http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 20  

PETITIONER: M/S.  LIPTON LIMITED AND ANOTHER

       Vs.

RESPONDENT: THEIR EMPLOYEES

DATE OF JUDGMENT: 02/02/1959

BENCH: DAS, S.K. BENCH: DAS, S.K. IMAM, SYED JAFFER KAPUR, J.L.

CITATION:  1959 AIR  676            1959 SCR  Supl. (2) 150  CITATOR INFO :  R          1963 SC1327  (6)  R          1963 SC1332  (7)  RF         1966 SC 305  (46)

ACT:        Industrial  Dispute-Bonus-Fixation of grades and  scales  of        Pay-Company with head office in England and branch in India-        Employees in the Delhi Office-Claim to bonus on the basis of        global  Profits-Revision of  wage  structure-Principle-Bonus        and  Wage, distinction-Jurisdiction of the Tribunal to  make        an  award in respect of employees of Delhi  office  employed        outside State of Delhi.

HEADNOTE: The  appellant  company  was  incorporated  in  the   United Kingdom,  with  its  registered office  in  London  and  its business  in  the  United Kingdom consisted  of  stores  and groceries, including tea which represented only about 10% of its business there.  Its operations in India were carried on by  a  branch  with its head office  in  Calcutta,  and  the business there consisted mainly in the sale of " packeted  " tea throughout India.  The Delhi office of its Indian branch controlled the salesmen and other employees employed in  the Punjab, Delhi State, Rajasthan and Uttar Pradesh, but had no connexion with the export side of the business.  The  Indian Branch  had no subscribed capital nor any reserves, and  the capital used in India was money advanced from the  company’s fund in England. The  dispute between the respondents who were the  employees of the Delhi office and the company related, inter alia,  to (1)  fixation  of  grades and scales  of  pay;  (2)  whether retrospective  effect should be given to the new scales  of, pay;  and  (3)  bonus for the year  1951.   The  respondents contended  that  the total global profits of  the  appellant company  should form the basis for determining the claim  to bonus on the ground that it was an integrated industry which had  trading activities in various countries.  The  Tribunal found that the Indian workmen did not in any way  contribute to the profits which the appellant company derived from  its ex-India   business,  that  the  Indian  branch   maintained separate accounts which had been audited and accepted by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 20  

Income-tax authorities as showing the profit and loss of the Indian  branch  of  the business, and that  though,  at  the relevant  time, the appellant company was one  legal  entity and  the capital of the Indian branch came from London,  the Indian  branch  was  treated as a separate  entity  for  all practical purposes.  The Tribunal also found that for 195  I there was no available surplus for distribution as bonus  to the employees in India.  In the matter of fixation of grades and  scales  of pay, the Tribunal found  that  the  existing scale  of  wages of the Delhi employees was  far  below  the standard of a living wage, and for fixing the wage level  it took into consideration the company’s global capacity to pay and came to the conclusion that having regard to its global 151 resources  the  company  was  financially  able  to  bear  a slightly  higher wage structure.  Accordingly, the  Tribunal revised  the  grades  by giving an increase of  20%  to  all workers.  As to the date from which the revised grades  were to take effect, the Tribunal directed that they should  have retrospective  effect  from  January  1,  1954,  instead  of January 1, 1953, as claimed by the Union. The  appellant contended that the Tribunal erred  in  taking into  consideration  the global financial resources  of  the company  in  support of an increase in wages  while  holding that the Indian branch was a separate entity for the payment of bonus, that the financial resources of the Indian  branch did not show any capacity to pay higher wages, and that,  in any  case, there was no reliable evidence to show  that  the existing wage structure required revision if it was compared to  the  wage structure in similar industries in  the  Delhi region.   A  question  was also raised  as  to  whether  the Industrial  Tribunal,  Delhi, had jurisdiction  to  make  an award  in respect of employees of the Delhi office who  were employed outside the State of Delhi. Held:     (1)  that  on the finding that  the  Delhi  office controlled  all its employees in the matter of  appointment, leave,  transfer,  supervision, etc.,  whether  employed  in Delhi  State or outside it, the Industrial Tribunal,  Delhi, had  jurisdiction to adjudicate on the dispute  between  the appellant  company and its workmen of the Delhi  office,  as the  Delhi State Government was the  appropriate  Government within the meaning of s. 2 of the Industrial Disputes,  Act, 1947,  and  under  s. 18 of the Act the award  made  by  the Tribunal  was binding on all persons employed in  the  Delhi office; (2)  that  in the circumstances in which the appellant  com- pany  operated  in  India at the relevant time  and  on  the finding  that  no  part of the profits  made  in  India  was diverted to England and that the Indian business depended on its  own trading results the global profits of  the  company could  not  be made the basis for awarding bonus  to  Indian workmen,  and that the latter can claim bonus only if  there was an available surplus of profits of the Indian business; Muir  Mills  Co. Ltd. v. Suti Mills Mazdoor  Union,  Kanpur, [1955] 1 S.C.R. 991, Ganesh Flour Mills Co. Ltd v. Employees of  Ganesh Flour Mills, A.I.R. 1958 S.C. 382, Burn and  Co., Calcutta  v. Their Employees, [1956] S.C.R. 781  and  Baroda Borough  Municipality  v.  Its workmen,  [1957]  S.C.R.  33, referred to. (3)  that  in determining the question of a revision of  the wage  scale, the relevant considerations were : (1)  whether the  existing wage structure required revision by reason  of its being below the standard of living wage, and (2) whether the industry could bear the additional burden of an increase in  the  wage scale on the basis of  industry-cum-region  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 20  

reason of its financial resources in India ; that judged  by the considerations stated 152 above,  it  could  not be said that the  Tribunal  erred  in revising  the  wage structure on the basis of  the  evidence adduced  before it ; and that the increase in the wages  was not  beyond  the  financial  resources  of  the  company  as disclosed by its trading results in India. There is a distinction between bonus and wage.  Bonus  comes out of profits and is paid, if after meeting prior  charges, there  is  an available surplus.  Wages  primarily  rest  on contract and are determined on a long term basis and are not necessarily dependent on profits made in a particular year. Crown  Aluminium Works v. Their Workmen, [1958]  S.C.R.  651 and Express Newspapers (Private) Ltd. v. The Union of India, [1959] S.C.R. 12, relied on. (4)  that  the  new  scales of pay should  be  brought  into effect from November 1, 1955, instead of January 1, 1954, as directed by the Tribunal.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeals Nos. 713 to 715 of 1957. Appeals  by special leave from the judgment and order  dated May  25,  1956, of the Labour Appellate  Tribunal  of  India (Lucknow  Bench)  in Appeals Nos. 111-272, 282  and  327  of 1955, arising out of an Award dated August 18, 1955, of  the Additional Industrial Tribunal, Delhi. M.   C. Setalvad, Attorney-General for India, B. Sen and  S. N. Mukherjee, for the appellants. A.   V.  Viswanatha  Sastri  and Janardan  Sharma,  for  the respondents. 1959.   February 2. The Judgment of the Court was  delivered by S.   K.  DAS, J.-These are three appeals by  special  leave. The  appellant in all the three appeals is a company  called Messrs.   Lipton Ltd., London, having an office at Asaf  Ali Road,  New  Delhi (hereinafter referred to  as  the  Lipton, Ltd.). The respondents are the employees of the Delhi office of the said Lipton, Ltd. represented by the Lipton Employees Union (hereinafter referred to as the Union).  On April  14, 1958, a petition was filed on behalf of the appellant for an amendment  of the cause title of the three appeals,  wherein it  was stated that as a matter of internal arrangement  the Board of Directors of the 153 Lipton Ltd., London, decided to separate the export side  of its  business  from  its internal trade in  respect  of  its branch  in India and on April 4, 1957, a  separate  sterling company called Lipton (India) Ltd., was incorporated in  the United  Kingdom and this new Company took over the  internal side  of the business in India on and from January 5,  1958, but the export side of the business continued to be a branch of  the  Lipton  Ltd., London.  Pursuant  to  the  aforesaid arrangement,  the  employees  of the  Delhi  office  of  the Lipton,  Ltd.,  were notified of the formation  of  the  new Company and on and from January 5, 1958, their services were transferred to Lipton (India) Ltd., on condition that  their services  would be treated as continuous, uninterrupted  and on  the same terms as before.  On the aforesaid  statements, the  appellant  made a prayer that the cause  title  of  the three  appeals  should  be amended  by  substituting  Lipton (India)  Ltd.  in place of Lipton, Ltd.   We  directed  that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 20  

Lipton  (India)  Ltd.  be added as  one  of  the  appellants without prejudice to either party on the merits of the case. Two of the appeals (Civil Appeals Nos. 713 and 714 of  1957) were consolidated by an order of this Court, and they  raise certain  common  questions with regard to  (1)  fixation  of grades and scales of pay of the respondent-employees and (2) bonus for the year 195 1. The third appeal (Civil Appeal No. 715  of  1957)  raises a somewhat  different  question  with regard to overtime payment and is directed against an  order of the Additional Industrial Tribunal, Delhi, dated  October 15,  1955, by which the Tribunal made a modification in  its award dated August 18, 1955, in respect of overtime payment. It  will  be convenient if Civil Appeal No. 715 of  1957  is dealt with separately from the other two appeals. It is necessary now to state very briefly some of the  facts which  have given rise to these three appeals.  The  Lipton, Ltd.,  is  a  company incorporated  in  England  having  its registered  office  in London.  Its business in  the  United Kingdom  consists  of stores and  groceries,  including  tea which represents only about 20 154 10%  of  its business there.  Its operations  in  India  are carried  on  by a branch with its head office  in  Calcutta. This  branch,  which may be conveniently called  the  Indian branch, has been operating in this country for more than  60 years.  The company is principally interested in the sale of " packeted " tea throughout India together with small  sales of imported tinned milk and also in the export of tea to all parts of the world.  The Lipton, Ltd., does not own any  tea gardens  in  India  and has no  financial  interest  in  the producing side of the industry.  All the teas which are sold in India or which are exported are purchased from  producers in  India,  either through public auctions in  Calcutta  and Cochin  or  by  private  contract.   It  has  factories   in Calcutta, Allahabad and Conoor in which teas are blended and packed  into retail packets for sale throughout  India.-  It -sells  tea  direct to retail dealers and,  with  relatively minor  exceptions,  does not  operate  through  wholesalers. Dealers  are supplied by the company’s own salesmen each  of whom  has a sales depot at which he maintains stocks of  the company’s  products.  The salesman sells these teas  at  the company’s  wholesale prices- to dealers for cash and  remits the  cash through banking channels to Calcutta.   The  sales Organisation is controlled through six offices, one of which is located at Delhi.  The Delhi office controls the salesmen and  other  employees employed in the Punjab,  Delhi  State, Rajasthan and Uttar Pradesh on its. business; but the  Delhi office  has  no  connexion  with  the  export  side  of  the business.   So far as the export business is  concerned,  it consists  of  two different types of trade  activities.   In some  foreign countries the Indian branch sells  packet  tea under the Lipton label on which it is able to make a profit; these  profits appear in the accounts of the Indian  branch, which  are separately maintained and audited.  This type  of trade  activity is mostly confined to Burma, Iraq, Iran  and certain  small Middle East countries.  The greater  part  of the export trade, however, consists of purchases made at the Calcutta auctions on behalf of overseas buyers, who  utilise the  services  of  Lipton’s  expert  tea  tasting  staff  in Calcutta 155 to  buy tea on their account at the auctions and the  Indian branch  is remunerated for this service by the payment of  a commission  of  one  per cent.  The  Indian  branch  has  no

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 20  

subscribed   capital  nor  any  reserves.   A.  W.   Samuel, Administrator,  Lipton,  Ltd., thus explained  the  position with  regard  to  the capital of the Indian  branch  in  his evidence:- "  Our  Company has no subscribed capital in India  nor  any reserves.  The capital used in India is money advanced  from the  company’s  fund  in England, and  the  amount  of  this advance at the balance sheet date is shown as the balance of the current account with the Liptons Ltd., London.  We  have also  to resort to overdraft on the local banks to meet  the working capital demand in India ". It  appears that an account is maintained which is known  as the London General Account and the capital which enables the Indian branch to operate in India is recorded as the balance of the current account in the Indian books and to  determine the  amount of capital employed in India a daily average  of the current account has to be taken and the working  capital of  the  Indian  branch is the amount  by  which  the  fixed current assets exceed the total liabilities. The  Delhi  office  of  the  Indian  branch  employs  peons, sweepers,  van-workers,  godown workers,  village  salesmen, drivers,.  junior  clerks, godown  keepers,  senior  clerks, stenographers,  divisional salesmen and other categories  of workers, details whereof need not be set out in full at this stage.  The case of the Union was that as far back as  June, 1951,   the  workers  of  the  Delhi  office  had   made   a representation  for an increase in pay;  the  representation was  repeated  in April, 1952.  As the  management  did  not accede  to  their request a union of  Lipton  employees  was formed  in September 1953.  This Union framed a  charter  of demands and submitted it in December, 1953.  The charter  of demands  consisted  of a large number of items  and  as  the management contended that it %,as not in a position to  meet the  demands,  certain  conciliation  proceedings  followed. They,  however, came to nothing and on October 1, 1954,  the industrial dispute 156 between the Lipton, Ltd., and the Union was referred to  the Additional  Industrial  Tribunal, Delhi,  for  adjudication. The reference set forth in a sub-joined schedule the matters upon  which  adjudication was necessary,  and  the  schedule contained  twenty  terms of reference out of which  the  two items  with  which  we  are now  concerned  related  to  (a) fixation of grades and scales of pay including the  question whether the new scales should be given retrospective  effect from  January 1, 1953, and (b) bonus for each of  the  years 1951, 1952 and 1953.  After hearing the parties the Tribunal made its award on August 18, 1955.  It disallowed the  claim of bonus, but as to the fixation of grades and scales of pay it allowed an increase of about 20 per cent. to all  workers over  their present wages and proportionate increase in  the dearness  allowance,  details whereof we shall  state  at  a later stage.  As to overtime payment which was item no. 8 of the terms of reference the Tribunal said:- " Since the company is allowed by law to take 48 hours  work in  a  week from its employees, it is only fair  that  if  a worker puts in over-time work in any week within a -total of 48 working hours, he should be only paid at the single  rate for  all  over-time work that he puts in between 39  and  48 hours in the week.  If the over-time work done by the worker brings his total working, hours during the week to more than 48 hours, any excess over-time work above 48 hours should be paid at double the rate.  I direct accordingly." It  may  be stated here that there was a dispute  about  the working  hours  also and the Tribunal  changed  the  working

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 20  

hours  from 9-30 a.m.-5 p.m. to 10 a.m.5 p.m.  on  week-days with  half  an hour’s interval for lunch, and 10 a.m.  to  I p.m.  on Saturdays-thus bringing the total to 36 hours in  a week,.   The question of over-time arose only if  a  workman was  asked to Work in excess of the working hours  fixed  by the  Tribunal.   On  October 12, 1955,  the  Union  made  an application  in  which  it stated that the  figure  "  39  " occurring in paragraph 24 of the award relating to over-time payment was obviously a mistake for " 36 "; because the 157 learned  Tribunal  had fixed. in paragraph 23 of  the  award that  the  working hours of a workman should be 36  hours  a week.   The  learned Tribunal  considered  this  application without  any notice to the present appellant  and  corrected the  error  by amending the figure 39 to 36.   The  Tribunal proceeded  on  the footing that the mistake was  a  clerical error  due  to an accidental slip which could  be  corrected under  r.  23 of the Industrial  Disputes  (Central)  Rules, 1947. Against  the award of the Industrial Tribunal three  appeals were taken to the Labour Appellate Tribunal (Lucknow Bench). The two main appeals before the Appellate Tribunal,  namely, No.  272  of  1955 and No. 282 of 1955, were  filed  by  the Lipton, Ltd., and the Union respectively and related to  the various  items  of  the  terms of  reference  on  which  the Industrial  Tribunal  had  given its  decision.   The  third appeal, No. 327 of 1955, related to the subsidiary matter of over-time  payment regarding which the  Industrial  Tribunal had  amended its award.  So far as the two items with  which in  Civil  Appeals  Nos.  713 and 714 of  1957  we  are  now concerned,  the  Labour Appellate Tribunal in  its  decision dated  May 25, 1956, upheld the decision of  the  Industrial Tribunal  as respects fixation of grades and scales  of  pay comprised  in the term of reference numbered 1 (a); it  also upheld  the  decision  of the Industrial  Tribunal  to  give retrospective  effect to the new scales of pay from  January 1, 1954, which was covered by the term of reference numbered I  (b).   As  to bonus, which was item 4  of  the  terms  of reference, the Appellate Tribunal upheld the decision of the Industrial  Tribunal with regard to the years 1952 and  1953 but for 1951 it awarded an extra two months salary as  bonus for that year in addition to the bonus of one month’s salary which the Lipton, Ltd., had already granted ex gratia to the workmen.  As to the subsidiary appeal relating to the  over- time payment, the Appellate Tribunal agreed with the view of the Industrial Tribunal that there was an error in computing the working hours and the error being of a clerical  nature, it was open to the Tribunal to correct it. From the decision of the Labour Appellate Tribunal 158 in  the  three appeals in question, the  appellant  obtained special leave to appeal to this Court on June 27, 1956,  and in  pursuance  of  the order of  this  Court  granting  such special leave, the present appeals have been preferred. Civil  Appeal  No.  715 of 1957.  It is  now  convenient  to dispose of Civil Appeal No. 715 of 1957. We have no doubt in our mind that the error in computing the working hours  with regard  to over-time payment was due to an ’accidental  slip in  making  the calculation; it was nothing but  a  clerical error which the Industrial Tribunal was entitled to  correct even without notice to the appellant.  The learned Attorney- General  who  appeared  for the  appellant  in  these  three appeals has not pressed Appeal No. 715 of 1957.  This appeal must accordingly be dismissed with costs. Civil Appeals Nos. 713 and 714 of 1957.  We now turn to  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 20  

other  two  appeals, namely, Civil Appeals 713  and  714  of 1957.   We  have already stated that the only  points  which survive for decision are those relating to items 1(a),  1(b) and  4  of the terms of reference.  These  items  relate  to fixation of grades and scales of pay, whether  retrospective effect  should be given to the new scales of pay, and  bonus for  1951.   The other items of the award relating  to  City compensatory allowance, leave, holidays, etc., have not been challenged  before  us.  We are, therefore,  saying  nothing about  those  items  of the award,  which  must  necessarily stand.   It may be made clear, however, at this  stage  that one  of the points taken before the Industrial  Tribunal  on behalf-of the Lipton, Ltd., was that the Industrial Tribunal had no jurisdiction to make an award in respect of employees of  the Delhi office who were employed outside-the State  of Delhi.   This point of jurisdiction was decided against  the appellant  and the Industrial Tribunal pointed out that  all the  workmen  of the Delhi office, whether  they  worked  in Delhi or not, received their salaries from the Delhi office; they were controlled from the Delhi office in the matter  of leave,  transfer,  supervision, etc.,  and,  therefore,  the Delhi State Government was the appropriate Government within the meaning of s. 2 of the Industrial 159 Disputes  Act,  1947, relating to the  dispute  which  arose between  the Lipton, Ltd., and the Union and under s. 18  of the  said Act the award made by the Tribunal was binding  on all  persons  employed in the Delhi office.   The  Appellate Tribunal  upheld the decision of the Industrial Tribunal  on this  point  and though this question  of  jurisdiction  was raised  in  the  appeals before us,  it  was  not  seriously pressed by the learned AttorneyGeneral.  We are of the  view that the Industrial Tribunal had jurisdiction to  adjudicate on the dispute between the Lipton, Ltd., and its workmen  of the Delhi office. Now, we go on to the two main points urged on behalf of  the appellant.  We take up first the question of bonus.  Item  4 of the terms of reference related to bonus and the claim  of the Union was made in two parts.  Item 4 reads thus:- "  Bonus:  (a) Whether every workman be, paid bonus  at  the rate  of 5 months’ salary for each of the years  1951,  1952 and  1953  and what other directions are necessary  in  this respect ? (b)  Whether special bonus equivalent to three months salary should  be  paid to all workmen in honour of  the  company’s Diamond Jubilee celebration for the year 1953 ? " Before  the Industrial Tribunal the claim of the  Union  was that the total global profits of the Lipton, Ltd., should be the  basis  for  determining  the  claim  to  bonus  ;   the contention  on  behalf  of the Lipton, Ltd.,  was  that  the profits  of  the Indian business only should be  taken  into account  in assessing any available surplus for the  payment of bonus.  The Industrial Tribunal held that as both  labour and  capital  contributed to the earnings of  an  industrial concern,  labour  must  have its  legitimate  share  of  the profits  to  which it has contributed; since,  however,  the employees  of  the  Lipton, Ltd., in India  do  not  by  any stretch of reasoning contribute to the profits which  accrue to  the Lipton, Ltd., in respect of its  trading  activities outside India, the employees in India cannot claim bonus  on account  of any profits which the Lipton, Ltd., derive  from its ex-India business.  On this footing the 160 Industrial  Tribunal  considered the question of  bonus  and held  that  for  1951 there was  no  available  surplus  for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 20  

distribution   as  bonus  to  the  employees  in  India   in accordance with the formula evolved by the Full Bench of the Labour Appellate Tribunal in Millowner’s Association, Bombay v.  Rashtriya  Mill Mazdoor Sangh (1) generally  though  not completely approved by this Court in Muir Mills Co’ Ltd.  v. Suti Mills Mazdoor Union, Kanpur (2).  For 1952 and 1953 the claim of the Union for bonus, the Industrial Tribunal  held, was  still  weaker, because in those years there  was  still less  available  surplus for distribution as  bonus  to  its workers,  and so far as the second part of the claim of  the Union,  namely,  Diamond Jubilee bonus,  was  concerned  the Industrial  Tribunal  rejected  it  outright.   The   Labour Appellate  Tribunal substantially affirmed the  decision  of the  Industrial  Tribunal and gave several reasons  why  the global profits of the Lipton, Ltd., could not be taken  into account  for the payment of bonus to its workers  in  India. After  having  given  those reasons,  the  Labour  Appellate Tribunal  referred to the auditors’ report dated  March  17, 1952,  with  regard  to  the profit  and  loss  account  and balance-sheet of the Indian business as on January 5,  1952. In that report which related to the year 1951 it was  stated that the value of the stocks of tea held at the end of  1951 had  been written down below cost by Rs. 9,93,824-5-3.   The auditors’ report then said:- "  We estimate the net realisable value of the total  stocks of tea as on January 5, 1952, to be in excess of their  cost and,  therefore,  in  our opinion,  such  stocks  have  been undervalued  to  the  extent of the  above  reduction  below cost." Relying  on this report the Labour Appellate Tribunal  added back  Rs. 9,93,824 to the available surplus of Rs.  9,66,654 which the profit and loss account of the Indian business for the  year  1951 showed.  Adding the two figures  the  Labour Appellate Tribunal opined that the available surplus at  the end  of 1951 was Rs. 19,60,478.  After  deducting  therefrom the (1) [1950] L.L.J. 1247. (2) [1955] 1 S.C.R. 991. 161 legitimate  prior charges on account of (a)  rehabilitation, (b)  a four per cent. return on capital and (c) one  month’s bonus  already  paid to the workers,  the  Labour  Appellate Tribunal  came  to  the conclusion that there  was  a  clear available surplus of Rs. 4,11,478 for distribution of  extra bonus over and above the bonus of one month’s salary.  which the Lipton, Ltd., had already paid to its workers. It has been contended before us, and rightly in our opinion, that  the  Labour Appellate Tribunal  committed  a  manifest error with regard to the sum of Rs. 9,93,824 and odd.  It is true  that  the  auditors in their report  referred  to  the under-valuation of the stock of tea available at the end  of 1951  by a sum of Rs. 9,93,824 and odd.  An  explanation  of such  undervaluation was given in the written  statement  of the  Lipton,  Ltd., dated February 8, 1955.  It  was  stated therein:- " It is a well recollected fact and the Court will not  need evidence  in  support of this that the  tea  market  dropped rapidly  and in a catastrophic fashion to,wards the  end  of 1951.   As a result of this the Company  apprehended  severe losses on the stocks which it was carrying and provision for this loss was made in the 1951 accounts by an adjustment  to the  value of stocks of tea on hand at the end of  December, 1951.  The amount of this adjustment was Rs. 9,93,824.  As a result   of  this,  the  profits  made  during   1951   were understated in the company’s accounts and overstated in  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 20  

accounts  for 1952.  It should be noted that the  Income-tax Department insisted that these profits were made in 1951 and not in 1952 and the Company was taxed accordingly." What  is  worthy  of  note  is  that  when  the   Income-tax Department  insisted that the sum of Rs. 9,93,824 should  be treated  as the profits of 1951, the said amount  was  added back in the summarised profit and loss account of the Indian branch  and the available surplus of Rs. 9,66,654 was  shown therein after having taken into consideration the sum of Rs. 9,93,824.  This is clear from the summarised profit and loss account 21 162 of the Indian branch.  It is clear, therefore, that the 1951 profit  and loss account took into consideration the sum  of Rs.  9,93,824 and after adding back that sum to the  profits of  1951, the available surplus of Rs. 9,66,654 was  arrived at.    The   Labour  Appellate  Tribunal   was,   therefore, manifestly in error in adding back the sum of Rs.  9,93,824; because that amount had already been added back in  arriving at  the  available surplus of 1951.  Thus, the  main  reason which the Labour Appellate Tribunal gave for its decision to award the payment of extra bonus for 1951 disappears, and it is  not disputed that if the available surplus for 1951  was only Rs. 9,66,654, then after making the necessary deduction for  prior  charges, nothing would be left  for  payment  as extra bonus in 1951 to the workers in India.  So far as  the other  two  years,  1952  and 1953,  are  concerned,  it  is unnecessary  to  consider the profits of  those  two  years, because there is no appeal before us on behalf of the Union. On  behalf of the Union, however, it has been very  strongly contended  that the bonus for 1951 as awarded by the  Labour Appellate  Tribunal can be justified, if the global  profits of  the Lipton, Ltd., are taken into consideration,  and  it has  been argued before us that there is no reason  why  the Lipton,  Ltd.,  should  not be  treated  as  one  integrated industry  which has trading activities in various  countries and, for the purpose of the payment of bonus, why the  total global profits of the Lipton, Ltd., should not be taken into consideration. We  do not think that the Union is justified in  asking  for bonus  for  a  particular year on the  basis  of  the  world profits of the Lipton, Ltd.  The true nature of a claim  for bonus  has  been  the subject of many  decisions  in  Labour Tribunals  and  Courts.  It has been  judicially  recognised that bonus is not deferred wage, and the justification for a demand of bonus as an " industrial claim " arises when wages fall  short  of  the  living wage  and  the  industry  makes sufficient  profits  to which both labour and  capital  have contributed.  Substantially, the claim for bonus is a  claim which is paid out of the available surplus from the  profits of an 163 industrial  undertaking,  to which both labour  and  capital have  contributed.   This  aspect of  bonus  was  considered in.Muir  Mills Co. Ltd. v. Suti Mills Mazdoor Union,  Kanpur (1).   It has also been said in some cases that bonus  is  a temporary  and  partial filling-up of the  gap  that  exists between  a living wage and the actual wage paid:  where  the goal of living -wage has been attained, bonus is a mere cash incentive to greater efficiency and production, but where an industry  has not the capacity to pay a living wage  or  its capacity varies or is expected to vary from year to year  so that  the industry cannot afford to pay a living  wage,  the payment  of  bonus  may  be  looked  upon  as  a   temporary

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 20  

satisfaction,  wholly  or  in  part, of  the  needs  of  the employees.   Learned  counsel for the Union  has  emphasised this  latter aspect and has contended that there is  nothing unfair  in  considering the global profits  of  the  Lipton, Ltd., in awarding a temporary satisfaction, in part, of  the needs  of its Indian employees.  We do not think that it  is necessary  or advisable to lay down any inflexible,  general rule  as  to the basis of a claim for bonus by some  of  its employees  in  an industrial undertaking  which  carries  on trade  activities in several countries or even in  different parts of the same country.  So far as foreign countries  are concerned,  many  considerations  such  as  restrictions  on foreign remittances and other trade restrictions may have to be  taken  into account in determining the question,  as  in Ganesh  Flour Mills v. Employees of Ganesh Flour Mills  (2). There are a number of decisions of Labour Tribunals, most of which  were  noticed  in  Ganesh Flour  Mills  Co.  Ltd.  v. Employees of Ganesh Flour Mills (2), where a distinction has been  made between a parent concern and subsidiary  concerns or  even between different units of the same  concern,  and, speaking  generally, the test laid down for the  payment  of bonus  in  such cases is (1) if the different units  are  so connected  together or integrated that the payment of  bonus to one section of employees will violate the principle  that all  workers  should share in the prosperity to  which  they have jointly contributed, or (2) the (1) [1955] 1 S.C.R. 991. (2) A.I.R. 1958 S.C. 382. 164 different  units  are so separated or unconnected  that  the trade activity of one and the contribution of labour made in the  profits  thereof has no necessary  connexion  with  the trade  activity  and  profits of the other  units.   In  the former  case the undertaking has been treated as a whole  as in Burn and Co., Calcutta v. Their Employees (1); and Baroda Borough  Municipality v. Its Workmen(2) ; in the latter,  it has  been held that each unit must rest its claim for  bonus on the profits made by that unit.  Whether a particular case comes under the former category or the latter must depend on its  own facts and circumstances, and we may  readily  agree that  the more keeping of separate accounts may not  in  all cases  be the proper criterion for determining  whether  the different units are integrated or not. For the purpose of these appeals it is sufficient,  however, to  state  that in view of the findings arrived  at  by  the Tribunals below, it will be unfair and unjust to grant bonus to  the Indian workers on the global profits of the  Lipton, Ltd.  The Tribunals below have clearly found that the Indian workmen  do not in any way contribute to the  profits  which the  Lipton, Ltd., derive from its ex-India business.  As  a matter of fact, even the nature of the trade activity is not quite  the same ; tea represents only about 10 per cent.  of the  trading activities of the Lipton, Ltd., in  the  United Kingdom,  whereas tea is the main commodity of  the  trading activity of the Indian branch.  The Indian branch  maintains separate  accounts which have been audited and  accepted  by the Income-tax authorities as showing the profit and loss of the  Indian  branch of the business.  The  Labour  Appellate Tribunal has very clearly found that though, at the relevant time, the Lipton, Ltd., was one legal entity and the capital of the Indian branch came from London, the Indian branch was treated as a separate entity for all practical purposes.  It said: "   Lipton,  London  never  interferes  with   the   trading operations  of Lipton, India, in India.  Lipton, India  buys

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 20  

vast quantity of tea amounting to millions (1) [1956] S.C.R. 781. (2) [1957] S.C.R. 33. 165 of tons at auctions in India and sells the same loose or  in packets  at a profit in the markets of India.  Profits  thus made  go entirely to the credit of the Indian  concern.   No part  of the profits is diverted to England.  Lipton,  India also  purchases  tea  for export......  Trading  results  of Lipton,  India  must  be regarded to be  restricted  to  the earning of commission on tea exported and returns on sale of tea-loose  or in packets-in the internal markets  in  India. Lipton,  India has got ,to pay income-tax to the  Government of  India on the basis of its earnings on those  two  heads. Workmen  of the Indian Organisation have to work mainly  for purchase  of  tea at auctions in India, for sale of  tea  at profit in Indian markets and for export of tea on commission to  a lesser extent.  Therefore, the returns on these  heads are  the  only  things upon which the staff  of  the  Indian Organisation may depend for bonus." In the appeals before us the claim for bonus was made really on  the  basis of an available surplus of  profits,  and  we agree  with  the Labour Appellate Tribunal that  the  Indian workers can claim bonus if there is an available surplus  of profits out of the Indian business.  In the circumstances in which  the Lipton, Ltd., operated in India at  the  relevant time, it would be unjust to award bonus to the Indian  work- men  on the basis of the global profits of the Lipton,  Lid. It  is  not disputed that the Lipton, Ltd., is  a  very  big Organisation  and has huge reserves which were built  up  in previous  years  out  of its world  profits.   There  is  no evidence to show to what extent, if any, the Indian business contributed to those profits.  On the finding of the  Labour Appellate Tribunal that no part of the profits made in India is  diverted to England and on the further finding that  the Indian  business depends on its own trading results, we  are of the view that the Tribunals below correctly held that the global  profits of the Lipton, Ltd., could not be the  basis for awarding bonus to its Indian workmen. There  was  some  argument before us as to  whether  the  1% commission  which the Indian branch earned on the export  of tea correctly represented the proper remuneration payable to the Indian business.  That, 166 however,  is  a question which we do not think  is  open  to enquiry in the present appeals.  The Income-tax  authorities accepted  as correct the returns of the Lipton, Ltd., as  to their  Indian business.  It was not suggested that  anything more  than 1% was in fact taken as commission by the  Indian branch,  or  that  the  accounts were "  cooked  "  in  that respect.   Whether the 1% commission was the  normal  market rate  of  commission  for purchases on  behalf  of  overseas buyers was not investigated ; on the contrary, the  accounts filed by the Lipton, Ltd., in this respect were accepted  as correct.   That  being the position, it is not open  to  the respondent  to contend that the available surplus should  be determined on mere speculation as to what the Indian  branch should have earned in the export side of its business. On  a consideration of all the relevant factors, we  are  of the view that the Labour Appellate Tribunal was in error  in awarding  an  extra  two  months’ bonus  for  1951  and  the decision of the Industrial Tribunal was correct.  Therefore, the  award in so far as it directs the payment of extra  two months’ bonus for 1951 must be set aside.  We now go to  the more difficult question of fixation of grades and wages.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 20  

What the Union demanded in the matter of fixation of  grades and   scales   of  pay  will  appear  from  the   terms   of reference. These terms were:- "  Fixation  of grades and scales of pay: 1(a)  Whether  the following  pay scales should be adopted and what  directions are necessary in this respect:-      Peon, Sweeper, Van      Mazdurs and God-....Rs. 60-3-90-4-130-5-155.      own Mazdurs.      Village salesmen....Rs. 70-5-120-7 1/2-195-10-245.      Drivers.............Rs. 90-71/2-150-10-250-15-325.      Junior Clerks, Typ-      ists, Salesmen and      Assistant Godown....Rs. 90-71/2-150-10-250-15-325.      Keepers.      Godown Keepers......Rs. 120-10-200-12-320-20-460. 167 Senior Clerks, Steno- graphers, Compto........Rs. 150-10-250-15-400-20-500. meter operator and Div.  Salesmen. (b)  Whether pay scales as stated in ’a’ above  should  come into  effect retrospectively from 1-1-53 and what should  be the method of adjustments while fixing the actual pay in the revised scale?  " The  Industrial  Tribunal  gave an increase of  20%  to  all workers and set out in tabular form the category of workers, their  present  grades,  and the revised  grades  which  the Tribunal was allowing on the basis of a 20% increase.  It is necessary to set out the -tabular form here:- "CATEGORY               PRESENT          REVISED                           GRADE            GRADE Peons, Sweepers, Van Mazdoors and Godown Mazdoors.               27-2-45          35-2-55 Village Salesman.       40-0-50          50-2-60 Drivers.                65-3-95         78-3-114 Junior Clerks and Typists.                70-5-125        84-6-150 Salesman.               50-0-75         60-5-90 Godown Keepers Gr. 1    70-5-130        84-6-150                    2   125-8-200       150-9-240                    3   195-10-235     230-10-280 Senior Clerks and Comptometer Operators.   120-8-200    140-10-240 Stenographers.           125-8-205    150-10-240 Divisional Salesman       80-0-125    100-10-150." As  to the date from which the revised grades were  to  take effect,   the  Tribunal  directed  that  they  should   have retrospective  effect  from  January  1,  1954,  instead  of January  1, 1953, as claimed by the Union.   This  direction the  Tribunal  gave  because the  Union  had  presented  its demands to the Lipton, Ltd., for the first time towards  the end  of  December,  1953.  The Tribunal  also  gave  certain directions as to how the present employees should be brought into the 168 new scales and what adjustments should be made therefor. The Tribunal proceeded on the footing that the existing wage structure,  though not far below what it called the  minimum fair wage, was far below the standard of a living wage,  the progressive  attainment of which (the Tribunal said) is  the aim  of all labour laws.  The Tribunal then  considered  the question of financial capacity of the Lipton, Ltd., to  bear

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 20  

a higher wage structure and expressed itself as follows : "  Since as remarked before, the existing wage level of  the company’s  employees  cannot  be said to be  far  below  the minimum fair wage level obtaining in this country, this wage level  can  be increased only if it can be  found  that  the company  is  in  a financially sound position  to  bear  the additional  burden.  This again brings us face to face  with the question whether it is the company’s capacity to pay  on an  all-world  basis  that should  be  considered  for  this purpose or only the prosperity of its Indian branch.  So far as  bonus is concerned, since bonus according to the  latest theory  represents a due share of the labour in the  profits of business so largely contributed to by it, profit accruing from  foreign  business does not come into  the  picture  in distributing  bonus.  The same principle cannot be  extended to  the fixing of the wage level of the workers for all  the employees  in  India are of course employees of  the  parent company..........................   The   company’s   global resources  cannot, therefore, be disregarded in  determining its  capacity  to  pay.  At the  same  time,  the  company’s overall  balance-sheet and state of business cannot  furnish the sole criterion for the fixing of the upper limit of  the fair  wage  in India, for if a burden is  imposed  upon  the company which is out of all proportion to the income that it derives  from  the business in India, the company  may  very well  be  tempted to close down its business  in  India  and employ  the capital thus released elsewhere.  No one can  be happy  over a situation like this, the  company’s  employees least  of  all.   While,  therefore,  the  company’s  global capacity to pay cannot be kept 169 out of consideration in fixing the wage level of its  Indian employees, any increase in the wages cannot be granted on  a level that would not leave it worth while for the company to continue  its business in India.  In other words, while  the company’s overall prosperity may be considered in fixing the wage  level in India, I should see to it that  the  increase should  not be such that it drives the company out of  India altogether." The Tribunal pointed out that according to the last balance- sheet  filed  in the case the share capital of  the  Lipton, Ltd.,  amounted in 1954 to pound 2,75,000 (but the  balance- sheet  however  shows  pound 2,500,000)  while  the  reserve capital stood at pound 3,60,417.  The Tribunal expressed the view that having regard to its global resources, the Lipton, Ltd.,  was financially able to bear a slightly  higher  wage structure  in  order to bridge the gap, in  part  at  least, between  the  existing wage structure and  the  living  wage standard.   The Tribunal also referred to  the  circumstance that  though the Lipton, Ltd., had incurred losses  in  1949 and  1950, it bad turned the corner in 1951 and the  Company having  overhauled  its system of sales, there  was  a  rea- sonable expectation of larger profits in future years.   The Tribunal said that in the course of arguments before it,  it put to the parties whether an overall increase of five lakhs of rupees in the wage structure on an all India basis  could be borne by the company.  The Tribunal then said: "  Mr. Samuel was prepared to accept this additional  burden on  the condition that in future there will be no  liability on  the  Company  to, pay bonus to their workers  on  an  ex gratia  basis, which they have been paying so far  to  their workers every year at the rate of one month’s basic salary." On   the  aforesaid  grounds,  the  Tribunal  came  to   the conclusion  that  the Lipton, Ltd., could  easily  stand  an additional burden to the tune of five or six lakhs of rupees

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 20  

over the wages and dearness allowance at present paid to its employees all over India, and as the total annual wage  bill of the Indian workmen was 22 170 in  the neighbourhood of about twenty lakhs, an increase  of 20%  allowed  to all workers over their  present  wages  and -proportionate increase in the dearness allowance would  not exceed  six  lakhs.  On this basis the  Industrial  Tribunal gave its award. The  Labour  Appellate-Tribunal substantially  affirmed  the reasons  given by the Industrial Tribunal and said that  the two questions which arose for determination were (1) whether the existing scales of pay required revision and (2) whether the revised scales as fixed by the Industrial Tribunal  were unwarranted and beyond the financial capacity of the Lipton, Ltd. Both these questions the Appellate Tribunal answered in favour of the respondent workmen. In  the  appeals  before  us,  the  learned  AttorneyGeneral appearing for the Lipton, Ltd., has very strongly  contended that the reasons given by the Tribunals below for a revision of   the  wage  structure  are  unsound  in  principle   and unjustified  on facts ; he has particularly laid  stress  on the  contradiction involved in taking the  global  financial resources of the Lipton, Ltd., in support of an increase  in wages  while  holding that the Indian branch is  a  separate entity  dependent  on  its own profits for  the  payment  of bonus.   He has also submitted that the financial  resources of the Indian branch do not show any capacity to pay  higher wages;  nor  was  there,  according  to  him,  any  reliable evidence  to show that the existing wage structure  required revision if it was compared to the wage structure in similar industries  in  the Delhi region.  He pointed out  that  the Tribunal was wrong in thinking that the Lipton, Ltd., turned the  corner  in  1951  and  that  there  was  a   reasonable expectation  of  larger  profits in  future  years,  and  in support  of his contention, he referred to  the  appellant’s statement  of the case, wherein the appellant stated in  the following  chart  from the profit and loss figures  of.  the Indian  branch  from  1949 to 1957 in  the  context  of  its average capital: 171 1949 1950 1951 1952 1953 1954 1955 1956 1957 (in lakhs of rupees)                       1                                          ----                                            2                                           year. Average Capital (re- presenting        162 158 167 209 195 235 245 193 165 Head office Current Ac- count). Net Profit (after taxa-   8.2  3.6  2.4  6.3  7.08.2  2.8  10.6  6.6 tion)         (loss)(loss)                  (loss)    (loss) Percen- tage of Net Profit/Loss    5.1   2.3  1.4  3.0  3.6 3.5  1.0  5.5  3.6 to the Aver- (loss) (loss)                   (loss)   (loss) age Capital The  learned Attorney-General then referred to  the  alleged admission of Samuel as to the capacity of the Lipton,  Ltd., to  bear an additional burden of about five lakhs  and  drew our attention to the affidavit of S. K. Choudhury, personnel

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 20  

officer  of  the  Lipton Ltd.,  made  before  the  Appellate Tribunal,  in which it was stated that Samuel  never  agreed that the appellant was able to bear an additional burden  of five lakhs in the wage structure.  On these submissions, the learned  Attorney-General has very strongly  contended  that the  Tribunals below were wrong, in principle as well as  on facts, in disturbing the present wage structure. We  think  that,  in the main,  three  questions  arise  for consideration: (1) were the Tribunals below wrong in  having regard to the global financial resources of the Lipton Ltd., in  fixing  the wage structure whereas for  the  payment  of bonus the profits of the Indian branch only were taken  into consideration;  (2) did the existing wage structure  require revision  and  was there any reliable evidence to  show  the wage  structure  of  any comparable  industry  in  the  same region, on the assumption that the capacity to pay should be gauged on the industry-cum-region basis; and (3) has  Lipton Ltd.,  financial capacity to bear the additional  burden  on its Indian resources ? 172 It  is necessary first to state that there is a  distinction between bonus and wage-a distinction to which we had earlier adverted  in this judgment.  Bonus comes out of profits  and can claim no priority over dividend or other prior  charges; bonus  is paid if after meeting prior charges, there  is  an available  surplus.   Wages stand on  a  somewhat  different footing; wages primarily rest on contract and are determined on  a long term basis and are not necessarily  dependent  on profits made in a particular year.  The distinction  between the two has been adverted to in two recent decisions of this Court:  Messrs.  Crown Aluminium Works v. Their Workmen  (1) and Express Newspapers (Private) Ltd. v. The Union of  India (2).   In  the  Crown Aluminium Works  (1)  this  Court  has observed: " The old principle of the absolute freedom of contract  and the  doctrine  of laissez faire have yielded  place  to  new principles  of  social  welfare  and  common  good.   Labour naturally looks upon the constitution of wage structures  as affording  ’ a bulwark against the dangers of a  depression, safeguard  against  unfair methods  of  competition  between employers and a guarantee of wages necessary for the minimum requirements  of employees’.  There can be no doubt that  in fixing  wage structures in different industries,  industrial adjudication  attempts,. gradually and by stages  though  it may be, to attain the principal objective of a welfare state to  secure ’to all citizens justice, social and economic  To the  attainment  of this ideal the Indian  Constitution  has given  a  place of pride and that is the basis  of  the  new guiding  principles  of social welfare and  common  good  to which we have just referred." In  so  far as bare minimum wage is concerned, it  has  been held  that no industry has the right to exist unless  it  is able  to  pay its workmen at least a bare minimum  wage;  in other  words,  minimum  wage  is  the  first  charge  on  an industry.   In the later decision of the Express  NewsPapers (Private)  Ltd. (2) the three concepts of the minimum  wage, fair  wage  and living wage have been examined, and  it  has been pointed out that (1) [1958] S.C.R. 651, 660. (2) [1959] S.C.R. 12. 173 the content of the expressions " minimum wage ", " fair wage " and " living wage " is not fixed and static; it varies and is bound to vary from time to time. The present case is not one of payment of the minimum  wage;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 20  

it  is  a case of payment of a fair wage which  still  falls short  of a living wage.  For the payment of a fair wage  as for a living wage, the financial capacity of the industry is undoubtedly  a relevant consideration.  The question  before us is-how is the financial capacity of the Lipton, Ltd.,  to be judged?  The question of the capacity of the industry  to pay  a  fair  wage  has  been  considered  in  the   Express Newspapers  (Private) Ltd. (1) (at p. 89) and the  following observations are apposite- "  The  capacity of industry to pay can mean  one  of  three things, viz., (i)  the   capacity   of  a   particular   unit   (marginal, representative or average) to pay, (ii) the capacity of a particular industry as a whole to  pay or (iii)     the capacity of all industries in the country to pay. The  Committee  on  Fair Wages had said (pp.  13-15  of  the report) : "  In  determining the capacity of an industry  to  pay,  it would be wrong to take the capacity of a particular unit  or the capacity of all industries in the country.  The relevant criterion should be the capacity of a particular industry in a  specified region and, as far as possible, the same  wages should be prescribed for all units of that industry in  that region." This  is  known  as the industry-cum-region  basis  for  the fixation of wages.  In the Express Newspapers (Private) Ltd. (1)  this Court has laid down the following  principles  for the fixation of wages (at p. 92): " The principles which emerge from the above discussion are: (1)  that  in the fixation of rates of wages  which  include within its compass the fixation of scales of wages also, the capacity of the industry to pay is one (1)  [1959] S.C.R. 12. 174 of  the  essential  circumstances  to  be  taken  into  con- sideration except in cases of bare subsistence or mini.  mum wage   where  the  employer  is  bound  to  pay   the   same irrespective of such capacity; (2)  that  the  capacity  of the industry to pay  is  to  be considered  on an industry-cum-region basis after  taking  a fair cross section of the industry; and (3)  that the proper measure for gauging the capacity of the industry  to pay should take into account the elasticity  of demand for the product, the possibility of tightening up the Organisation  so  that the industry could pay  higher  wages without  difficulty and the possibility of increase  in  the efficiency of the lowest paid workers resulting in  increase in production considered in conjunction with the  elasticity of  demand  for the product-no doubt  against  the  ultimate background that the burden of the increased rate should  not be such as to drive the employer out of business." We  do  not  think that it is necessary  to  decide  in  the present  case  whether  the Tribunals below  were  right  in having  regard to the global resources of the Lipton,  Ltd., in the matter of the revision of the wagestructure;  because we  consider  that  on an application of  the  principle  of industry-cum-region, the revision of the wage-structure made by  the Tribunals below cannot be said to be unjustified  on the financial resources of the Lipton, Ltd., as disclosed by its trading results in India.  The learned  Attorney-General has  referred  to  certain  larger  considerations:  he  has suggested that if the global resources of a company like the Lipton, Ltd., which operates in several countries are  taken

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 20  

into consideration in determining the wage structure, it way result  in  disparity of wages in different  regions  giving rise to industrial unrest and it may also have the effect of stopping new industries in this country and thereby increase unemployment.   These are matters which may require  serious consideration in a more appropriate case; but in the present case  we may examine the problem from the narrower point  of view,  namely, the trading results in India if  the  Lipton, Ltd. We may first. dispose of a subsidiary but connected 175 point.  In the Industrial Tribunal the case proceeded on the footing that the Lipton, Ltd., had a uniform system of wages in  India and if the wage structure of the  Delhi  employees was revised it would mean revising the wage structure of the employees  in other Indian offices as well.  It was  further suggested  that if the wage structure was uniformly  revised at all other places, then the cost of the increase in  wages taken  along with the cost of other reliefs granted  by  the Industrial  Tribunal,  would be much more than five  or  six lakhs.  We do not think that this would be a good ground for setting  aside the award.  The Industrial  Tribunal,  Delhi, had  jurisdiction  to  make  an  award  in  respect  of  the employees of the Delhi office only ; it had no  jurisdiction to make an all-India award.  Moreover, if the true principle for fixation of wages is region-cum-industry, then there  is no reason why the Delhi award should automatically apply  to all the other regions. It has not been disputed before us that the existing wage of the Delhi employees is far below the living wage.  The first question is-was there any reliable evidence to show that  in comparable  industries  in the same region, the  wages  were higher and, therefore, the wage structure required  revision to the extent allowed by the Industrial Tribunal.  On behalf of  the Union evidence was given about the scales of pay  of employees  in  the Delhi office of a  number  of  industrial undertakings,  such  as  the Standard  Vacuum  Oil  Company, Thomas  Cook  (Continental)  Overseas,  Burma  Shell,  Lever Brothers (India) Ltd. and Associated Companies, and Marshall Sons and Co. (India) Ltd.  On behalf of the appellant it has been  contended  that  none  of  the  above  are  comparable industries;   some  are  oil  companies,  some   engineering concerns and some manufacturing concerns.  On behalf of  the Union,  it has been pointed out that so far as the  drivers, sweepers, peons, clerks, godown keepers, typists,  stenogra- phers and the like are concerned, and these form the bulk of the employees, their nature of work is about the same in all the  aforesaid industries and, therefore, there was a  basis for comparison on which the 176 Tribunals  below could proceed.  We are of the view that  it is impossible to say in this case that there was no evidence on  which  the Tribunals could proceed to  revise  the  wage structure;  on the contrary there was evidence  accepted  by the  Tribunals below which justified a revision of the  wage structure. The  Appellate Tribunal also referred to the scales  of  pay obtaining  in  Brooke  Bond,  India,  and  opined  that  the appellant’s  scales of pay were lower than the  Brooke  Bond scales.   This  opinion of the Appellate Tribunal  has  been challenged  before us; firstly, it has been  contended  that though Brooke Bond has a similar trading activity in tea, it is not a comparable industry because it owns tea gardens  in India; secondly, it has been pointed out that no evidence of the Brooke Bond’s scales of pay was given and the opinion of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 20  

the Appellate Tribunal was a mere surmise.  It appears  that no  evidence was given before the Industrial Tribunal  about the  Brooke  Bond’s  scales  of  pay,  but  some  additional evidence  was offered at the appellate stage; this was  not, however,  accepted.  In the circumstances, we do  not  think that  the  Brooke  Bond’s scales of pay can  be  taken  into consideration.  But as we have earlier said, there was other evidence on which a comparison could be and was made by  the Tribunals  below.  That comparison justified an increase  in the The next question is-do the trading results in India of  the Lipton,  Ltd.,  show that it has the financial  capacity  to bear  the  burden of the wave increase?  The  statement,  in chart form, of the profit and loss figures from 1949-1957 to which  we have earlier referred, shows that net  profits  in 1952 exceeded six lakhs, in 1953 seven lakhs, in 1954  eight lakhs  and  in 1956 ten lakhs.  We have  said  earlier  that wages  do not necessarily come out of the net profits  of  a particular year, and it cannot be said that a fair wage must inevitably  be  postponed till a fair return on  capital  is obtained.   Wages are fixed on a long term basis and  depend also  on  the  cost  of living and  the  needs  of  workmen. Judging  the trading results of the Indian business  of  the Lipton, Ltd., over a period of years, 177 we  cannot say that the Tribunals below committed any  error in revising the wage structure.  It is germane to point  out here that Samuel’s evidence showed that the managerial staff of  the Indian business, recruited in England, receive  very high salaries.  Samuel said that the General Manager, who is the  Chief  Executive Officer of the Indian  branch  of  the Lipton,  Ltd.,  gets a salary of Rs. 5,000 per  month.   The next officer is the Administrator whose pay is Rs. 4,250 per month.  The third man, who is the Manager of the Tea Depart- ment, gets the same pay as the Administrator.  The fourth is the  Accountant of the company and his pay is Rs. 3,800  per month.   The fifth is the Marketing Controller whose pay  is Rs. 3,650 per month.  The Factory Manager gets Rs. 3,350 per month.  There are several other officers who also get a very high  salary  and the total number  of  covenated  Executive Officers consists of 32 Europeans and 17 Indians.  Now,  the point  taken  on  behalf  of the  Union  is  that  the  wage structure  of the Indian branch is top-heavy, in  the  sense that  the higher administrative officers get a salary  which is out of all proportion to the wage scale of the  employees with whom we are now concerned. It is further contended that the  high salaries paid to the superior Executive  show  (1) that  the  wage structure of the  lower  employees  requires revision  and (2) that the financial capacity of the  Indian branch  is not as negligible as the appellant wants to  make out.  We think, however, that it is not the duty of a Labour Tribunal  or Court to dictate to an industrial concern  what salaries  should be paid to superior executive officers  who are    not    workmen   within   the    meaning    of    the Industrial,Disputes   Act,  1947.   We  have  pointed   out, however, in the Express Newspapers (Private) Ltd. (1) that " the  possibility of tightening up the organisation  so  that the  industry could pay higher wages without difficulty  and the possibility of increase in the efficiency of the  lowest paid  workers  resulting in increase in production  must  be considered in conjunction with the elasticity of demand  for the product- (1)  [1959] S.C.R. 12. 23 178

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 20  

no doubt- against the ultimate background that the burden of the  increased  rate  should not be such  as  to  drive  the employer out of business ". This is an aspect of the  matter which the Tribunals below had considered and the  Industrial Tribunal had particularly said that the increase in the wage structure was not such as would drive the Lipton, Ltd.,  out of its Indian business. Our  attention has been drawn to the financial  implications of  the  award and it has been pointed out  that  the  total annual  cost  to  the company of the increase  in  the  wage structure  of the employees in the Delhi office would be  in the  neighbourhood of Rs. 49,721 per year; on  an  all-India basis  it would be in the neighbourhood of Rs. 2,71,000  and odd.   Having  regard to the evidence which Samuel  gave  it cannot  be  said that the burden of the increased  rate  was such as would be beyond the financial resources of the  Lip- ton,  Ltd., on its trading results in India or was  such  as would  drive  the Lipton, Ltd., out of India.  Even  on  the basis  of  all the reliefs granted by the award,  the  total cost  to  the company for the Delhi office would be  in  the neighbourhood of Rs. 1,15,000 and on an all-India basis  Rs. 6,34,000.   We have said earlier that the award was  not  an all-India  award,  and so far as the fixation  of  wages  is concerned,  it must be judged on the principle of  industry- cum-region.  So judged, we do not think that the increase is beyond  the  financial  resources of the  Lipton,  Ltd.,  as disclosed by its trading results in India. On behalf of the  appellant, it has been submitted that  one of  the tests for measuring the capacity of the industry  to pay the increased wage is, amongst others, the selling price of the product and it has been pointed out that by reason of the imposition in 1953 of an excise duty of three annas  per pound of packet tea, there is serious competition from those who sell tea in loose form and any further increase in price will  give  rise  to consumers’  resistance  and  ultimately result  in lesser sale and lesser profits.  In  our  opinion the  industrial  Tribunal  rightly  pointed  out  that   the moderate  increase  in the wage scale proposed by  it  would only 179 be  a very small fraction of the overall cost of  production of  a packet of tea and would have very little  repercussion in its price. Lastly,  our attention was drawn to an award of the  Special Industrial Tribunal, Madras, dated October 15, 1956, between the  management of the Lipton, Ltd., Madras and its  workers employed  in Madras where on more or less similar facts  the Industrial  Tribunal repelled the argument on behalf of  the workmen  that the global financial position of  the  Lipton, Ltd.,  should  be  taken into  account  in  considering  the capacity of the company to pay higher salaries and  dearness allowance, and it was held that the Lipton, Ltd., could  not be burdened with any additional liability and the  employees must wait for better days.  That award is not the subject of the  present  appeals and we consider  it  unnecessary,  and indeed  inadvisable,  to make any pronouncement  as  to  the correctness or otherwise of that award. The  only  other point which requires consideration  is  the question of the date from which the new scales of pay should come into effect.  The Industrial Tribunal fixed January  1, 1954, on the ground that the Union had presented its charter of  demands to the appellant for the first time towards  the end  of  December  1953.  We are unable to  agree  with  the Tribunals  below  that the circumstance that  a  charter  of demands was presented in December 1953 is a good ground  for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 20  

giving  retrospective effect to the new scales of pay.   The charter  of demands presented by the Union consisted  of  20 items  and  in the matter of the wage scale what  the  Union demanded  was in some cases more than 50 to 75% increase  on the  existing  scales of pay.  Obviously, the  demands  were exorbitant  and the management was justified in refusing  to accept  the demands in toto.  We are, therefore,  unable  to agree  that retrospective effect should be given to the  new scales  of pay from January 1, 1954.  The award was made  on August  18, 1955, and it was published on October  6,  1955. We  think that it will be more just to bring the new  scales of  pay  with effect from November 1, 1955,  and  we  direct accordingly.’ The other directions given 180 by  the Industrial Tribunal to bring the  present  employees into  the  new  scales  of pay will  stand  subject  to  the necessary modification that instead of January 1, 1954,  the relevant date should be November 1, 1955. The result, therefore, is as follows: Appeal No. 715 of 1957 is  dismissed with costs.  Appeals Nos. 713 and 714 of  1957 are  allowed to the extent indicated above.  The  order  for the grant of bonus for 1951 is set aside and the new  scales of  pay will take effect from November 1, 1955,  instead  of from  January 1, 1954.  There will be no order for costs  in these two appeals.             Appeals Nos. 713 and 714 allowed in part.             Appeal No. 715 dismissed.