1. Bonus dispute between employer and workmen regarding available surplus and claims for additional bonus payments. (Para 1 , 2 , 3 )
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1959 Supreme(SC) 90
SUPREME COURT OF INDIA
5th May, 1959
S.R. DAS, C.J.I., N.H. BHAGWATI, S.K. DAS, P.B. GAJENDRAGADKAR AND K.N. WANCHOO, JJ.
The Indian Oxygen and Acetylene Co., private Ltd., Bombay, Appellant
Versus
Its Workmen and others, Respondents.
Civil Appeal No. 753 of 1957.
All India Indian Oxygen and Acetylene Employees Federation, Intervener.
Advocates appeared
Mr. C. K. Daphtary, Solicitor-General of India (Mr. N. A. Palkhivala, Advocate, M/s.J. B. Dadachanji and S. N. Andley, Advocates. of M/s. Rajinder Narain and Co., with him), for Appellant; M/s. D. H. Buch and I. N. Shroff, Advocates, for Respondent No, 1; M/s. C. L. Dudhia and I. N. Shroff, Advocates, for Respondent No. 2; M/s. Janardhan Sharma and B. P. Maheshwari, Advocates, for Intervener.
Advocates:
B.P.MAHESHVARI, C.K.DAFTARY, C.L.DUDHIA, D.H.BUCH, I.M.SHROFF, J.B.DADACHAN, JANARDAN SHARMA, N.A.PALKHIWALA, S.N.ANDLEY
B.P.MAHESHVARI, C.K.DAFTARY, C.L.DUDHIA, D.H.BUCH, I.M.SHROFF, J.B.DADACHAN, JANARDAN SHARMA, N.A.PALKHIWALA, S.N.ANDLEY
Industrial tribunals must apply the Full Bench formula in bonus disputes, including claims for rehabilitation. The weighted average method is the scientifically accurate approach for determining the average life of assets to calculate rehabilitation costs.
Headnote:(A) Industrial Disputes - Bonus Claims - Full Bench Formula - Industrial tribunals must give effect to the Full Bench formula when determining available surplus for bonus payments, including allowing claims for rehabilitation. (Para 6)
(B) Determination of Surplus - Price Level - It is inexpedient to confine the decision of the tribunal solely to the price level prevailing in the bonus years. (Para 8)
(C) Rehabilitation Allowance - If an amount for rehabilitation is allowed to an employer and remains available during the relevant year, it must be taken into account in subsequent years unless it is proven that the amount was used for rehabilitation purposes. (Para 9)
(D) Calculation of Asset Life - Weighted Average Method - The weighted average method is scientifically more accurate and realistic than the ordinary arithmetic mean for determining the average life of assets, as it prevents small items from distorting the average. (Paras 12-13)
Facts of the case:
A dispute arose between a company and its workmen regarding bonus claims for two specific years. While the company paid a voluntary bonus, the workmen sought a higher percentage of their total earnings. The tribunal awarded a bonus based on available surplus but rejected the company's claim for rehabilitation on grounds of social justice. The company challenged this award before the court.
Findings of Court:
The tribunal was in error for not applying the Full Bench formula and rejecting the claim for rehabilitation. Based on the tribunal's own alternative finding, if the rehabilitation claim were granted, no available surplus would exist for the relevant years. The court also upheld the use of the weighted average method for calculating the life of assets as a scientifically sound practice.
Issues: Whether the tribunal is bound to follow the Full Bench formula in bonus disputes; whether price levels are restricted to bonus years; and whether the weighted average method is appropriate for calculating asset rehabilitation.
Ratio Decidendi: The court held that the Full Bench formula is binding on industrial tribunals for bonus calculations. Furthermore, the weighted average method for asset life is superior to the arithmetic mean as it provides a more realistic result by accounting for the relative value of assets, thereby preventing distortion in the calculation of rehabilitation costs.
Result: Appeal allowed.
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Table of Contents
2. Employer contends no additional bonus is due under the formula; workmen dispute the calculation of available surplus and the validity of rehabilitation claims. (Para 4 , 8 , 9 , 14 )
3. The court evaluated the mandatory nature of the Full Bench formula, the use of current price levels, and the scientific validity of the weighted average method. (Para 6 , 8 , 9 , 11 , 12 , 15 , 16 )
4. Industrial tribunals must apply the Full Bench formula for bonus claims, including allowing for the rehabilitation of plant and machinery. (Para 6 )
5. Appeal allowed and the industrial tribunal's award set aside. (Para 17 )
6. Are industrial tribunals bound to follow the Full Bench formula when determining available surplus for bonus claims?
Yes, industrial tribunals must give effect to the Full Bench formula when dealing with claims for bonus, including granting claims for rehabilitation. (Para 6 )
7. Must a tribunal confine its decision on available surplus solely to the price levels prevailing during the bonus years?
No, it is inexpedient to confine the decision solely to the price levels of the bonus years; price levels prevailing at the time of the decision may be considered. (Para 8 )
8. How should previously allowed rehabilitation amounts be treated in subsequent bonus disputes?
If an amount for rehabilitation was allowed and remained available to the employer during the relevant year, it must be taken into account unless shown to have been used for rehabilitation. (Para 9 )
9. Is the weighted average method acceptable for determining the average life of assets for rehabilitation purposes?
Yes, the weighted average method is scientifically more accurate and realistic than the ordinary arithmetic mean for determining the average life of assets. (Para 12 , 13 )
Judgement
P. B. GAJENDRAGADKAR J.: This appeal by special leave arises from a bonus dispute between the Indian Oxygen and Acetylene Co., Private Ltd., (hereafter called the appellant) 1115 and its workmen, the relevant years for the bonus claim being 1952-53 and 1953-54. This claim was made separately by the workmen excluding the members of the clerical staff as well as by the clerical staff and the two claims, thus made were referred by the Bombay Government to the Industrial Tribunal for its adjudication. The claim raised by the workmen excluding clerical staff was numbered as Ref. (I. T.) No. 40 of 1956, while that made by the clerical staff was numbered as Ref. (I. T.) No. 44 of 1956. Both categories of workmen will hereafter be described as the respondents in this judgment.
2. The appellant is a private limited company incorporated in 1935 and it has its head office at Calcutta. Its business is to manufacture and sell oxygen and acetylene. It is a subsidiary" of the British Oxygen Co. Ltd. It sells its products to the hospitals & nursing homes and in large quantities to industrial concerns for welding, cutting and blasting operations. It voluntarily paid bonus equal to two months basic wages for both the years in dispute; but the respondents were not satisfied with the said payment and they made a claim for 1/3 of their total earnings for the two respective years. That is how the dispute arose between the parties.
3. It appears in evidence that all the shares of the appellant (excepting two or three held by nominee share-holders) are held by the British Oxygen Co. Ltd. Evidence also shows that the appellant has been prospering and has been expanding at a rapid rate. It has capitalised its reserves in 1940, 1941, 1942, 1945, 1946, 1947&1949 with the result that the major portion of its capital is made up of bonus shares. It has made good profits for the year ending 30-9-1953 as well as for the year ending 30-9-1954. There is also no doubt that a large gap exists between the actual wages paid by it to its workmen and the living wage. It is on these allegations that the respondents made a claim for bonus of 1/3 of their total earnings.
4. The appellant pleaded that it was paying good wages to the respondents and that under the formula the respondents were not entitled to claim any additional bonus for the relevant years. In fact, according to the appellant, if the formula was properly worked the bonus already voluntarily paid by it to the respondents could not have been claimed by them.
5. The tribunal has, however, rejected the appellant s case and has directed it to pay to the respondents bonus at the rate of 1/4 of the annual basic wages for l952-53 and 1/3 of the said wages for 1953-54 (less the bonus already paid for these years). It has also directed that in calculating the amount of bonus overtime and dearnness and other allowances should be excluded. This award has been made subject to the two conditions specified by it. It is the correctness of this award that is challenged by the appellant before us.
6. The first point which the appellant has urged is against the finding of the tribunal that it was not bound to give effect to the Full Bench formula. In determining the available surplus the tribunal has taken the view that the formula was not binding on it and that on considerations of social justice to which it has referred it was open to it to reject the claim of the appellant for rehabilitation, This question has been considered by us at length in the case of Associated Cement Companies Ltd., Bombay v. Their Workmen , Civil Appeals Nos. 459 and 460 of 1957, D/- 5-5-1959, and we have held that in dealing with claims for bonus industrial tribunals must give effect to the formula. We have also indicated how the calculations under the formula should be made in such disputes. In view of the said decision we must hold that the tribunal was in error in not granting to the appellant its claim for rehabilitation.
7. According t
