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PETITIONER: ALUMINIUM CORPORATION

       Vs.

RESPONDENT: THEIR WORKMEN AND ORS.

DATE OF JUDGMENT: 14/08/1963

BENCH:

ACT: Industrial   Dispute-Award  of  bonus-Full  Bench   Formula- Allowance  under  rehabilitation  charges-Burden  of  proof- Evidentiary value of statements in balance sheets.

HEADNOTE: The  appellant  is a manufacturer of aluminium,  having  two factories  one  near  Asansol and  another  in  Asansol.   A dispute   having  arisen  between  the  appellant  and   the respondent on the question of bonus for the year 1957-58  it was referred to the Industrial Tribunal by the Government of West Bengal.  A similar dispute arose between the  appellant and  its  workmen in the second factory and  this  also  was referred  to the same tribunal.  In the second  dispute  the parties  submitted  joint  petitions  before  the   tribunal agreeing to abide by the award on the bonus question in  the first dispute and requesting that similar award be made  ,in the second dispute also.  In the first dispute the  Tribunal awarded  a  bonus  equivalent to three  months  basic  wages inclusive  of the amount that had already been paid  by  the company  voluntarily.   An  award was  made  in  the  second dispute also in similar terms.  In determining the amount of available surplus the Tribunal applied the rules embodied in the  Full Bench Formula which was approved by this Court  in Associated Cement Co. Ltd. v. Itsworkmen,  [1959]   S.C.R. 925, and allowed Rs. 43 lacs as returnon  reserve used  as working   capital  and  allowed  nothing  under   the   head rehabilitation charge.  The appellant appealed against  both the awards by way of special leave granted by this Court. On  behalf of the appellant it was contended that there  was no  justification  in  rejecting the claim  under  the  head rehabilitation charge.  It was urged that the balance  sheet of the company would by itself show what part of reserve was used as working capital and a correct way of reaching at the figure of reserve 430 used as working capital would be by deducting liabilities of the company in the balance sheet from as shown therein. Held   :  (i)  The  burden  to  prove  any  prior  head   of rehabilitation  lies  on the employer and  that  unless  the employer  has  by proper evidence established its  claim  to some  amount  as  rehabilitation charge the  claim  must  be rejected.  In the present case the materials on the basis of which the multipliers and devisers have been arrived at have not  been established by proper evidence and  therefore  the tribunal was justified in rejecting the claim under the head rehabilitation charge. (ii)Regarding  the  claim of prior charges under  the  head "return  on reserve used as working capital"  the  appellant

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gave  widely  different estimates and this fact  gives  some justification in refusing to accept any of these as correct. The mere statements in the balance sheet as regards  current assets  and  liabilities cannot be taken as  correct.   They have   to  be  established  by  proper  evidence  by   those responsible  for  preparing the balance sheet  or  by  other competent witnesses.  This has not been done in the  present case. Petled Turkey Dye Works v. Dye and Commercial Workers  Union [1960]  2 S.C.R. 906, Khandesh Spg and Wvg.  Mills Co.  Ltd. v.  Rastriya  Girni Kamgar Sangh, Jalgaon, [1960]  2  S.C.R. 841,  Bengal  Kagazkal Mazdoor Union v. The  Titagarh  Paper Mills Co. [1964] 3 S.C.R. 38, referred to. (iii)The practice on the part of employers to show  the entire  amount  of  reserve available  for  use  as  working capital as the actual amount used was wrong. (iv)For deciding what part of the available surplus  should be paid to the workmen as bonus the wage bill of the workmen only has to be considered and the Tribunal is not  concerned with what is paid by the company to its officers. The Tribunal has not committed any error in fixing the bonus figures and the appeals arc therefore dismissed.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  238  and 818 of 1962. Appeals  by special leave from the awards dated October  21, 1960,  and  May 17, 1961 of the Fifth  Industrial  Tribunal, West  Bengal in Cases Nos.  VIII-77 of 1959 and  VIII-93  of 1959 respectively. A.   V.  Viswanatha  Sastri and B.  P.  Maheshwari  for  the appellant (in both the appeals). Janardhan Sharma, for the respondents (in the both appeals). August 14, 1963.  The Judgment of the Court was delivered by the 431 DAS  GUPTA J.-These appeals by special leave are against  an award of the Fifth Industrial Tribunal, West Bengal, on  the question  of  bonus for the year 1957-58 to workmen  of  the appellant-Company.   The appellant which is engaged  in  the manufacture of aluminium from basic material has its factory at  J.  K.  Nagar near Asansol in West  Bengal.   A  dispute having arisen between the appellant and some of its  workmen on  the  question  of  bonus for the  year  1957-58  it  was referred  to the Fifth Industrial Tribunal, West Bengal,  by an  order  of  the Government of West  Bengal.   In  another reference  made by that Government to the same  Tribunal  on May  2, 1959 a dispute between the Company and  its  workmen employed  at  its factory at J. K. Nagar,  Asansol,  on  the question  of  bonus  for the year 1957-58  was  one  of  the matters  referred.  In the first reference the Tribunal  has awarded  in favour of the workmen bonus equivalent to  three months’  basic wages inclusive of the amount (equivalent  to half  a month’s basic wages) that has already been  paid  by the  Company  voluntarily.   In  the  second  reference  the parties filed joint petitions before the’ Tribunal  agreeing to  abide by any decision or award whatsoever passed by  the Tribunal  regarding the bonus issue in the  first  reference and  requesting  that similar award be  made  regarding  the issue of bonus in both references.  The Tribunal accordingly passed  an  order in the second reference that  the  workmen would get the same bonus as awarded in the first  reference. The result of this is that the workmen covered by the second

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reference  would  also be entitled to  three  months’  basic wages as bonus for the year 1957-58. Applying  the  rules embodied in what is known as  the  Full Bench  Formula evolved by the Labour Appellate  Tribunal  in 1950  and  approved  by  this  Court  in  Associated  Cement Companies Ltd., v. Its Workmen(1) for calculation of  profit bonus  the Tribunal held that the available surplus was  Rs. 4.63 lacs.  It pointed out that if bonus equivalent to three months’  basic wage was given to workmen, still the  Company will  have Rs. 3.91 lacs as the available surplus  inclusive of the refund of incometax on account of bonus, which  meant an expenditure of (1)  [1959] S.C.R. 925. 432 only Rs.. 0.72 lacs on this head by the Company. In reaching this  figure of Rs. 4.63 lacs as the available  surplus  the Tribunal allowed Rs. 0.43 lacs as return on reserves used as working   capital  and  allowed  nothing  under   the   head rehabilitation  charge.   In  support  of  the  appeals  Mr. Vishwanatha Sastri has vehemently challenged the  Tribunal’s view on both these matters.     On  the  question of rehabilitation charge   Mr.  Sastri contended  that  there was no justification  whatsoever  for rejecting  the claim on this head altogether.  It has to  be remembered in this connection that by a series of  decisions of  this  Court it is now well settled that  the  burden  to prove any prior charge under the head rehabilitation lies on the  employer  and that unless the employer  has  by  proper evidence   established   its  claim  to   some   amount   as rehabilitation  charge  the  claim must  be  rejected.   The appellant  adopted  a curious procedure.   It  examined  its Manager  and  through  him put  in  statements  showing  its calculations  of available surplus.  A number of  statements were  put,  in each showing the available surplus   as  nil. While  however in  statements  1 and  11 the  rehabilitation charge  is  shown  as Rs. 6,27234.00 it is  shown   as   Rs. 5,84,534.00  in  statements  III  and  IV, and in statements V and VI the figure is Rs. 10,25,021.00 How  such  different figures  could   be arrived  at  has not been sought  to  be explained  by  its only witness, the Manager.   The  witness stated that the assets of the Company were revalued in  1956 by  a Committee of which he was one of the members.  He  had added that each of the assets was ascertained with reference to the Company’s registers and they were .divided in  blocks according   to their date of acquisition.  A portion of  the report made by the Revaluation Committee was put in.   There is  nothing  however in this or in  the  witness’s  evidence that   throws  any  light  on  the  important  question   of multiplier  and divisor.  On the question of multiplier  the witness says that the multiplier was worked out according to the procedure as detailed in the Revaluation Report it,self. He has not tried himself to explain this basis.  It is by no means  clear that he has special knowledge and skill in  the matter of replacement of the different machinery. The report was signed also by two other members, neither 433 of  whom has been examined.  The materials on the  basis  of which  these multipliers were arrived at have also not  been established by any evidence. When we turn to the question of divisor the position is even more unsatisfactory.  The witness has not vouchsafed a  word as  to  how  the  divisor was  arrived  at.   It  is  hardly necessary  to  point  out  that the  mere  submission  of  a statement prepared in the Company’s office showing a certain divisor cannot meet the requirements of law unless and until

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the  basis of this calculation is explained by testimony  on oath which can be tested by cross-examination.  The Tribunal -was  therefore wholly justified in rejecting the claim  for rehabilitation.   On  the  claim of prior charge under the head  "return  on reserves used as working capital", the Tribunal, as  already stated, has allowed Rs. 0.43 lacs.  What the Company  claims under this head is difficult to understand.  For, as in  the case  of  rehabilitation  charge so also  under  this  head, different  figures have been shown in different  statements. Statements  Nos. 1, III and V show the reserves employed  in business  as Rs. 111,74,162.00, while in statements  11,  TV and  VI  the  amount  is shown  as  Rs.  199,56,718.00.  The difference  is due to the fact that while in  statements  1, III  and  V, the depreciation reserves is shown  as  Rs.  86 lacs,  the corresponding figure in statements 11, IV and  VI is more than double of this, being Rs. 173,82,556.00.    The  very fact that such widely different  estimates  have been given is some justification for refusing to accept  any of  these  as  correct.  Indeed, the  way  the  Company  has approached  the  calculations of reserves  used  as  working capital  makes  one think that those responsible  for  these calculations  did not treat the matter seriously at all  and felt that by putting arbitrary figures under this head  they could play havoc with the Full Bench Formula.  This deserves strong condemnation. Mr.Sastri  made no attempt to justify these calculations  of reserves  used as working capital.  He tried to persuade  us however  that  the  balance-sheet of the  Company  would  by itself  show  what  part of reserves  was  used  as  working capital.   Learned counsel submitted that are easy and  safe way of ascertaining the correct figure under this head is 434 by  deducting the current liabilities of the Company in  the balance-sheet  from  the current assets  as  shown  therein. There  is undoubtedly support in standard books on  account- ancy  for  the proposition that the excess  of  the  readily realisable, liquid, or current assets of a concern over  its current  liabilities  is the proper measure of  the  working capital. (See Cropper’s Higher Book-Keeping and Accounts 7th Edition,  p. 301 and Pickles on Accountancy, 2nd Edition  p. 1325). There  are however two difficulties in the way of  accepting Mr. Sastri’s contention.  The first is that the mere  state- ments  in  the balance-sheet as regards current  assets  and current  liabilities cannot be taken as sacrosanct.  As  has been  emphasised  in more than one case by this  Court,  the correctness  of  the figures as shown in  the  balance-sheet itself are to be established by proper evidence in Court  by those  responsible  for preparing the  balance-sheet  or  by other competent witnesses. (Petlad Turkey Dye Works v.  Dyes and Chemical Workers’ Union(1) and Khandesh Spg. and Weaving Mills  Case(2)).   This  was recently  emphasised  again  in Bengal  Kagabkal Mazdoor Union v. The Titagarh  Paper  Mills Co. Ltd.(3). The  second  difficulty  is that the task  here  is  not  to ascertain  the total working capital of the concern, but  to find out what portion of the reserves has been used as work- ing  capital.   It may often happen that the  whole  of  the working  capital  is  provided from  what  remained  of  the subscribed  capital  after  the  acquisition  of  the  fixed assets.   There  may be other cases where a portion  of  the working capital is provided from the subscribed capital  and the remainder is met from the reserves.  There appears to be a tendency on the part of some employers to show the  entire

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amount  of reserves available for use as working capital  as the actual amount used for that purpose.  This is  obviously wrong. It would be improper and indeed impossible in most cases  to come to a correct conclusion on these matters by scrutiny of the   balance-sheet  itself.   Whenever  a  Company   claims deductions from the gross profits under the head (1)  [1960] 2 S.C.R. 906. (2)  [1960] 2 S.C.R. 841. (3)  [1964] S.C.R. 38. 435 "return  on  reserves  used as working  capital,"  as  prior charge,  for  ascertaining the available surplus  under  the Full  Bench  Formula  it is necessary and  proper  that  the accountant,  or  other  competent officers  of  the  Company should come into the witness-box and assist the Tribunals in coming to a satisfactory conclusion on the question. No  such  attempt  was  made in this case  and  we  find  it impossible to say from the evidence on the record as to what portion,  if  any,  of the reserves  was  actually  used  as working capital.  The tribunal would have been justified  in rejecting in toto the Company’s claim under this head.   The allowance  of  Rs. 0.43 lacs as prior charge  on  return  on reserves  used as working capital was therefore an error  in favour of -the appellant.  There is no reason therefore  for reducing  the  figure  as  found  by  the  Tribunal  as  the available surplus. Lastly it was suggested by Mr. Sastri that in deciding  what should be allowed as bonus out of this available surplus the Tribunal should have proceeded on the basis that one month’s basic  wages  amount  to Rs. 90,000 and  not  Rs.  50,00  as mentioned by the Tribunal.  This figure of Rs. 90,000/-  has been given by the Company’s Manager as the total wage of the workmen and the employees, including officers.  We are  told that the officers were also paid bonus and that also has  to come  out of the available surplus.  So Mr.  Sastri  argued, though rather faintly, that the bonus should have been fixed on the basis of Rs. 90,000 wage bill.  We do not think  that to be the correct approach.  The Industrial Tribunal is  not concerned with what is paid by the Company to its  officers. It is concerned only with the workmen’s claim of bonus.  For deciding therefore what part of the available surplus should be paid to the workmen as bonus the wage bill of the workmen only  has  to be considered.  It is -not disputed  that  the wage  bill  (basic  wage)  of  the  workmen,  excluding  the officers,  was  Rs.  50,000.   The  Tribunal  has  therefore committed  no  error  in fixing the bonus  figures  on  this basis. We  wish  to make it clear that what we have  said  in  this judgment  will  not  stand  in  the  way  of  the   employer substantiating  a claim for rehabilitation charge by  proper evidence, in any future dispute on that question. As all the points raised in the appeals fail, they are dismissed with costs.                     Appeals, dismissed. 436