materials and the Tribunal will have to scrutinize them carefully and to be satisfied that the claim is justified. It is no doubt true that it is but proper in the larger interest of the industry as well as the employees that proper rehabilitation Reserve should be built up taking into consideration the increase in price in plant and machinery which has to be replared at a future date and by determination of multiplier and its divis~. It is also clear from the decisions of this Court that if a Company has no scheme for rehabilitation, then of course, its claim on that head must be rejected. tvide Azam Jahi Mills, Ltd. v. Their Workmen(')].

Further, since it is the employer who seeks replacement costs, it is for him to satisfy the Tribunal as to what wii(be the overall cost of replacement and in doing so, it is he who has to discharge this burden by adducing proper evidence and giving other paty an opportunity to test the correctness of that evidence by cross-examination. [vi de National Engineering Industries Ltd. v. Its Workmen(')].

It is also' now well-settled that in determining the claim of the employer for rehabilitation, two factors are essential to be ascertained, namely, ( 1) the multiplier, and that has to be done by reference to the purchase price of the machinery and the price which has to be paid for rehabilitation or replacement; and (2) the determination of the diviser and thait has to be done by deciding the probable life of the machinery. [vide The Honorary Secretary, South India Millowners' Association and others v The Secretary Coimbatore District Textile Workers' Union(') and Mis Gannon Dunkerley and Co. Ltd. and another v. Their Workmen(')].

Mr. Malhotra, learned counsel for the appellant, very strongly relied on the statement Ex. M.S. as well as the evidence of M.W. 2, ithe Mill Manager and M.W. 3, the Assistant Officer,

Efficiency Section of the Mill, in support of his contention that the appellant has a scheme for rehabilitation and that the claim made by the appellant for making provision for rehabilitation is proper. The counsel also pointed out that the evidence of these two witnesses clearly establishes that most of the items of machinery have long out lived, their normal age of 25 years. and

(I) [1967p L.L.1' 18.

(3) (1962] SuPJi. 2 l .c.~

2) [1969J 1 s.c.R. 779.

(4) A.I.R. 1971 S.C. 2567.

therefore they require replacemeait in order to ensure proper production. The counsel further pointed out that the rejection by the Tribunal .of the claim made by the appellant, on 'the basis that the life of the textile machinery is only 25 years, is .not correct and that the view of the Tribunal that the normal age is more than 25 years is opposed to the decisions of this Court.

So far as the age of the machinery is concerned, it is no doubt true 1that in The Honorary Secretary, South India Mil/owners' Association and others v.

The Secretary Coimbatore District .'f.exti/e Workers' Union( 1), this Court, after a reference to the evidence adduced confirmed the findings of the Tribunal 'i:hat the estimated life of the textile machinery in question should be taken to be 25 years, but in the said decision itself it is observed as follows :

"We are not prepared 'to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties."

But it is unnecessary for us to pursue this aspect further as we are

disallowing he entire claim for rehabilitation.

Mr. Malhotra, also criticised the view of the Tribunal that in this case the evidence of the witnesses on the side of the appellant clearly shows that the. machines are working very efficiently though they have been running for over 50 years. On the other hand, the counsel ur, ged that the principle to be borne in mind, when considering the claim for rehabilitation, is that 'the life of the machinery is the period during which it is estimated to work with reasonable efficiency and not the period during which it has actually been operated, that is, till it becomes too deteriorated for use.

No doubt the last proposition enunciated by the counsel in the abstrtact is correct; but the question is whether 1the appellant has discharged its burden of satisfying the Tribunal that it had a scheme for rehabilitaition and whether it had placed the necessary materials for the purpose of working out the multiplier and the diviser.

Mr. Keshava, learned counsel for the first respondent, referred us to the written statement filed by one of the Unions, Binny Mills Labour Association, wherein it has specifically stated that the plant and machinery owned by the Mills are amongt the most modern machineries and that no provision for rehabilitation is necessary.

The appellant, it is pointed out, in its reply statement did not controvert these averments.

Even in the statements Exs. M. 1 and M. 2, filed by the appellant, no claim for rehabilitation has been made.

He also referred to ithe evidence of

(1) [1962] Supp. 2. S.C. R. 926.

A M.Ws. 2 and ~. and pointed out that their evidence does not show that the Company had any scheme for rehabilitation.

On thei; e grounds, the counsel pointed out that the appellant has not placed sufficient materials before the Tribunal to. sustain its claim for rehabilitation.

8 It must be emphasised that in _dealing with the claim of an employer for rehabilitation, as pointed out earlier, the onus of proof is on the employer.

He has to prove the price of the plant and the machinery, its age, the period during which it requires replacement, the cost of replacement, the amount standing in the

Debentures and Reserve Funds and to what extent the funds at its disposal would meet the cost of replacement.

If the employer C fails to lead satisfactory evidence on these ppints, the result will be that the claim for rehabilitation will have to b! itotally rejected.

It is no doubt true that a chart Ex.M. 8 has been filed by the appellant and N:.W. 3, the Assistant Officer, Efficiency Section, has spoken regarding the same.

But he has admitted hat the D original quotations received from the do.lalers regarding the price of new machinery for the purpose of replacement have nat been produced before the Tribunal.

He has further admitted that the appellant has not produced the lel!ters written by it calling for quotations regarding the price of the machinery.

He has further admitted that no charts have been produced to show the value of the machineries in 1962 .. The multipliers, according to this witness, E have been adopted as advised by the appellant's Legal Adviser.

It is clear from the above answers of the witness that there is no material placed before the Tribunal by "the appellant from which the multiplier and diviser can be properly worked out for the purpose of considering the claim for rehabilitation.

In fact F the Mill Manager, M. W. 2 has stated that the company has floated a debenture for 1 i crore for buying new machinery.

This clearly shows that the appellant had no scheme for rehabilitation and that explains the rson why it had not made any provision for rehabilitation.

Mr. Malhotra, then urged that at any rate the Tribunal itself G has proceeded on the basis that some amount for rehabilitation is necessary to be provided for each year.

Based on this observation of ihe Ttibunal, 100 counsel pointed out that the appellant

hould be allowed at least the amount that it has actually spent for

replacement of machineries in the years 1962 and 1963.

Accor ding to himJ!. sum of Rs. 2619608 and Rs. 2124102 have been H spent in the years 1962 and 1963 rcspcctiwly for machinery and plant installed in those years. In this conneotion m referred us to the balance sheet and profit and. loss accounts for these two years and stres9':d that the Tribunal has committed an error in not

allowing at least these amounts by way of provision for rebabiU- A rtation.

It is no doubt true that these amounts are shown in the schedules to the balance sheets for the years concerned.

Admittedly, there is_ no such claim made in 1the written statement filed by. the appellant before the Tribunal.

When the Unions were constesting the claim of the awellant on the ground that it bas no scheme B for rehabiliitation and that it has not spent any amount by way of replacement of old machinery, it was the duty of the appellant to have ma4e a proper claim and it should have adduced evidence regarding that aspect before the Tribunal.

Mere production of balance sheet and profit and Joss accounts by themselves will not entitle the appellant to sustain its claim for rehabilitation. c For all the reasons given above, it is clear that 1the Tribunal was justified in holding that the appellant has not been able to make out its claim for making provision for rehabilitation.

In this view the Tribunal was justified in rejecting this claim of the appellant.

We may also state that the Tribunal is also of lhe view that D the appellant has large Reserves with which it can meet rehabilitation expenses of the machinery.

In this connection the Tribunal has also referred to the evidence on the side of the appellant, that even according to the appellant rehabilita1tion will have to be completed only within eight years from 1962 and that only a sum of rui>ees eighty Jakhs will be required •for each year.

On •this E reasoning the tribunal has held that this amount of rupees eighty lakhs can be ea5ily met with from the large Reserves available with the appellant.

It is not necessary for us to consider this aspect further because we have already agreed with. the findings of the Tribunal that the appe!lant has no scheme for rehabilitation and that it has not placed any satisfactory evidence before the Tribunal in support of its claim.

F The last point that arises for consideration is regarding the available surplus for the years 1962 and 1963 as calculated by the Tribunal and the award by it of 1 /3rd of the amount as additional bonus for the two years after deducting the bonus already paid by .the appellant. The Tribunal, after re.jecting the appellant's claim for rehabilitation and also allowing return on Reserves used as G working capital in 'the manner, already referred to, had arrived at the. available surplus for the year 1962 in the sum of'Rs. 2635914 and for the year 1963 at Rs. 4904987. The appellant filed a statement Ex. M. 4 showing the amount of bonus already paid for the year~ 1962 and 1963 to all employees drawing a total of Rs. 500/- and less per mensem: From that statement it is seen H that for the year 1962 it had paid a sum of Rs. 1441455 and for the year 1963 a sum of Rs. 1960795. On the basis of the available surplus worked out for the years 1962 and 1963, the balance

available surplus after deducting bonus already paid will be as follows :

1%2

A vailabie surplus as worked out by the Tribunal

Amount already paid as bonus by the apPellant .

Balance: •

Available surplus as worked out bY. the Tribunal

Amount already paid as bonus by the appellant

Balance,

Rs. 2635914

490498'

What the Tribunal has done is to distribute 1/3rd of the amouat shown as balance above, for each of the years as additi.onal bonus. That results in the workmen getting Rs. 398153 D representing 25 days basic wages as additional bonus for the year

1962. Similarly, the workmen get Rs. 981397 representini two months basic wages as additional bonus for the year 1963.

Therefore, i<t will be seen that the total bonus that the workmen wi!I get for each of the years will be as follows :

1'62

1. Amount already paid by the appellant

2. Additional amount awarded by the Tribunal

TOTAL

Rs.

1839608"

. From the available surplus of Rs. 2635914 in 1962, the .workmen will get a total sum of Rs. 1839608 as bonus for that year which works out to more than 60% of the available aurplus.

Similarly for the year 1963 th~ figures are as follows : . 1963

I. Amount already paid by the appellant

2. Additional amount awarded by the Tribunal

TOTAL

Rs. 19l5079s

981397"

.2942192

H From the available surplus of Rs. 4904987 in.· 1963, thcworkmen will get a sum of Rs. 2942192 for that year which works" out more or less about 60% of the available surplus, falling short by a sum of Rs. 800/-. ,

Mr. Malhotra, learned counsel for the appellant attacked the A method of calculation adopted by the Tribunal. According to him the Tribun11l should not have fixed more than 60% of the available surplus as bonus payable for a year. On the other hand, th: amounts of bonus now awarded by the Tribunal and already paid by the appellant exceed 60%. Jn our opinion, there is considerable force in the contention of the Learned counsel. The avail- U able surplus, as found by lb~ Tribunal for the year 1962 is Rs. 2635914. Working out roughly 60% of this surplus to be distributed as bonus to the workmen, the amount of bonus will be aboui Rs. 1581600. The appellant has admittedly paid a sum of Rs. 1441455. The balance that tthe workmen will be entitled to will be Rs. 14.9145.00, whereas the Tribunal has directed the c apJ"llant to pay for this year by its Award a sum of Rs. 3~153.

The award of this amount is not justified.

So far as 1963 is concerned, the available surplus as found by the Tribunal is Rs. 4904987. 60% of this available surplus, to which the workmen will be entitled to will be Rs. 2942992. On the other hand, the total amount that the workmen will get as per o the award includi111t the amount already paid by the appellant as bonus is Rs. 2942192. The appellant will have to pay only an additional sum of Rs. 800/. to make up 60%.

There is no appeal by the Unions and therefore the bonus awarded for the year 1963 does not require any interfereno:.

In allocting the available surplus between the company and E the workmen, it has been held by this Court that it will be eguitable if roughly 60% of the surplus is distributed as bonus to the workmen and the Company is left with the remaining 40%. The Company will get in addition to this 40%, the benefrt of the Income-tax rebate on the 60% bonus payable to the workmen. !vide Mis. Gannon Dunkerley and Co. Ltd. and anotlrer v. Their F workmen( 1)]. We have adopted the same principle jn thease

on hand.

To conclude the Award of the Industrial Tribunal in A:J.D.

No. 6 of 1966 is set aside and Civil Appeal No. 1291 of 1967 is allowed. Ture will be no order as to costs.

The Award of the Industrial Tribunal in A.I.D. No. 8 of G 1966 is modified to the following extent: For tthe year 1962 the appellant will be liable to pay as additional bonus only a sum of Rs. 140145 inste1d of a sum of Rs. 398153 as directed by the Tribunal in the Award. To this extent Civil Appeal No. 1292 of 1967 is allowed in part. In other respects, it is dismissed. There will be no or.der as to costs.

'V.P.S.

(I) A.l.R.1971, S.C. 2S67

February 15, 1972

I. D. DuA

G. K. MITTER

Payment of Bonus Act, 1965

Payment of Bonus Act

30th June 1965

BINNY LTD

s. 19

s. 19

s. 11

Section 17

[1968] 2 S.C.R. 311

CIVIL APPELLATE JURISDICTION

P. Malhotra

D. N. Gupta

N. Keshava

K. Rajendra Chowdhary

Vineet Kumar

December 8, 1965

Government of Mysore

March 5, 1966

As the Payment of Bonus Act, 1965

August 28, 1965

June 30, 1965

May 29, 1965

December 31, 1965

August 28,

1965

Malhotra

H. K. Puri

Puri

August 28.

1965

Section 2

Section 4

s. 4

Second Schedule

Section 5

s. 6

Section 6

ss. 8 and 13

Section 11

Section 17

s. 19

Section 34

section 17

s. 17

s. 17

s. 19

s. 11

s. 19

Section 17

Fixed Assets and Capital Works

Malhatra

Their Workmen

I. N.

Keshava

Keshava

Binny Mills Labour Association