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PETITIONER: J.   K. SYNTHETICS LTD.

       Vs.

RESPONDENT: J.   K. SYNTHETICS MAZDOOR UNION

DATE OF JUDGMENT09/09/1971

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN VAIDYIALINGAM, C.A.

CITATION:  1972 AIR 1954            1972 SCR  (1) 651  1971 SCC  (3) 509  CITATOR INFO :  RF         1976 SC 611  (15)  D          1976 SC1207  (218)

ACT: Bonus-When dividends on shares are extraneous income for the purpose  of  payment of Bonus Act, 1965  The  principle  for determining the  share required for rehabilitation.

HEADNOTE: A  dispute  for  Bonus  was raised by  the  workers  of  the Appellant  company  before the Tribunal for the  Bonus  year 1962-63,  as the appellant company which made profit  during the  year, did not pay any bonus to the workers; but only  a gratuity  of  one  month was paid  to  them.   According  to revised returns filed by the workers, there was an available surplus of Rs. 5.34 lakhs; but according to the  management, there was a deficit.  There were two main points of  dispute :  (1) the workers challenged the deduction of Rs. 4.1  lakh received  as dividend by the company as  extraneous  income. According to the management however, as the company invested part of the paid up capital in hares which earned an  income of  Rs.  4.1 lakh, the company was entitled  to  claim  this amount as an extraneous income because the workers had  made no contribution in its earning and so this amount should  be deducted  from  the  gross  profit.  (2)  The  workers  also disputed  Rs.  75.89 lakhs shown by the  management  as  the annual  share required for rehabilitation.   The  management divided  the  plant and machinery of the  company  into  two blocks.   The original cost of the plant and  machinery  for firdt  block  was 133.00 lakhs and Rs. 15.0  lakhs  for  the second block. The appellant company claimed the ‘multiplier’ (which  is the probable increase in the price of  assets  at the time of rehabilation over the original cost) for each of the two blocks as 6 and the ‘deviser’ (number of years after which  the asset require s replacement) for the first  block as 10 and for the second block as 11. The Tribunal decided the first point against the  management because even though there was share capital available to the appellant,  instead of utilising it as working  capital,  it had borrowed amounts to work the Nylon factory for which  it bad  to  pay  an interest of over Rs.  5  lakhs.   In  these circumstances, it disallowed the claim for deduction on  the

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ground  that it would be unfair to allow the  management  to treat  the income from investments as extraneous income  and still reduce the profits by raising loans and pay  interests resulting in diminution of the surplus.  On the second point the Tribunal admitted only a fraction of the total amount as annual  share  required for ’rehabilitation.   It  held  the ’Multipliee  as 4 for the first block and 2 for  the  second block  and the ’deviser’ as 13 and 14  respectively.   After deducting  the  prior charges from the  gross  profits,  the tribunal computed the available surplus to be Rs. 3.25 lakhs and of this, 60 per cent payable as bonus would come to  Rs. 2,11,000/-.   As  the company bad  already  distributed  Rs. 90,000  the tribunal directed payment of the balance of  Rs. 1,21,000/- a# bonus.  In appeal by special leave, a  further point  was  agitated  before the Court  as  to  whether  the Respondent  can challenge a finding by the Tribunal  in  the absence of an appeal by it.  Dismissing the appeal, HELD,  : (i) Since the dividend in the present case  is  the return  from investment-, of part of the paid up capital  of the company which is invested for the purpose of earning  an income, it cannot be construed as 652 ,extraneous   income  and  the  Tribunal  is  justified   in disallowing  tile dividend on shares as a  valid  deduction. The  return on paid up capital is one of the  prior  charges admissible as a valid deduction and if any amount is .earned from the employment of capital unconnected with the business of  the  company,  the  labour cannot  claim  the  right  to participate  in  its  returns.  Further if  any  reserve  is utilised  for  working  capital, whether  this  .reserve  is depreciation reserve or any reserve, a return in respect  of they  are also allowed as prior charges, at a reduced  rate. The  company  has the discretion to invest  its  capital  in various activities; but it cannot deprive the workmen of the benefits  of  the  returns  derived  therefrom  unless   the investments in such activity is extraneous to the activities of the company, in the earning of which the workers had  not made any contribution.  In the present case, the return from the  investments  is  a return on a part  ,of  the  paid  up capital  which  is invested for the purpose  of  earning  an income and therefore, it is not extraneous income as claimed by the management. [656 G-B] (ii) The elements which are important for the computation of annual rehabilitation is the price of the asset at  original cost,  the period for which these assets can be used  before requiring rehabilitation due to rise in prices,  devaluation etc.    In   other   words,  for   computation   of   annual rehabilitation, the ’multiplier’ and the ’deviser’ is to  he found  out.  In the present case, the management  failed  to place satisfactory evidence before the Tribunal to arrive at a  proper ’multiplier’ and ’deviser’ and in absence  of  any proof  as to how and on what basis the Tribunal had  arrived at  its own ’multiplier’ and ’deviser’ on a pure  conjecture and  guess work, the appeal cannot be  sustained.   Further, the  Tribunal  is  not justified in  including  the  trading investments   to  be  available  for  the  purpose  of   re- habilitation  as these investments were made prior  to  1960 when the company was an investment company and as such these investments  were not connected with the activities  of  the present company, which was floated only in 1960. [666 G] (iii)In   appeal,  the  respondents  are  entitled   to challenge or support the judgmentin   his   favour   given before the High Court even upon grounds which are  negatived in the judgment. Workmen  of M/s.  Hindustan Motors Ltd. v.  M/s.   Hindustan

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Motors  Ltd.  &  Anr.  [1968] 2  S.C.R.  311,  M/s.   Gannon Dunkerley  &  Co. v. Their Workmen, [1971]  22  F.L.R.  158, Management  of Northern Railway Cooperative Society Ltd.  v. Industrial   Tribunal,  Rajasthan,  [1967]  2  S.C.R.   476, Ramabhal  Ashabhai  Patel v. Dabhai  Ajit  Kumar  Fulshingji [1965]  1  S.C.R.  712, Associated Cement Co.  Ltd.  v.  Its Workmen, [1959] S.C.R. 925, Khandesh spinning & Wvg.   Mills Co.  Ltd. v. Rashtriya Gir Kamgar Samiti Jalgoan,  [1960]  2 S.C.R. 841, Bengal Kagazkar Mazdoor Union v. Titaghar  Paper Mills  Co.  Ltd., [1964] 3 S.C.R. 38,  National  Engineering Indnstries  Ltd.  v. Its Workmen, [1968] 1  S.C.R.  779  and Honorary  Secretary,  Coimbatore  District  Textile  Workers Union [1962] Supp. 2 S.C.R. 926, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1675 of 1970. Appeal  by special leave from the Award dated  February  18, 1970  of the Industrial Tribunal, Rajasthan, Jaipur in  Case No. 1.T. 12 of 1967. G.   B.  Pai,  P.  N.  Tiwari and  O.  C.  Mathur,  for  the appellant. M.   K. Ramamurthi and Vineet Kumar, for the respondent, 653 The Judgment of the Court was delivered by P.  Jagamohan  Reddy, J.-This Appeal is by Special’.   Leave against  the  Award of the  Industrial  Tribunal,  Rajasthan directing  the  payment of a bonus of Rs.  1,21,000/-  apart from  an  amount of Rs. 90,000/- already  disbursed  to  the workmen of the Appellant for the year 1962-63.  The  dispute for  the bonus year beginning 1st July ’62 and  ending  30th June ’63 was raised by the workmen because the Company which had admittedly made profits, did not pay them a bonus though a  gratuity of one month was given to them.   The  following dispute was therefore referred to the Tribunal:               "Whether workmen of M/s. J.K. Synthetic  Ltd.,               Kota  are entitled to any bonus for  the  year               1962-63  and  whether payment of  one  month’s               wages  as  gratuity by the management  can  be               regarded  as  payment towards bonus  for  the,               year in question?". The Mazdoor Union (hereinafter called ’the Union’) on behalf of   the  Workmen  contended  that  on  the  basis  of   the calculation,;  of available surplus they were entitled to  a bonus of 60% in accordance with the bonus formula which will entitle  them  to  a five months wages apart  from  the  one month’s wages already paid to them.  The first statement  of computation  filed  on behalf of the workers  was  obviously incorrect  because it did not take-into account the  various prior  charges  such  as Income  Tax,  return  on  reserves, rehabilitation reserve etc. which are deductible under  Full Bench  formula as approved and accepted by this Court  from% time  to  time.  It therefore filed another  revised  return showing  an  available  surplus  of  Rs.  5.34  lakhs.   The management on the other hand challenged the validity of  the claim as according to it there was no available surplus  for distribution  even though they had already paid one  month’s bonus wrongly styled as gratuity.  The calculations given by it were also found to be equally wanting.  As such it  filed a  revised  calculation showing a net deficit of  Rs.  72.35 lakhs.  It may however, be mentioned that as pointed’ out by the Tribunal, there was no dispute with regard to any of the eight items which comprised the computation of gross profits amounting  to  Rs.  62.16 lakhs.  The  Union  also  did  not

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dispute the deduction of interest on debentures of Rs.  0.06 lakhs;  share transfer fee of Rs. 0.05 lakhs;  the  notional normal  depreciation of Rs. 30.57 lakhs; and the  return  on share capital of Rs. 7.50 lakhs.  It had however  challenged the  deduction  of  Rs. 4.1 lakhs received  as  dividend  on shares  as  extraneous income which was being claimed  as  a deduction by the management.  It also disputed an amount  of Rs. 1, 11,000/- shown as return on reserves employed in  the business  and  Rs.  75.89 lakhs shown as  the  annual  share required  for rehabilitation.  The method of calculation  of income  tax amounting to Rs. 15.23 lakhs was  also  objected to.  The four" 654 items  upon which the Tribunal was called on  to  adjudicate therefore were: ( 1 ) Deduction of Rs. 4. 10 lakhs  received as  dividend on shares from the gross profits as  extraneous income;  (2) Rs. 1, 11,000/- as return on reserves  employed in  business; (3) Rs. 75.89 lakhs as annual  share  required for rehabilitation, and (4)   Rs. 15.23 lakhs towards Income tax. With respect to the first issue the Tribunal felt that  even though  there was share capital available to the  Appellant, instead  of utilising it as working capital it had  borrowed amounts to work the Nylon factory for which they had to  pay an interest of over Rs. 5 lakhs.  In these circumstances  it disallowed  the  claim for deduction on the ground  that  it would be unfair to allow the management to treat the  income from  Investments as extraneous income and still reduce  the profits  by  raising loans and pay  interests  resulting  in demunition  of  the  surplus.   On  the  second  issue   the objection of the Union for a deduction of Rs. 1,11 lakhs  as return   on  reserves  employed  as  working   capital   was disallowed-on  the  ground  that  the  statement  M.W.   2/1 produced by Talwar, established that the excess of liability over  the assets was utilised as working capital during  the course of the bonus. year.  The claim of the management  for deduction   of  Rs.  75.89  lakhs  as  share  required   for rehabilitation  was  however  disallowed, as  the  oral  and documentary  evidence produced on behalf of  the  Management did not according to the Tribunal either establish that  the life of the Plant and machinery was only 10 years for  1961- 62 Block (hereinafter called ’the first Block’) and 11 years for  1962-63 Block (hereinafter called ’the  second  Block’) nor was the deviser of six years for both the first and  the second Block reasonable.  It found that the more  reasonable multiplier  was 13 years for machinery purchased in  respect of  the first Block and 14 years for machinery purchased  in respect  of,  the  second Block and  likewise  a  reasonable deviser  for  these two Blocks would be four years  and  two years   respectively.    In   so   far   as   rehabilitation requirements  for buildings was concerned the Union did  not raise  any dispute to the claim of the management  amounting to  Rs. 0.90 lakhs.  As there was also no dispute about  the original cost of plant & machinery, the Tribunal by applying the multiplier and deviser as aforesaid computed the  annual rehabilitation   replacement   for  plant,   machinery   and buildings as follows : Rupees in lakhs Block Origi Mul- Repla- Break- Balan- Funds Net Life Annu-- of    nal   tip  cement down   ce     avail  Repla  al re plant       lier cost    value        able   cement quire & Mach cost                                  cost   ment 61-62 133 -004 522 .006 -65   525 -35113 -28412 -07 1331 -70 62-63 15-00 2 -0 30 -00 0 .’75 29 -25  29 -25 14 2 -10                                                   --------

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                                                 33.80 655 Rehabilitation replacement for machinery.......33.80 Rehabilitation  replacement  for building  (as  per  Company calculation)................................0.90                                    Total         34.70 Accordingly the additional rehabilitation to be providedfor was calculated as under Funds available : Depreciation upto 31-3-62............Rs. 15 .68 lakhs General reserves         .......         12.00 Investments         .....................85.60                                         113 -28 Annual rehabilitation replacement........34.70 Less : Depreciation provided during the year30 -57                                       _________________ Additional rehabilitation to be provided . .4.23 In  so far as Income tax calculation of Rs. 15.18 lakhs  was accepted being in accordance with the calculations under the Income  Tax Act with respect to which it was said the  Union did not find itself in a position to contest.  The  Tribunal after  giving its finding on the matters in  issue  computed the available surplus as follows:      1.   Gross profit............Rs. 62 -11 lakhs      2,   Deduct prior charges:                                              Rs. 1. Notional normal depreciation.........30.57 lakhs 2. Direct tax...........................15.18 3. Return on share capital..............7.50 4. Return on reserves...................1.11 5. Additional requirement for rehabilitation4 -23                                              ---------                                                   58.59 Available suprlus        .......      Rs. 3 .25 lakhs of  the 60% payable as bonus would come to Rs. 2,1  1,000/-. As  the  Company  had already disbursed  Rs.  90,000/-,  the Tribunal directed payment of the balance of Rs. 1,21,000/-. Before  us  only two items of controversy  have  been  urged namely:(1)  relating to extraneous income of Rs. 4.10  lakhs and(2)    relating  to rehabilitation requirement  amounting to  Rs.  75.89  lakhs,  the  first  of  which  the  Tribunal disallowed  while in respect of the second it only  admitted Rs.  4.23  lakhs.   With  respect to  the  first  item,  the disallowance  of  Rs. 4.10 lakhs, the  management  not  only claimed this amount but also Rs. 7.5 lakhs as return on paid up capital of Rs. 125 lakhs @ 6% per annum.  Obviously  even on a cursory glance it would appear that the management  was seeking to obtain double benefit in respect of investments 656 made out of the paid up capital.  The reasons which impelled the  Tribunal  to reject the claim of the  management  have, already  been noticed and it would therefore be  unnecessary to  reiterate  them.  It however, appeared to  the  Tribunal that   if  the  Company  wanted  to  exclude   income   from investments it cannot also be allowed 6% return on that part of the share capital which is invested elsewhere and at  the same  time be allowed to treat the income of Rs. 4.10  lakhs earned  therefrom as extraneous income, because  apart  from deducting  income tax on this amount the Company also  meets the expenses of administration and management in respect  of the  said  investments.   In  this  view  it  sustained  the objection of the Union. The  return on paid up capital is one of the  prior  charges admissible under the Full Bench formula as approved by  this Court.  It is based on the principle that while the claim of

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labour  to  a  share in the profits by way of  bonus  is  in furtherence of social justice, the claim of the capital  for a fair return to the investor and also to keep the  industry running efficiently which will in the long run enure for the benefit of labour is equally based upon that principle.   If therefore  any  amount  is earned  from  the  employment  of capital  unconnected with the business of the  Company,  the labour cannot claim the right to participate in its returns. Apart  from  this if any reserves are utilised  for  working capital whether these reserves are depreciation reserves  or any other, a return in respect of these also is allowed as a prior  charge at a reduced rate because utilisation of  such reserves  would obviate the borrowing from  outside  sources for which a higher interest has to be paid and which in  the long run will not be for the benefit of the- workers.  These principles  have  been  laid  down by  this  Court  as  well accepted in Industrial adjudication.  While it is true  that the  Company  has the discretion to invest  its  capital  in various  activities  it cannot on that account  deprive  the workmen  of  the benefits of the returns  derived  therefrom unless  of  course  the  investments  in  such  activity  is extraneous to the activities of the Company, in the  earning of which they had not made any contribution.  Whether in any particular  case  the return on investments  amounts  to  an extraneous income will depend on the facts and circumstances of  each  case.  So far as the case before us  is  concerned there  can be no doubt that the return from the  investments is a return on a part of the paid up capital of the  Company which is invested for the purpose of earning an income.   It cannot  therefore  be construed as  extraneous  income.   In Workmen  of M/s.  Hindustan Motors Ltd. v.  M/s.   Hindustan Motorv  Ltd.  &  Anr.,(1) to which one of  us  was  a  party (Vaidialingam, J.) no doubt where the income of the  Company was from interest on (1)  (1968) 2 S.C.R. 31 1. 657 fixed deposits, it was treated as extraneous income  because it  was  held  that it accrued to the  Company  without  any contribution  by the workmen.  At the same time the  Company was not permitted on equitable ground to claim the  interest paid  by  it  on its  borrowings  as  business  expenditure. Further in that case even the income received by the Company from  its  foreign  collaborators  as  commission  on  sales effected  by  the said collaborators of their  own  cars  in India  was  treated  as  extraneous  income  to  which   the Company’s workmen made no contribution and was therefore not to  be  taken  into account  in  calculating  the  available surplus.  In the recent case of MI?  Gannon Dunkarley &  Co. Ltd. v. Their Workmen(1), by a reference to the decision  in the  Hindustan Motor’s this principle was again  reiterated. In that case one of the question which this Court considered was whether dividends received from trade investments should be  deducted  from the gross profits-  for  calculating  the surplus available for bonus.  It was held that "these  trade investments  have  to be treated as capital  assets  of  the Company  forming  part  of their  trading  activities.   The income  accruing from these dividends must therefore be  re- lated  to the business of the Company as a whole  and  hence the  income from these dividends has to be included  in  the income for purposes of calculation of surplus available  for bonus".  In this view we think the Tribunal was justified in disallowing  the deduction of Rs. 4.10 lakhs and in fact  on behalf  of the Appellant it was frankly conceded  before  us that the claim in respect of the said item cannot be pressed on any tenable or valid grounds.

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This brings us to the only remaining controversy, the provi- sion for rehabilitation requirement.  The claim for a  prior charge on this account like any other prior charge has to be established  by  evidence  but As this  item  results  in  a substantial  deduction  from the gross profits  and  reduces available  surplus, materially, effecting the claim  of  the employees  for  bonus,  each constituent  element  which  is necessary  for computing the amount to be provided for  must be  proved  by satisfactory evidence and cannot be  left  to surmises and conjectures.  It is idle to suggest that as the employees have not in any particular case given any evidence or have not produced any material to controvert the claim of the  management that claim must be admitted, because  it  is the  management  that is in possession of all  the  relevant material  and  is  accordingly  required  to  satisfactorily substantiate  that claim.  The elements which are  important for  the computation of annual  rehabilitation  requirement, is, the price of the assets at the original cost, the period for  which  these  assets  can  be  used  before   requiring rehabilitation  and  the probable increase in  the  cost  of rehabilitation, due to rise in prices, devaluation etc.  The probable increase in the price of assets at the time of  the rehabilitation over the original (1) (1971) 22 F.L.R. 148. L3SupCI/72 658 cost  is  the  multiplier, as it is  measured  in  terms  of multiples  of the original cost.  The number of years  after which  the  asset requires  replacement,  rehabilitation  or modernisation  is  termed the deviser because  the  probable cost  on  a  future date has to  be  provided  annually  and therefore  has to be divided by the number of years  at  the end of which the amount would be required.  There is in this case no dispute between the parties as to the original  cost of the plant and machinery which is for the first block  Rs. 133.00 lakhs and for the second block Rs. 15.00 lakhs.   The only  controversy  is about the multiplier and  the  deviser which  has been adopted by the Tribunal.  The Appellant  had in its written statement claimed the multiplier for each  of the two blocks as six and the deviser for the first block as 10  and  for the second block as 11 but as we  have  already noticed earlier the Tribunal has accepted the multiplier  as 4  for  the first block and 2 for the second block  and  the deviser as 13 and 14 respectively.  Even in respect of these the  learned Advocate for the Appellant admitted that he  is not in a position to contest the reasonableness of what  has been  adopted  by  the  Tribunal  but  the  Respondent   has challenged  the very basis adopted by the Tribunal as  being more  dependent  on  guess  work than  on  any  evidence  or material before it. On behalf of the management the right of the Union to  chal- lenge  the  multiplier  and deviser, in the  absence  of  an Appeal by it is strenuously contested but in our view  there is  little  force  in this objection.   The  appeal  by  the employer  is  against the grant of bonus  to  the  employees which  implies that the method of computation of  the  gross profits, as well as of the available surplus and the rate at which the bonus is granted can be subjected to scrutiny.  It is  needless to recount the several priorities that have  to be  deducted and the items in respect of which amounts  have to  be added, before arriving at the available surplus.   In an  Appeal,  the several steps which have to  be  taken  for computation  of the available surplus either in  respect  of the actual amounts or the method adopted, can be challenged. If so the Union, even where it has not appealed against  the

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Award, can support it on a method of computation, which  may not  have  been adopted by the Tribunal but  nonetheless  is recognised  by the Full Bench formula of this Court so  long as  in the final result the amount awarded is not  exceeded. We are supported in this view by a decision of this Court in Management  of Northern Railway Cooperative Society Ltd.  v. Industrial  Tribunal, Rajasthan, Jaipur & Anr.(1)  where  it was  held that the Respondents were entitled to support  the decision  of  the Tribunal even on grounds  which  were  not accepted by the Tribunal or on other grounds which (1)[1967] 2 S.C.R. 476. 659 may not have been taken notice of by the Tribunal while they were patent on the face of the record. A passage from the case of Ramanbhai Ashabhai Patel v. Dabhi Ajithkumr Fulsinji & Ors. (1), will give the reasons adopted by this Court for the aforesaid view.  That no doubt was  an election appeal but it was said that though the rules framed by  this Court in exercise of its rule making powers do  not contain any provisions analogous to Order XLI Rule 22 of the Civil  Procedure Code, which permits a party to support  the Judgment appealed against upon a ground which has been found against him in the Judgment, it was held that this Court has the  jurisdiction to sustain the Judgment on  grounds  which have  been  found  against the  Respondent.   Mudholkar,  J. speaking   for  himself,  Gajendragadkar,   C.J.,   Wanchoo, Hidayatullah,  and  Raghubar Dayal, JJ..  after  considering whether  the provisions of Order XVIII, Rule 3 of the  Rules of  this Court which requires parties to file  statement  of the case could limit it only to those contentions which deal with  the  points  found  in favour of  that  party  in  the Judgment appealed from, observed at page 724:               "Apart  from that we think that while  dealing               with  the appeal before it this Court has  the               power  to decide all the points  arising               from the Judgment appealed against and even in               the  absence  of  an  express  provision  like               O.XLI, R. 22 of the Code of Civil Procedure it               can  devise  the appropriate procedure  to  be               adopted  at  the hearing.  There could  be  no               better way of supplying the deficiency than by               drawing  upon the provisions of a general  law               like the Code of Civil Procedure and  adopting               such of those provisions as are suitable.   We               cannot lose sight of the fact that normally  a               party  in whose favour the  Judgment  appealed               from  has  been  given  will  not  be  granted               special    leave    to   appeal    from    it.               Considerations of justice, therefore,  require               that  this Court should in  appropriate  cases               permit  a party placed in such a  position  to               support  the judgment in his favour even  upon               grounds   which   were   negatived   in   that               Judgment". In the view we have taken, we will have to consider the plea on  behalf  of  the  Respondents  that  the   rehabilitation requirement has not been properly established, but this need only  be entertained if we come to the conclusion  that  the main contention that the rehabilitation requirement has  not been  properly computed and if so computed there will be  no available surplus for awarding bonus to the employees. (1) [1965] 1 S.C.R. 712. 660 The  learned Advocate for the Appellant as we  said  earlier has not seriously insisted on the adoption of the multiplier

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and  the deviser claimed by the Appellant but on  the  other hand contends that even if the multiplier and the deviser as adopted  by the Tribunal is followed the  trade  investments amounting  to Rs. 85.6 lakhs cannot be said to be  available for  computation  of rehabilitation  requirement.   On  this assumption  while  not  disputing  the  computation  of  the Tribunal  in respect of the original cost which as  we  have earlier  mentioned has not been disputed, even by  accepting the  multiplier,  the break-down value and  the  deviser  as adopted by the Tribunal the annual amount required would  be Rs.  10.71 lakhs and not Rs. 4.23 lakhs as computed  by  the Tribunal.  The only variation between the computation of the appellant  and  that of the Tribunal is in  respect  of  the funds  available  which  according to the  Tribunal  is  Rs. 113.28  lakhs  including the trade investment  of  Rs.  85.6 lakhs  and according to the Appellant it is Rs.  27.8  lakhs comprising  of  only two items namely  depreciation  of  Rs. 15.68  lakhs  and general reserve of Rs. 12 lakhs.  If  this computation isaccepted  then  there  will  be  a   negative balance of Rs. 2.9 lakhs.This  result is arrived at  as follows : Gross profits  .............................Rs. 62.11 lakhs 1. Notional normal depreciation..Rs. 30.57 lakhs 2. Direct tax  ....................Rs. 15 .18 3. Return on share capital.........Rs.  7 .50 4. Return on reserves..............Rs. 1 .11 5. Additional requirement for rehabilitationRs.  10 .71                                              Rs.65. 07"      Negative balance.          (-) Rs. 2 .96 lakhs It  will  be observed that the prior  charges  comprised  in items  1  to 4 are not really in dispute.  It  is  only  the additional requirement for rehabilitation that- is the  bone of contention between the parties and this is challenged  on two  grounds; firstly that the trade investment of Rs.  85.6 lakhs are available funds for rehabilitation requirement  as admitted  by  the  Appellant  to  be  so  available  in  the statement which it furnished to the Tribunal; secondly  that no   claim   for   rehabilitation   requirement   has   been substantiated. On the first ground it is contended that the question,  what was  the:  available amount for the annual  requirement  was specifically  before the Tribunal, and that it was the  case of  the management and not of the workmen that an amount  of Rs.  1,23,90,000/-  was available consisting  of  Rs.  26.30 lakhs  towards  depreciation, Rs. 12 lakhs  towards  general reserves  and Rs. 85 6 lakhs towards investments.  In  these circumstances   the   Tribunal  was  not  called   upon   to investigate  the question as to what exactly was the  nature of the investments or whether any of 661 them  were realisable or were not available for meeting  the rehabilitation requirements.  Further there was no grievance made  in  this  behalf in the  Special  Leave  Petition  and therefore  the management is, it is submitted  stopped  from challenging  before his Court the validity of  inclusion  of this amount in the amount available for rehabilitation.   It is further submitted that assuming that this question can be agitated, in the absence of any specific investigation as to the nature of the investments and more particularly when the management itself had shown this amount as being  available, the  Appellant  cannot be permitted to say that  it  is  not available.  The contention of the respondents proceeds on  a basic error namely that the Appellant had held out that  the trade   investments   were  available   for   rehabilitation requirement.   This  is  not so.   In  the  amended  written

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statement filed on 4-7-69 after obtaining the permission  of the  Tribunal  on 3-7-69, the Appellant claimed  the  annual share required for rehabilitation as Rs. 93,56,207/-.   Even in  the  statement filed earlier on 10-4-69  it  showed  two amounts as being available namely depreciation of Rs.  26.31 lakhs and general reserves of Rs. 12 lakhs.  It is submitted by the Appellant that only when the arguments were completed on  behalf of the Company on 9-12-69, having regard  to  the claim  made  by  it  for  deduction  of  Rs.  4.1  lakhs  as extraneous  income derived from the trade  investments,  the corpus  of Rs. 85.6 lakhs which earned that income was  also shown as available and a statement to ’hat effect was  filed on the same day to facilitate the Tribunal in arriving at an Award.   In as much as we are not allowing the deduction  of Rs. 4.1 lakhs as extraneous income, the question whether the corpus  should be treated as being available also has to  be considered in the light of the decisions of this Court.  The Appellant  in  our view is fully justified  in  urging  this contention before us, as it cannot be said that this was not raised   before  the  Tribunal.   The  Tribunal  had   ample opportunity   of  considering  this  aspect  since  it   did specifically consider the nature of the income therefrom. Assuming  for the present that the adoption by the  Tribunal of  the multiplier and deviser can be justified, though  the validity  of  the Tribunal’s award in this behalf  has  been seriously   challenged  ’before  us,  the  question  to   be determined  is  whether  the investments  of  the  Appellant amount  to  Rs. 85.6 lakhs is available  for  rehabilitation which in turn will depend upon whether these investments are made  in  the course of the business of the Company  or  are unconnected with its business and only invested with a  view to  earning  extraneous income.  The principles  upon  which rehabilitation  grant  is to be calculated as laid  down  by this Court is that the depreciation reserves, or in the case of  other  reserves  only if they are  available  as  liquid assets and cash and not earmarked for any specific purposes, are deemed to be available and can be taken into account  in computing the annual requirement.  The 662 depreciation  reserve,  the object of which is to  meet  the requirement of replacement, rehabilitation and modernisation at  a  future  date is considered  to  be  always  available whether  it is in the form of a liquid asset or not.  It  is obvious  that even this amount will not achieve the  purpose of  recouping the cost of replacement of the  wasted  assets and  it  is for that reason the claim of  the  industry  for rehabilitation  in addition to the  admissible  depreciation has  been recognised.  Then there are the general  reserves, capital reserves and development reserves all of which  will be  considered  to be available if they are in the  form  of liquid assets or cash.  The question in some of these  cases will be whether they are considered to be the capital assets of  the  Company  kept in that form in  the  course  of  its business or kept as investments outside the business of  the Company  for the purposes of earning an  extraneous  income. If it is the former then they are available but if it is the latter  they cannot be brought into account for  calculating the rehabilitation requirement.  As it happens in most cases the  claim by the employer is that the reserves  are  either wholly  or partly not available because they have been  used as  working  capital  and consequently  the,  amount  to  be utilised  should  not be excluded from  the  amount  claimed towards  rehabilitation.   The  principles  governing   what deductions  should  be  made from  out  of  reserves  before calculating the amount in respect of rehabilitation for  the

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bonus  year were set out in the Full Bench formula and  have been  restated  in  the Associated Cement Co.  Ltd.  v.  Its Workmen(1).   The two items according to that decision  that are to be taken into consideration are the general  reserves available  to the employer and the reserves which have  been reasonably earmarked for specific purposes of the  industry. In explaining what was meant by availability of the reserves or the earmarking for specific purposes Subba Rao, J. as  he then was in Khandesh Spinning & Wvg.  Mills Co. Ltd. v. Th.? Rashtriya  Girni  Kamgar Sang Jalgaon(2), observed  at  page 845-846 :-               "We do not think that by using the said  words               this  Court  meant  to depart  from  the  well               recognized  principle  that  if  the   general               reserves   have  not  been  used  as   working               capital,  they  cannot be  deducted  from  the               rehabilitation amount.  The reserves may be of               two  kinds.   Moneys  may be set  apart  by  a               company  to  meet future. payments  which  the               Company  is under a contractual  or  statutory               obligation  to  meet, such  as  gratuity  etc.               These amounts are set apart and tied down  for               a  specific purpose and, therefore,  they  are               not    available   to   the    employer    for               rehabilitation  purposes.  But the same  thing               cannot be said of the general reserves :  they               would be available to               (1) [1959] S.C.R. 925 @ 970.               (2) [1960] 2 S.C.R. 841.               663               The use of the words "reasonably earmarked" is               also  deliberate  and significant.   The  mere               nominal allocation for binding purposes,  such               as gratuity etc. in the Company’s books is not               enough.    It  must  be  ascertained  by   the               Industrial Court on the material placed before               it whether the said amount is far in excess of               the requirements of the particular purpose for               which  it  is so earmarked and whether  it  is               only  a  device  to reduce the  claim  of  the               labour for bonus". What  is  meant by the above observations  in  the  Khandesh Spinning  & Wvg.  Mills case was later explained by  Wanchoo J, as he then was in Bengal Kagazkal Mazdoor Union & Anr. v. The Titaghur Paper Mills Co. Lid.(1). This was what was said at page 54               "All that that decision lays down is that that               part  of the reserves which go to make up  the               working  capital which is in the shape of  raw               materials  etc. or earmarked reserve will  not               be  deducted from the  I  gross-rehabilitation               amount;  it  does not lay down that  all  cash               reserves in the shape of depreciation reserve,               general reserve, renewal reserve and so on and               also in the shape of investments and  advances               cannot    be   deducted   from    the    gross               rehabilitation  amount as they may be used  as               working capital next year". Now  the question of trade investments unconnected with  the purposes  of  the  industry fell for  consideration  in  the National Engineering Industries Ltd. v. Its Workmen (2).  In this  case  the Company had an investment of  Rs.  18.22  in shares, which were treated by this Tribunal as liquid assets available  for  rehabilitation.  But the  Company  contended that  this  investment can either -be treated as  a  trading

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transaction  carried out in the ordinary course of  business or as a capital asset.  If it was the former then it  should have  been  allowed the loss of Rs. 1.72  lakhs  as  trading expenditure  but instead the tribunal had added the  profits therefrom  to  the  gross  profits,  thereby  treating   the investment as capital asset.  It could not therefore  deduct Rs. 18.22 lakhs as a fund available for rehabilitation cost. Negativing  this  contention  of  the  Company,  Shelat   J, observed at page 796-797 :-               "We fail to see any contradiction on the  part               of  the Tribunal.  The balance sheet  for  the               year 1957-58 contains two schedules;  Schedule               A  shows  fixed assets and  schedule  B  shows               trade investments of the value of               (1) [1964] 3 S.C.R. 38.               (2) [1968] 1 S.C.R. 779               664               Rs.  18,21,571/-.   The Company not  being  an               investment Company the investment of Rs. 18.22               acs  in shares of other joint stock  Companies               prima  facie  represents  extra  capital   not               required as working capital for otherwise  the               Company could not have spared this amount  for               investment  in the stocks of other  Companies.               The  Tribunal  was  right  in  treating   this               investment as a capital asset and in  refusing               to   treat  the  loss  therefrom  as   trading               expenditure.   ’the Tribunal at the same  time               could    deduct   this   amount    from    the               rehabilitation  cost because that  amount  was               available  to  meet the  rehabilitation  cost.               The investment in shares could easily, if  the               Company was so minded, be converted into  cash               and  utilised for replacement of its worn  out               machinery". In  Gannon  Dunkerley’s  case  also  these  principles  were reiterated.  It  was held in that case that  in  calculating rehabilitation grant one of the principles which this  Court has  laid down is that the depreciation reserve must  always be deducted irrespective of the fact whether it is available or  not as a liquid asset.  In addition other reserves  like general  reserve  are  also  to  be  deducted  if  they  are available as liquid reserves and are not ear-marked for  any specific  purpose.  The capital reserve and the  development reserve  can also be deducted if there is material  to  show that they existed in the form of liquid assets or cash.  The question  would  be whether they are capital assets  of  the Company  kept in that form in the course of its business  or whether  they have been treated as investments  outside  the business for the purposes of earning extraneous income.   If they are investments made in the course of its business they are  to be treated as part of the capital but  otherwise  if they are extraneous to the business they do not form part of the reserves available for rehabilitaion. It  may  be  observed  that  in  the  National   Engineering Industries  Ltd.  v. lts Workmen(1), an exception  had  been made in the case of an investment Company the investment  of which  is to be treated as working capital employed  in  the business   of  the  Company.   The  Companies   Act   placed restrictions  on the purchase of shares by one  Company,  of shares of any other body corporate except to the extent  and except  in accordance with the restrictions  and  conditions specified  in Sec. 372 of that Act as amended by Act  65  of 1960.   By.  Sec. 373 it is enjoined on Companies  investing after  1st April 1952 in shares of any other body  corporate

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in  exercise of the limit specified in sub-section  (2)  and the  second proviso to the said-sub-section of Sec.  372  to obtain  the authority of ’he Central Government  within  six months  from  the  commencement  of  the  Act  and  if  such authority and approval is not so obtained 665 the  Board of Directors must dispose of the  investments  in excess  of the limits specified in the  aforesaid  provision within  two years from the commencement of the Act.   It  is also provided by Sec. 372(10) that after the commencement of the Companies Amendment Act a statement should be annexed to the  balance-sheet  giving the details of,  the  investments acquired;  the bodies corporate in the same group, of  which the  shares have been acquired, whether the investments  are existing or not, and the nature of the said investments.  An exception  however has been made by the proviso to the  said sub-section  in the case of investment Companies (which  are those whose principal business is the acquisition of  shares etc.)  that  it  shall be  sufficient  if  the  investments, existing on the date as at which the balance-sheet to  which the statement is annexed has been made out From these provisions it is contended that the balance-sheet in this case shows only those details which are required  to be  given by an investment Company which is also  consistent with the plea,, ,that the investments of the Appellant  were made  prior to 1952 when it was an investment Trust  Company and  these  investments,  which are the  same  exceeded  the limits  prescribed  by the Companies Amendment  Act  without having  to  conform to the conditions of  having  either  to obtain  approval of the Central Government or to dispose  of the excess within two years i.e. by 31st March 1962. On  behalf of the Respondents however it is  submitted  that there  has been no finding by the Tribunal that the  Company is  an Investment Company or that the investments were  made prior to, 1952 as an Investment Company which would  entitle it  to  treat  those investments as not  available  for  the purposes of rehabilitation within the exception indicated in the National Engineering Industries case.  In our view  this submission  has no force.  There is ample  justification  in the contention of the Appellant’s Advocate that the Tribunal did advert to the fact that the Company invested initially a capital  of Rs. 75 lakhs as an investment Trust Company  and from its inception these investments have been made and that it  is  only  after the amendment in 1960 when  it  was  not possible  for it to invest further amounts that  it  changed its  name,  increased its capital and  started  the  present industry.  On this, aspect of the matter the Tribunal stated thus :               "Originally  the Company was floated as J.  K.               Investments Trust Ltd.  It had a share capital               of  Rs. 75 lakhs.  They invested  this  amount               and  some loans in debentures and loans.   Due               to amendments in Company law they had to  stop               further  investment  from  1960  onwards   and               changed  the  name  of the Company  to  J.  K.               Synthetics  Limited,  raised  additional   Rs.               50.00 lacs               666               share capital and started this Nylon  factory.               Thus to date the share capital of the  Company               is  Rs.  125.00 lacs including the  old  share               capital of Rs. 75.00 lacs of J. K. investments               Trust  Ltd.  Now instead of utilising the  old               share capital and loans invested in debentures               the  Company took separate loans to  work  the

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             Nylon  factory  for  which  according  to  the               balance sheet they had to pay over Rs. 5  lacs               as interest on loans". It is also apparent from Schedule ’E’ statement forming part of  the balance-sheet as at 30th June, 1963 that a  list  of trade  investments  held by the Appellant have  been  given. There  are  two notes attached thereto.   Note  (1)  states- Investments  in the Companies marked with  asterisks  exceed ten per cent of their respective subscribed capital.   These investments  were  acquired before the commencement  of  the Companies  (Amendment) Act, 1960, while Note (2)  states-The Total  investments of the Company exceed thirty per cent  of its  subscribed  capital.  These investments  were  acquired before  the commencement of the Companies  (Amendment)  Act, 1960. Having  regard  to these undisputed facts it appears  to  us clear  that the trading investments were made prior to  1960 when  the Company Was an Investment Company, as  such  these investments  are  not connected with the activities  of  the Company, are extraneous to its business and do not form part of  the  reserves  available ,for  rehabilitation.   In  the circumstances  the  Tribunal is not justified  in  including this  amount  in the amounts  available  for  rehabilitation purposes. While this is so and the result of the non-exclusion of  Rs. 85.60  lakhs  would  result  in  a  negative  balance,   the respondents  as  we  have  already  held  are  entitled  to- challenge  the claim for rehabilitation on the  ground  that the  essential requisites have not been established  by  any cogent   or   sufficient   evidence.    In   computing   the requirements  for rehabilitation as has been  stated  often, regard  must be had, to two imponderables out of  the  three main  elements because one of them namely the original  cost of  the asset is specifically ascertainable while the  other two  have to be established as near as possible which  might to  some  extent  involve  an  estimate  based  on  evidence deducible  therefrom.   These  two  imponderables  are   the multiplier  and the deviser.  Unless all these elements  are determined the amount required for rehabilitation cannot  be ascertained.   of course the scrap value of the  old  assets has  also  to be ascertained but this does not  involve  any difficulty  because normally it is taken as 5% of the  value of  the  assets at cost.  Even so the determination  of  the amount for rehabilitation no doubt poses problems but it  is suggested  that a reasonable method would be to divide  them into blocks, accord- 667 ing  to  the nature of the asset and the year in  which  the assets have been acquired.  The cost of the separate  blocks has  then to be ascertained and their probable  future  life has to be estimated.  Once this estimate is made it  becomes possible to anticipate approximately the year when the plant and machinery would need replacement and the probable  price of such requirement at a future date when the asset requires replacement.   In  determining this difficult  question  the Tribunal  as  already  observed  must  have  before  it  all available  evidence  from which a  reasonable  and  probable adjudication  can  be  made in respect  of  these  essential requisites. The  Respondent’s Advocate submits that the  Tribunal  while quite properly rejecting the evidence produced on behalf  of the  Appellants  indulged  in guess  work  when  it  adopted arbitrarily the multiplier and the deviser.  It is his  case that  the determination of the life of machinery depends  on various   factors  such  as  for  instance  nature  of   the

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machinery,  its  quality, the nature of  the  industry,  the efficiency  of workmen etc.  In the Hindustan Motor’s  case, Bhargava,  J, after examining the several cases relating  to this aspect of the matter observed at page 319 :               "The  life  of  machinery  of  one  particular               factory   need not necessarily be the same  as               that of another factory.  Various factors come               in that affect the useful life of a machinery.               There  is,  first  the  consideration  of  the               quality   of  machinery  installed.   If   the               machinery   is   purchased  from   a   country               producing higher quality of machines, it  will               naturally have longer life than the  machinery               purchased  from  another  country  where   the               quality  of production is lower.   Again,  the               articles  on which the machinery operates  may               very markedly vary the life of a machine.  If,               for   example,  a  machine  is  utilised   for               grinding of cement the strain on machine  will               necessarily  not be the same as on  a  machine               which operates on steel or iron". In   the   Honorary  Secretary   South   India   Millowners’ Association  &  Ors. v. The Secretary,  Coimbatore  District Textile  Workers’  Union(1), to which a reference  had  been made  in  the above case, after accepting, on the  facts  of that  case,  that  the life of  the  textile  machinery  was adopted  as  25 years, this Court laid  down  the  following principle at p. 933.               "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". (1) [1962] 2 Supp.  S.C.R. 926. 668 The  Advocate on behalf of the Appellant on the  other  hand says   that   the  Full  Bench   Formula   for   determining rehabilitation as accepted in Associated Cement Companies(1) case  laid  down  an elastic  measure  for  determining  the probable cost which was to be estimated "as near actualities or realities as possible".  At pages 967-968  Gajendragadkar J, as he then was observed :               "The  estimate about the probable life of  the               plant and machinery’is itself to some extent a               matter  of  guess work and  any  anticipation,               however,   intelligently   made,   about   the               probable trend of prices during the  interven-               ing period would be nothing but a guess.  That               is  how,  in determination  of  this  problem,               several imponderables face the tribunals.  One               of  the points which raises a  controversy  in               this  connection  is : What  level  of  prices               should  the  tribunal consider in  making  its               calculations   about  the  probable  cost   of               replacement..... It seems to us that in  order               to enable the Tribunal to make an estimate  in               this matter as near actual ties of realises as               possible  it  is necessary that  the  Tritunal               should  be given full discretion to admit  all               relevant  evidence  about the trend  in  price               levels  ....  The problem of  determining  the               probable  cost of replacement itself  is  very               difficult;  but the difficulty is  immediately               increaser when it is remembered that the claim               for  rehabilitation covers not only  cases  of

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             replacement    pure   and   simple   but    of               rehabilitation  and  modernisation.   In   the               context  rehabilitation is distinguished  from               ordinary  repairs  which go into  the  working               expenses  of  the industry.  It is  also  dis-               tinguished  from replacement .... That is  why               we  think it is necessary that  the  tribunals               should exercise their discretion in  admitting               all relevant evidence which would enable  them               to     determine    this    vexed     question               satisfactorily". Keeping  these  observations  in view what we  must  see  is whether  the  Tribunal  was justified  on  the  evidence  in adopting  the  particular multiplier and the  deviser.   The stand  taken  by  the management is  that  it  had  produced sufficient  evidence  in support of its own  multiplier  and deviser  and  in  any case the  learned  Advocate  says  the Tribunal  is  right in arriving at its own  conclusion.   In fact it is submitted, the management had made an application for appointment of an assessor to assist the Tribunal as  an expert for determining the several questions appertaining to the computation of rehabilitation requirements, but that was rejected  as the Tribunal did not feel any necessity for  it and  there is nothing more which the management could do  in the circumstances. (1)[1959] S.C.R. 925 @970. 669 It is pointed out that the Nylon industry was a new industry at  the  time when it was started and the  evidence  of  the General  Manager,  who had been with the  Company  from  the initial  stages and throughout the negotiation for  purchase of  the machinery, says that according to the  manufacturers the  life  of the machinery could only be six  years.   That apart the management also produced sample invoices for  each year  and adduced the evidence of the Manager to prove  what would  be  the cost of rehabilitation.  In fact it  is  said that  the Appellant was fortunate in having actual  invoices of  machinery  purchased because the Company had  only  then expanded  its undertaking.  The Tribunal rejected  the  oral evidence  on the ground that the witnesses produced  by  the management  were  no  experts and they  did  not  throw  any material  light on the matters to be adjudicated by it.   It also  rejected the documentary evidence on the  ground  that the machinery which was said to have been purchased was  not the same as was sought to be replaced and in any case  there was not sufficient evidence for it to accept the  multiplier and  deviser  as claimed by the  management.   Whether  this criticism  is  valid or not will depend largely on  what  in fact weighed with the Tribunal in arriving at the multiplier and  the deviser.  No doubt the employer did make an  appli- cation  to the Tribunal as noticed earlier and the same  was rejected  on  5-8-69  as it did not  find  it  necessary  to appoint  an  assessor.   The  application  itself  was   for requesting the Tribunal to appoint an assessor if it  thinks necessary.   The management cannot without  discharging  its duty  of  placing  all the  necessary  material  before  the Tribunal ask it to appoint an assessor who would be  useless without that material.  We do not think in the circumstances the Tribunal was wrong in rejecting the application. The  Tribunal  considered  the  evidence  of  S/Shri   Jain, Aggarwal  and that there had been hundred per cent  increase in  prices  also  machinery worth about  Rs.  10  lakhs  had already  been  replaced  and that  there  had  been  hundred percent  increase  in prices also due to  devaluation.   The witness was however, not able to give any details as to when

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the  replacement of the parts and machinery took place  even though the management kept the record of the replacement  of the  machinery.  He could not also explain what exactly  was the  impact of the devaluation of Rupee on prices.   He  did not  see the quotations of the machinery.  It was  therefore concluded that his statement both with regard to the life of the  machinery and the replacement cost was  quite  us--less and was based on hearsay.  Shri Aggarwal’s evidence was also considered unsatisfactory, both with respect to the estimate of the replacement cost and the life of the machinery.   His calculations were based on a comparison of the original cost of  machinery in invoices Ex. M. 1, M. 2 and M. 3 and  their cost in 1967, as given in the corresponding invoices Ex.  M. 4, M. 5 and M. 6 and the devalua- 670 tion  of  the  Rupee.   The  Tribunal  then  considered  the discrepancy  between  the  machines  mentioned  in   various exhibits.   No  doubt  there is some  justification  in  the comment  of  the  learned Advocate by  the  Tribunal  merely because  the  machines mentioned therein for  the  Appellant that  some  of  these invoices were  not  relied  upon  were different  in size and weight to those which were  installed in  the  factory.  Undoubtedly there would  be  a  variation because the ingenuity of the inventor and technician is  not static   and  as  time  goes  on  there  are   improvements, renovations   and  changes  that  make  the   machine   more sophisticated and efficient.  While this is so the  question is whether satisfactory evidence has been produced to  prove the  total cost of rehabilitation and also the life  of  the machinery.   The evidence of Talwar was equally found to  be defective.   He  was  greatly relying  on  the  Handbook  of Chemical Engineers by John Parry, for establishing the  life of  the machinery.  He said that in that Book the life of  a Chemical  plant  working in three shifts is shown to  be  11 years.   He  also admitted that the Author  gives  only  the guideline  for Income tax purposes only.  An extract of  the Parry’s  Handbook  was  also given by  the  Tribunal,  which stated its conclusions as under :               "In  view of the above said infirmities it  is               evident   that  the  management’s  claim   for               rehabilitation  is  very much  inflated.   The               selection of the average multiplier is  rather               arbitrary  or at least quite generous  to  the               management  and their estimate about the  life               of  the  machinery is  slightly  conservative.               From the available evidence on record he  then               proceeds  to make his own estimates  which  as               far as the life of the machinery is  concerned               was  placed between that adopted  for  textile               machinery of 25 years and the life given in he               Chemical Engineers Handbook of 11  years.   It               said  after referring to the statement in  the               Chemical Engineer’s Handbook that the life  of               a  Chemical  machinery must be  more  than  II               years  in America where they work  efficiently               to the maximum capacity of the machinery.   It               was observed here the working conditions being               different  the  machinery is  likely  to  last               longer  and  certainly due  to  poor  economic               conditions in the country the management  also               cannot   afford  to  discard   such   valuable               machines  in eleven years only.  The  life  of               the  plant  therefore  must be  more  than  11               years.  On the other hand the ordinary life of               textile  machinery is taken to be 25 years  or

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             more.   In this view of the matter if we  take               the life of the machinery as 14 years it would               still  be  on  the side  of  the  conservative               estimate". 671               Regarding the multiplier the Tribunal said that :               "The  1961-62  Block of  the  machinery  would               require replacement according to our  estimate               in 1975-76.  The Company’s claim of six  times               the original cost based on a comparative study               of invoices Ex.  M. 1 to M. 3 on the one  hand               and  Ex.   M. 4 to M. 6 on the other  is  very               much   inflated  ....  The  Company  has   not               produced  the current price list also  of  the               machinery or any price indices indicating  the               trend  of prices of machines.  The  prices  of               machines  are more stabilised than  prices  of               consumer   goods.   The  production   of   the               machines  has also gone up in the country  and               it  is  not impossible that by 1975  we  might               manufacture our own machines for Nylon factory               also.   Even otherwise the prices of  imported               machines  are not likely to be more than  four               times.    Therefore,   in  our   opinion   the               multiplier  should only be four for the  block               of  1961-62.   In awards also relied  upon  by               Shri  Talwar even though they considered  only               prewar  block  of machines, in  no  case  they               allowed a multiplier of six.  For the block of               machines  installed  in the  accounting  year,               ordinarily the unit is taken as the multiplier               but  as there has been in the  meantime  deva-               luation of the rupee we think it would on  the               whole  be  fair  to adopt two  as  a  suitable               multiplier  for  the block  installed  in  the               accounting year". It  appears  to  us that this is an  unsatisfactory  way  of determining  the  two most important  factors  required  for computing  the  rehabilitation  requirement.   The  evidence produced  before  the  Tribunal  consisted  only  of  a  few invoices  which  were to serve as samples of  the  price  of machines  to  show  that  they have gone  up.   We  are  not impressed  with the submission of the learned  Advocate  for the Appellant that a complete set of invoices in respect  of all   the  Departments  of  the  industry   which   required rehabilitation had been placed before the Tribunal.   Indeed the   very   application   for   appointment   of   Assessor demonstrably   contradicts   this   assumption.    In   this application  the  management stated that  it  did  ,’examine S/Shri S. S. Aggarwal, A. C. Talwar as its expert  witnesses and  have filed some invoices by way of example to show  the trend in rising cost in plant and machinery.  With regard to useful  life of the plant the Respondent places reliance  on Chemical  Engineer’s  Handbook IVth Edition by  John  Parry" (emphasis ours). It is apparent from this application that the management was relying  only on a few sample invoices which they said  they had  produced  while  depending  heavily  only  on   Parrv’s Handbook for ascertaining the life of the machinery and  the probable cost. 672 We  have  also  gone  through  the  evidence  of  the  three witnesses and the invoices referred to and we think that the Tribunal rightly rejected this evidence as not being of much assistance.   It  is quite probable that the  price  of  the

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indigenous  industry as appearing from the bulletin  of  the Reserve Bank of India has gone up but that does not  furnish a  basis for arriving at any specific multiplier or  deviser for  the Appellant’s plant.  All that the invoices  produced before  the Tribunal establish is only the probable cost  of machinery of 2 1/2 lakhs, in an attempt to prove the cost of replacement of plant and machinery worth Rs. 825 lakhs.  The Tribunal  was therefore, amply justified in saying that  the only  evidence  given is of the few invoices  the  value  of which is only 2 1/2 % of the requirement of the  replacement cost  which in our view is not sufficient to establish,  how many  machines  in  each  Department  of  the  industry  are required,  what is the nature of those machines and what  is the  probable  cost of each of those machines.  We  are  far from  satisfied  that the management has placed  before  the Tribunal  any  satisfactory evidence  much  less  sufficient evidence  to arrive at a multiplier and deviser nor has  the Tribunal  any bases for arriving at its own  multiplier  and deviser  except it be on a pure conjecture and  guess  work. The  result is that though the appellant is able to  succeed in  one  of the main points of his Appeal, the  Appeal  will have to be dismissed as the Respondents are able to  sustain the  Award on other grounds.  The circumstances of the  case justify a direction for each party to bear its own costs. S.C.                                                  Appeal dismissed. 673