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PETITIONER: BIHAR STATE ELECTRICITY BOARD, PATNA.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT30/09/1975

BENCH: ALAGIRISWAMI, A. BENCH: ALAGIRISWAMI, A. GOSWAMI, P.K. UNTWALIA, N.L.

CITATION:  1976 AIR  251            1976 SCR  (2)  42  1976 SCC  (2) 231  CITATOR INFO :  RF         1986 SC1999  (8)  E          1990 SC1851  (36)

ACT:      Industrial  Disputes,   Act  Computation  of  financial burden before making an award :

HEADNOTE:      Electricity Supply  Act, 1948-S.  59, 64, 65, 66 67 and 68.      The  Employees  Provident  Fund  Act  applies  only  to establishments which are factories. The industry in question electricity-including    generation,     transmission    and distribution thereof,  is one  to which the Act applies. But only a  small proportion  of employees  connected  with  the generation  of   electricity  is  establishments  which  are factories. To the rest the Act does not apply. The appellant maintains a  contributory provident fund for those employees who are  not covered by the Act where the contribution is on the basis  of basic  wage the  appellant and  the  employees contributing equally.  The contribution  under the  Act is 8 per cent whereas under the appellant’s scheme it is 6.25 per cent.      The workmen  respondents claimed  before the Industrial Tribunal in  a reference made by the Govt. Of Bihar (1) that all workmen  of the  appellant should  have the same and the similar benefits  and that,  therefore. there  should be  no distinction between  the appellant’s  contributory provident fund scheme  and the  scheme under  the Employees  Provident Fund Act.      (2) The  services of  the workmen  of the appellant are liable to  be transferred  from one establishment to another both of which may not be covered by the same scheme and such anomalies can  be removed by giving the same benefits to all the workmen;  (3) That  the State  was the  financier of the appellant which  now charges  interest at the rate of 61 per cent as  against previous 4 per cent; (4) That no scheme run by the  Board was running at a loss; (5) That a large amount was paid  to the  Government by me appellant in the shape of interest towards  the loans received from the Government and that such amounts should be taken as dividends to be paid to

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the Government by the appellant and should not be taken into consideration while  deciding the matters regarding benefits to be made available to its employees.      The appellant  contended before the Industrial Tribunal that the  demand of  the  workmen  would  impose  additional financial liabilities  which the appellant would not be able to bear      The Tribunal did not consider the validity of the above submissions It merely relied on an earlier award in which it was observed that if the interest realised by the Government were excluded  from consideration  there would be surplus in favour or  the appellant.  The Tribunal  held that since the position of  the appellant was not worse than what it was at the time  of the  earlier award, the appellant should extend the benefits  of the  contributory  provident  fund  to  all workmen who  are  not  covered  by  the  Act  and  that  the contributions should  be 6.25   per  cent not  on the  basic wages but on the total wages.      Allowing the appeal, ^      HELD: (1)  The Tribunal has treated the whole matter in a  very   perfunctory  manner.   The   main   question   for consideration by  the Tribunal was the financial capacity of the Board.  It has  made no  effort at  all to  analyse  the balance sheet of the appellant to show the actual results of his working. It has made no effort to work out the financial implications of  its order.  It has  not made  it clear what exactly are  the total  wages. This  Court in  the  case  of Gramophone Company.  although it  was  a  case  of  ordinary commercial concern,  calculated the actual burden to protect the stability of the industry and to see that the imposition of the burden does not result in loss to the employer. 43      (2)  The   appellant  is  not  an  ordinary  commercial concern. It  is a  public   service institution.  lt is  not expected to  make any  profits. It is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred is a result of such extension.  Section 59 of the Electricity (Supply) Act, 1948 provides  that as  far as  practicable The  Board shall carry on  its operations  so as  not to  incur loss.  S.  64 enables the  State Government to advance loans to the Board. S. 65  authorises the  Board to borrow. S. 66 authorises the State Government  to guarantee loans raised by the Board. S. 67 lays  down the  manner in  which the  profits have  to be distributed. S. 68 imposes obligation on the Board to make a credit to the depreciation reserve in the prescribed manner. [46 A-C].      The assessment by the Tribunal that the interest should not be  taken into account in working out the profits is not borne out by the provisions of the statute. The Tribunal did not look  into the  Act at  all.  Whether  in  view  of  the statutory  obligations  laid  on  the  appellant  under  the aforesaid sections  whether the  same  considerations  which apply in  the case  of private  commercial concerns could be applied to  the Board  while analysing  the capacity to bear the additional  burden is rather a difficult question. We do not express  any view on that question. However various sums payable under  s. 67  have to be deducted before the profits could  be   ascertained  and  with  regard  to  depreciation reserve, the  provision of  s. 68  may have to be taken into account. [47 C-E].      The matter  was remanded  back to  the Tribunal  to  be disposed of  in the  light of  the observations  made in the judgment.

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JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2104 of 1969.      Appeal by  Special Leave  from the  Judgment and  order dated the  27th February,  1969 of  the Industrial Tribunal, Bihar, Patna in reference No. 54 of 1966.      S. V. Gupte and U. P. Singh for the Appellant. E      A. K. Nag and D. P. Mukherjee for Respondents.      The Judgment of the Court was delivered by      ALAGIRISWAMI,  J.-This   appeal  is  by  special  leave granted by  this Court  against the  award of the Industrial Tribunal, Bihar at Patna in reference No. 54 of 1966 made by the Government  of Bihar on 25th November, 1966. The special leave granted  is limited only to the question whether there should be  a contributory provident fund scheme on the basis of basic  wages or  total wages. It was noted at the time of granting the  special leave  that  the  appellant  Board  is willing to  extend that scheme to all the workers except the Government servants  who are on deputation and those to whom the Employees   Provident  Fund Act  applies. Therefore  the only item  in reference No. 54 of 1966 which is relevant for the purpose of this appeal is the following:           "Whether the  benefit of  the Employees’ Provident      Fund Act,  1952 should  be extended  to any  additional      categories of workmen ? If so, what should be the terms      and conditions and from what date ?"      The Employees’  Provident  Fund  Act  applies  only  to establishments which  are factories.  It could be applied to establishments  which  are  not  factories  if  the  Central Government by notification in the official 44 Gazette specifies  in this behalf. The industry in question" electricity  including   the  generation,  transmission  and distribution thereof, is on to which the Act applies. But as is well known only a small proportion of employees connected with the generation of electricity is in establishment which are factories. The transmission and distribution is all over the State  and the employees concerned with transmission and distribution  and   the  maintenance   of  those   lines  of transmission and  distribution are spread all over the State and probably  far outnumber  those working in establishments which are  factories. To  them the Employees’ Provident Fund Act does  not apply.  The  Board  maintains  a  Contributory Provident Fund  where the  contribution is  on the  basis of basic  wage,   the  Board  and  the  employees  contributing equally.      The workmen  claimed that  all  workmen  of  the  Board should have the same and similar benefits and that therefore there  should   be  no   distinction  between   the  Board’s Contributory Provident  Fund scheme and the scheme under the Employees Provident  Fund Act.  Moreover,  the  contribution under the Act is 8 per cent whereas under the Board’s scheme it is  6.25 per  cent. The employees also contended that the services of  the workmen  of the  Board  are  liable  to  be transferred from one establishment to another both which may not he  covered  by  the  same  scheme  under  the  Act  and therefore it  will bring about serious injustice if they are deprived of their benefits under the Act, and such anomalies will be  removed by  making  the  benefits  under  both  the schemes similar.  The Board’s contention was that this would impose additional  financial  liabilities  which  the  Board would not  be able  to bear.  Therefore, the  main  question

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which the Tribunal had to consider was the Board’s financial capacity to  implement the  Provident Fund scheme as demand: ed by the workmen. It seems to have been argued on behalf of the workmen  that the  State Government  is the financier of the Board which charges interest now at the rate of 6.25 per cent as  against the  previous 4 per cent per annum. It, was also contended  that no  scheme run by the Board was running at a  loss. Exhibit 17, purported to contain trading results of the  Board., was  shown to the Tribunal and it was argued that in  the year  ending March  1969 Board’s  gross profits amounted to  Rs. 305.12  lakhs and  it had been continuously rising from  Rs. 59.39  lakhs in  1961. Exhibit 18 shows the loans which  have been  received from  the Government by the Board and the balance sheet shows a very large amount in the shape of  interest payable  to the Government. It was argued on behalf  of the  Union that this amount should be taken as dividend to  be paid  to the  Government by  the  Board  and should  not  be  taken  into  consideration  while  deciding matters regarding  benefits to  be  made  available  to  its employees. The  validity of  none of  these contentions  was considered by  the Tribunal. It referred to an award made by it in  1964 in reference No. 19 of 1960 in which it had held that if  the interests  realised by  the State were excluded from consideration,  there would be surplus in favour of the Board. In that award it had been pointed out that it had not been explained  by the  management how  the depreciation had been calculated. That award also pointed out that one of the main reasons  for the  deficits shown  was heavy interest on the capital  investment, that in an electrical establishment capital investments  are heavy  in the  initial stages, that the Board  expected that  after the load developed fully the scheme would start giving adequate 45 profits. The  Tribunal thought  that the position at present was not   worse  than what it was earlier and that therefore the Board  should extend  the benefits  of the  Contributory Provident Fund  to all  workmen other  than  those  who  are covered  by   the  Act.   It  therefore   ordered  that  the contribution should  be 6.25  per cent  but not on the basic wages but on the total wages.      The Tribunal  has treated  the whole  matter in  a very perfunctory manner.  The main  question for consideration by the Tribunal was the financial capacity of the Board. It has made no  effort at  all to  analyse the balance sheet of the Board to show the actual results of its working. It has made no effort  to work  out the  financial implications  of  its order. It  has not  made it clear what exactly are the total wages. In  Gramophone Co.  v. Its  Workmen(1) it was held by this Court that:           "Before the  real profit  for each of the relevant      years  is   ascertained  amounts  to  be  provided  for      taxation and  for development  rebate reserve could not      be  deducted   in  order  to  ascertain  the  financial      capacity of  the employer.  In considering the question      of provident  fund and  gratuity which  stands more  or      less on the same footing the industrial tribunal has to      look at  the profits made without considering provision      for  taxation  in  the  shape  of  income-tax  and  for      reserves. The provision for income-tax and for reserves      must take  second place  as compared  to provision  for      wage structure  and gratuity,  which stands on the same      footing as  provident fund  which  is  also  a  retiral      benefit. Payment  towards, provident  fund and gratuity      is expense  to be  met by  an employer  like any  other      expense including  wages and  if the financial position

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    shows that  the  burden  of  payment  of  gratuity  and      provident fund  can be  met without undue strain on the      financial position of the employer, that burden must be      borne by the employer. It will certainly result in some      reduction in  profits; but  if the  industry  is  in  a      stable condition  and the  burden of provident fund and      gratuity does  not result  in loss to the employer that      burden will  have to  be borne by the employer like the      burden of  wage-structure in  the  interest  of  social      justice. While  on the  one hand casting of this burden      reduces the margin of profit, on the other hand it will      result in  the reduction  of taxation  in the  shape of      income-tax." That case was a case of an ordinary commercial concern. Even so it was noticed that the stability of the industry as well as the  fact that  the burden of provident fund and gratuity does not result in loss to the employer are to be taken into consideration.   the actual burden was calculated and it was pointed out that 63 per cent of it would be met by reduction in taxation.  Nothing of  the sort  has  been  done  by  the Tribunal in  this case.  It is true that in that case it was said that  the amounts  to be  provided for taxation and for development rebate reserve could not be deducted in order to ascertain the  financial capacity  of the  employer. Nothing was said there about the depreciation reserve (1) [1964] II L. L. J.131. 46 which is  obligatory under s. 68 of the Electricity (Supply) Act the  Electricity Board  is not  an  ordinary  commercial concern. It  is a  public service  institution.  It  is  not expected to  make and  profit. It  is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred as a result of such extension.  The Government  makes  subventions  to  the Board for  the purposes  of  the  Act.  Section  59  of  the Electricity  supply  Act,  1948  provides  that  as  far  as practicable and after taking credit for any subventions from the State Government the Board shall carry on its operations so as  not to incur a loss. Under s. 64 the State Government may advance  loans to  the Board  and under  s. 65 the Board itself has  the power  to borrow.  Under  s.  66  the  State Government  may  guarantee  the  payment  of  principal  and interest of  any loan  proposed to  be raised  by the Board. Under s.  67 after  meeting its  operating  maintenance  and management expenses  and after  provision has  been made for the payment  of taxes on its income and profits the revenues of the  Board have  to be  distributed as  far as  they  are available in the following order, namely:-      (i)  interest on bonds not guaranteed under section 66;      (ii) interest on stock not so guaranteed;      (iii)credits to depreciation reserve under section 68;      (iv) interest on bonds guaranteed under section 66:      (v)  interest on stock so guaranteed;      (vi) interest on sums paid by the State Government           under guarantees under section 66;      (vii)the write-down  of amounts paid from capital under           the proviso to sections 59;      (viii)the  write-down   of  amounts   in   respect   of           intangible assets  to the extent to which they are           actually appropriated  in any year for the purpose           in the books of the Board;      (ix) contribution to  general reserve  of an amount not           exceeding one half of one per centum per annum  of           the original  cost of fixed assets employed by the           Board so  however that  the total  standing to the

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         credit of  such reserve  shall not  exceed fifteen           per centum  of the  original cost  of  such  fixed           assets;      (x)  interest  on   loans  advanced  or  deemed  to  be           advanced to  the Board under section 64, including           arrears of such interest:      (xi) the balance  to be  appropriated to  a fund  to be           called the Development Fund to be utilised for-           (a)  purposes beneficial,  in the  opinion of  the                Board,  to   electrical  development  in  the                State;           (b)  repayment of  loans  advanced  to  the  Board                under section 64 and required to be repaid: 47      Provided that  where no  such loan  is outstanding, one half of  the balance  aforesaid shall  be  credited  to  the Consolidated Fund of the State.      Section 68  lays an  obligation on  the Board to make a credit to the depreciation reserve in the prescribed manner.      The facile assumption by the Tribunal that the interest should no.  be taken into account in working out the profits is not  borne out  by the  provisions of the statute. Indeed the Tribunal  did not  look into  the Act at all. Whether in view of  the statutory  obligations laid  on  ii  under  the various sections  just now  referred  to  in  analysing  the capacity of  the Board  to bear any additional burden in the matter  of  provident  fund  or  other  amenities  the  same considerations  that   applied  in   the  case   of  private commercial concerns  could be  applied is a rather difficult question. In  fact the decision might very often depend on a close analysis  of the  financial condition of the Board. We do not want at present to express one view or the other. one thing at  least is  obvious, that  the various  sums payable under the provisions of s. 67 have to be deducted before the profits could  he  ascertained.  Even  with  regard  to  the depreciation reserve  the provisions of s. 68 may have to be taken into  account. If it is not it would have to be met by loans on  which interest  will have to be paid and deduction of interest  so paid  will have  to be taken into account in calculating   the   profits.   The   contribution   to   the depreciation reserve  is a  statutory obligation  and  is  a definite proportion  whereas  it  is  open  to  an  ordinary commercial concern  to credit any amount to the depreciation reserve. These  and other matters cannot be properly decided in the  absence of a detailed examination of the finances of the Board.  That is  why we said that the Tribunal has dealt with the matter in a perfunctory way. It should. be directed to dispose  of  the  matter  afresh  in  the  light  of  the observations made in this judgment.      The appeal  is accordingly  allowed. There  will be  no order as to costs. P.H.P.                                       Appeal allowed. 48