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1963 Supreme(SC) 307
SUPREME COURT OF INDIA
19th December, 1963
P.B. GAJENDRAGADKAR AND K.C. DAS GUPTA, JJ.
Podar Plastics (P) Ltd. Bombay Appellants
Versus
Workmen (excluding clerks employed under the Appellant and represented by Bombay General Kamgar Union), Respondents.
Civil Appeal No. 496 of 1963.
Advocates appeared
Mr. S. V. Gupte, Additional Solicitor-General of India, (Mr. I. N. Shroff, Advocate, with him), for Appellant; Mr. K. R. Chaudhuri, Advocate, for Respondents.
I.M.SHROFF, K.R.CHAUDHARY, S.V.Gupta
In calculating bonus payable to workmen, an employer cannot claim a deduction for notional remuneration to a director who has not actually charged any remuneration, and rehabilitation expenses must be supported by sufficient evidence.
Headnote:
BONUS - PAYMENT - CALCULATION - PRIOR CHARGES - REMUNERATION TO DIRECTOR - REHABILITATION - AD HOC BASIS - WEALTH TAX - DEDUCTION.
Fact of the Case:
The appellant, Podar Plastics (P) Ltd., challenged an industrial tribunal's award directing it to pay bonus to its workmen for the year 1959. The dispute centered around the calculation of available surplus for bonus payment, particularly the deduction of prior charges, including notional remuneration for a director and rehabilitation expenses.
Finding of the Court:
The Supreme Court held that the tribunal was justified in disallowing the appellant's claim for notional remuneration to a director who had not actually charged any remuneration. The court also rejected the appellant's contention that rehabilitation should be calculated on the basis of replacing second-hand machinery with new machinery, but upheld the tribunal's finding that the appellant had not provided sufficient evidence to support its claim for rehabilitation.
Issues: 1. Whether the appellant was entitled to deduct notional remuneration for a director who had not actually charged any remuneration? 2. Whether rehabilitation should be calculated on the basis of replacing second-hand machinery with new machinery? 3. Whether the appellant was entitled to deduct wealth tax as a prior charge.
Ratio Decidendi: 1. The court held that it would be unfair to allow a deduction for notional remuneration when the director had not actually charged any remuneration, as this would artificially depress the available surplus for bonus payment. 2. The court held that the tribunal was correct in rejecting the appellant's contention that rehabilitation should be calculated on the basis of replacing second-hand machinery with new machinery, as this was not supported by the law. 3. The court held that the appellant could not claim a deduction for wealth tax without providing evidence of the amount of wealth tax charged or paid.
Final Decision: The appeal was dismissed with costs.
Judgment
GAJENDRAGADKAR, J. : This appeal arises from an industrial dispute between the appellant Podar Plastics (P) Ltd. and the respondents, its workmen and it has reference to the claim made by the respondents for bonus for the year 1959. The respondents claim that for the relevant year they should get bonus equivalent to three months salary including dearness, allowance. On hearing the parties and on considering the evidence adduced by them, the Tribunal has directed that the appellant shall pay to the respondents bonus at the rate of half months basic wages excluding allowances and overtime for the said year. It is against this award that the appellant has come to this Court by special leave.
2. The appellant is a private company and its registered office is situated at Podar Chambers, Parsee Bazar Street, Fort, Bombay. It owns a factory at Supari Baug Road where it manufactures plastic products. The appellant s case before the Tribunal was that if proper accounts are made in accordance with the Full Bench Formula, it would be found that there is no available surplus from which any bonus can be paid to the respondents. On the other hand the respondents urged that the working of the Formula would show a substantial available surplus from which three months wages as bonus can be easily paid. As usual, the controversy between the parties centered round prior charges which the appellant claimed ought to be deducted from the gross profits. One of the points of dispute between the parties was whether depreciation which has to be deducted as a prior charge should be statutory depreciation or notional normal depreciation. The figure of the profit was admitted at Rs. 2.70 lacs. The Tribunal made alternative calculations, one on the basic that statutory depreciation alone should be deducted, while the other was prepared on the basis the notional normal depreciation as claimed by the appellant should be deducted. On the first calculation the available surplus was found to be Rs. 0.44 lac. On the alternative calculation, it was found to be Rs. 0.33 lacs. For the purpose of this appeal we will accept the latter calculation which is made on the basis that the notional normal depreciation has to be deducted.
3. It has conceded before us by the learned Addl. Solicitor-General for the appellant that there are two mistakes in this calculation. The amount of notional normal depreciation which has been shown as Rs. 0.18 lac ought to be Rs. 0.73 lac. Similarly the amount of income-tax which is shown as Rs. 0.96 lac ought to be Rs. 0.95 lac. Thus, the two mistakes accounting for nearly Rs. 60,000/- have been made in favour of the appellant by the Tribunal in making this calculation, and that would make the available surplus as Rs. 0.39 lac; that is one aspect of the matter which has to be borne in mind in dealing with the appeal before us.
4. The main point which has been urged before us by the learned Addl. Solicitor-General relates to the claim made by the appellant for the decision as a prior charge of Rs. 60,000/- by way of notional remuneration for M. K. Podar, one of the Directors of the Company. We have already seen that the appellant is a private Ltd. Co. and four of the major share-holders are members of the Podar family; they are : R. S. Podar, G. R. Podar, K. R. Podar and B. J. Podar; the 5th share-holder is M/s. Podar Trading Co. Private Ltd., 6th is Jay Agents Private Ltd.; 7th is the Notional Traders Private Ltd. and the 8th is Ratilal B. Desai. According to the appellant, K. R. Podar devoted the whole of his time to the supervision and management of the appellant concern, and so, he was entitled to charge remuneration at the rate of Rs. 5,000/- a month. In support of this claim, Mr. Gupta, the Manager of the concern, made an affidavit and offered himself for cross-examination. He stated that Mr. Podar attends the factory from 9 to 1 and 2.30 to 6.30. P. M. In his cross-examination, it was brought out that when the previous Direct
