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PETITIONER: M/S.  TITAGHUR PAPER MILLS CO.  LTD.

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 05/05/1959

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. DAS, SUDHI RANJAN (CJ) BHAGWATI, NATWARLAL H. DAS, S.K. GAJENDRAGADKAR, P.B.

CITATION:  1959 AIR 1095            1959 SCR  Supl. (2)1012  CITATOR INFO :  R          1960 SC 896  (5)  F          1960 SC 985  (12)  RF         1961 SC 867  (8)  R          1963 SC 325  (19,20)  R          1963 SC1474  (9,12)  F          1963 SC1480  (5)  F          1964 SC 472  (3)  E          1968 SC 963  (30)  RF         1972 SC1436  (11)  RF         1972 SC2148  (22)

ACT:  Industrial Dispute-Production Bonus, nature of-jurisdiction of Tribunal to revise production bonus scheme introduced  by employer-Profit  Bonus-If  can  be awarded  in  addition  to Production     bonus-Available     surplus-Deduction     for rehabilitation, how calculated.

HEADNOTE: In 1949 the appellant framed a scheme called " Tonnage  Pro- duction Bonus Scheme " whereunder the workmen were to get 13 days’ basic wages by way of bonus on a production Of  30,000 tons  and thereafter an additional one day’s basic wage  for every  46o  tons  produced upto a maximum  Of  36,000.   The scheme  was  accepted by the workmen.  In 1953  the  workmen raised  industrial  disputes claiming profit bonus  for  the years  1950-51  and 1951-52 in addition  to  the  production bonus and asked for revision of the production bonus scheme. The   Industrial  Tribunal,  to  which  the  disputes   were referred,   rejected  both  the  claims.   On  appeal,   the Appellate Tribunal awarded profit bonus equal to one month’s basic  wage for 1951-52 but dismissed the claim for  1950-51 as  having  been made too late.  It revised  the  production bonus  scheme by providing for i day’s basic wage  for  each increase  Of 460 tons over 30,000 tons uPtO 36,000 tons  and for  2  days, basic wage for each increase Of  46o  tons  in excess Of 36,000 tons.  The appellant contended (i) that the Tribunal  had no jurisdiction to vary the  production  bonus scheme  ;  (ii) that such a scheme could only be  varied  by

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agreement  ; (iii) that no proper grounds had been made  out for varying the scheme ; (iv) that profit bonus could not be awarded  in  addition’ to production bonus ;  (v)  that  the production bonus in this case was really profit bonus ;  and (vi) that there was no available surplus out of which profit bonus could be paid. Held, that the Tribunal had jurisdiction to revise the  pro- duction  bonus  scheme.   Payment of  production  bonus  was payment  of  further  emoluments depending  not  upon  extra profits, but, upon extra production, as an incentive to  the workmen  to  put  in more  than  the  standard  performance. Though it was discretionary with the appellants to introduce the  scheme,  once the scheme was introduced  and  put  into operation, it became a term of employment of the workmen and any  dispute with respect to such term of employment was  an industrial  dispute  which could properly be referred  to  a Tribunal.   The  power of the Tribunal  in  considering  the scheme 1013 was  not confined to the question of mala fides etc. of  the employer’s action but it had power to vary the terms of  the scheme if circumstances justified it. There  was no justification for interfering with the  scheme upto  a production Of 36,000 tons in view of  the  agreement between  the  parties.  But the scheme did not  provide  for production  above  36,000  tons and as  such  there  was  no agreement  with respect to this, and as the  production  had gone  up beyond 36,000 tons it was necessary to provide  for production  bonus  beyond  this quantity.   There  were  two reasons  for increase in the rates of payment of  production bonus,  viz., (i) the intensification of the efforts of  the workmen  in increasing production, and (ii) the  progressive going  down  of  the labour cost of production  per  ton  as production  increased.   The  rates  had  to  be   increased progressively  with production.  Consequently, for each  46o tons increase in production the proper rates for payment  of production  bonus  would be 1-1/4, 1-3/4 and 2  days’  basic wages respectively or production between. 36,000 and  42,000 tons,  42,000  and 48,000 tons, 48,000 and 54,000  tons  and 54,000 and 60,000 tons. The  " Tonnage Production Bonus Scheme " introduced  by  the appellant was in fact also a production bonus scheme and not a  profit bonus scheme.  The fact that one of the  terms  of the  scheme empowered the directors to cancel or reduce  the payment of production bonus in case the gross profit was not sufficient  to meet fixed dividends, interest,  depreciation charges, taxation and 10% dividend to ordinary  shareholders did  not make it a profit bonus scheme as the  circumstances mentioned  are  not  the same that have  to  be  taken  into account  in arriving at the available surplus  according  to the Full Bench formula.  Nor was the position altered by the clause in the scheme which empowered the appellant to cancel or  modify  the  scheme  in  case  Government  enforced   by legislation  any scheme for bonus or profit sharing as  this did  not mean that the scheme itself was for profit  sharing or  profit bonus.  The other clauses of the  scheme  clearly indicated that it was for production bonus.  If there was an available  surplus  of profits according to the  Full  Bench Formula  the  workmen were entitled to get profit  bonus  in addition to the production bonus. Mathuradas Kanji v. Labour Appellate Tribunal, A.I.R. [1958] S.C. 899, distinguished. Held  further, that there was available surplus  of  profits and  the profit bonus equal to one month’s basic  wages  was properly  awarded  by the Appellate Tribunal  for  [1951-52.

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The  claim  for deduction for rehabilitation was made  on  a wrong  basis  by  the appellant.  In order to  arrive  at  a realistic figure for rehabilitation     the   total    block should be divided into three heads : (i) land,(ii)buildings, railway sidings and things of that nature which had a..much longer   life  and  where  no  imports  were   needed,   and (iii)machinery.   In  the case of land  no  replacement  was necessary and no provision need be made for  rehabilitation. In the 1014 case of buildings etc. the multiplier would be smaller while the divisor would be larger.  Machinery bad again to be sub- divided  according to when it was purchased so as to  arrive at correct multipliers and divisors.  As machinery purchased before  the last war stood on one footing there would  be  a pre-1939  block.   The  second block  may  be  of  machinery purchased  during  the war and the third of  that  purchased after the war.  The last two- were not rigid divisions.   In the   circumstances   of  the  present  case,   the   proper multipliers  for  these  three bocks would be  4,  2  and  1 respectively.   As  both Tribunals had accepted  10  as  the divisor  that may be accepted as. the divisor for the  three blocks.  Calculating on that basis the rehabilitation  costs did not wipe out the entire gross profits as claimed by  the appellants  and there was an available surplus out of  which profit bonus could be paid. The clerical staff, budli workers and temporary workers were not entitled to claim attendance bonus as they were  differ- ent from other workmen.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeals Nos. 450 &  451 of 1957. Appeals  by special leave from the judgment and order  dated July  31, 1956, of the Labour Appellate Tribunal  of  India, Calcutta, in Appeals Nos.  Cal. 282/55 and 6/56. C....K. Daphtary, Solicitor-General of India, H. N.  Sanyal, Additional  Solicitor-General of India, D. N. Mukherjee  and B. N. Ghose, for the Appellant (In C.A. No. 450/57). A....Roy  Mukherjee and H. N. Hingorani, for the  respondent (In C. A. No. 450/57.) M....C.   Setalvad,  Attorney-General  for  India,   C.   K. Daphtary,  Solicitor-General  for India and  H.  N.  Sanyal, Additional  Solicitor-General of India, D. N. Mukherjee  and B. N. Ghose, for the appellants (In C. A. No. 450/57). Sadhan Chandra Gupta, Janardhan Sharma and M. K. Ramamurthi, for the respondents (In C. A. No. 451/57). Sadhan Chandra Gupta, Janardhan Sharma and M. K. Ramamurthi, for the appellant (In C. A. No. 451/57). 1015 M....C. Setalvad, Attorney-General for India, H. N.  Sanyal, Additional  Solicitor-General of India, D. N. Mukherjee  and B. N. Ghose, for the respondent (In C.  A. No. 514/57). G....D, Ambukar for the Secretary, for the Intervener No. 1. Sadhan  Chandra Gupta and Janardhan Sharma,  for  Intervener No. 2. 1959.  May 5. The Judgment of the Court was delivered by WANCHOO,  J.-These are three appeals by special  leave  from the same decision of the Labour Appellate Tribunal of  India and  will  be dealt with together.  The  first  two  appeals (Nos.  450 & 451) are by Messrs.  Titaghur Paper  Mills  Co. Ltd., and the third (No. 514) by its workmen. Titaghur Paper Mills Co., Ltd. (hereinafter called  company)

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own two paper mills one at Titaghur (hereinafter called Mill No. 1) and the other at Kankinarah (hereinafter called  Mill No.  2).  It appears that there had been a  dispute  between the  company and its workmen in 1948, which was referred  to the adjudication of a tribunal.  That was disposed of by the tribunal  on  November  5, 1949.   Among  the  matters  then referred  was  the question of profit bonus  for  the  years 1945-46  and  1946-47.   When  that  matter  was  under  the consideration  of  the tribunal, the company put  forward  a scheme  of  production  bonus  on the  basis  of  a  minimum production  of  30,000 tons of paper in a year  in  the  two mills  together.   The  basis of the  scheme  was  that  the workmen would get 13 days’ basic wage (this being equivalent to  half  of one month’s basic wage) by way of  bonus  on  a production  of 30,000 tons for both mills.   Thereafter  the workmen  were to get an additional one day’s basic wage  for every  460 tons produced upto a maximum of 36,000 tons  when the  production bonus would come up to 26 days’  basic  wage (which  would  be  equivalent  to  one  month’s  basic  wage including weekly holidays).  The company in putting  forward the scheme said that "as an admittedly rough basis for  such a scheme something on the 1016 following  lines  might, we think, be equitable".   It  then gave the scheme mentioned above.  The tribunal dealing  with the question of profit bonus for the years 1945-46 and 1946- 47 observed that the scheme of production bonus put  forward by   the  company  had  been  accepted  by  the   union   as satisfactory  and  for  the purpose of  that  proceeding  it accepted  the scheme as a measure for awarding profit  bonus for  the years 194546 and 1946-47.  The actual bonus  worked out  to 17 days’- basic wage for 1945-46 and 19 days’  basic wage  for 1946-47 ; (see award of Sri M. C. Banerji, in  the publication of Government of West Bengal, Labour Department, I  Awards  made  by the Tribunals  for  the  quarter  ending December,  1949 ", pp. 130_ 150).  It further  appears  that the  detailed scheme was later communicated to the union  in July 1950 and as the principle had already been accepted  by the union before Sri Banerji the scheme was put in operation from April 1, 1949,- and production bonus has all along been paid in accordance with it after that date. Disputes, however, arose between the company and its workmen in 1953.  The workmen of Mill No. 2 were the first to  raise a dispute in August 1953, in which inter alia they  demanded profit  bonus  for the years 1950-51 and  1951-52  and  also prayed  for certain changes in the production bonus  scheme. The  workmen  of  Mill  No. I  also  raised  a  dispute  and presented  a  charter of demands to the company  in  October 1953.   They  also demanded profit bonus for the  two  years mentioned above and revision of the production bonus scheme. These  disputes  were  referred by the  Government  of  West Bengal to the Fifth Industrial Tribunal, West Bengal.  There were  two references, one relating to each mill.  They  were heard  separately by the Industrial Tribunal which gave  two separate  awards  rejecting  all the  demands  made  by  the workmen.   Consequently, two appeals were preferred  by  the workmen before the Labour Appellate Tribunal.  There the two appeals  were heard together at the request of  the  parties and disposed of by the Tribunal by the same judgment on July 31, 1956.  The Fifth Industrial Tribunal rejected the claim of 1017 the workmen for revision of the production bonus scheme  and for grant of profit bonus for the years 1950-51 and 1951-52. It  was of opinion that the claim for profit bonus  for  the

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two years was not maintainable as the workmen had been given production bonus and that met the profit bonus claim of  the workmen  for the two years and all claims for  profit  bonus for  these  two  years  must be taken  to  have  been  fully satisfied.  The question of delay in making the profit bonus claim was also raised; but the Fifth Industrial Tribunal was of  the  view  that  the profit bonus  claim  could  not  be defeated merely on the ground of delay.  As to the  revision of  production  bonus scheme, it held that scheme  had  been accepted  by the union and no reason had been shown why  the rate  of one day’s basic wage as production bonus for  every increase  of 460 tons over 30,000 tons should be  disturbed. It  was also of the view that increased production  was  not due to increased efforts on the part of the workmen but  was due  mainly  to  increase  in labour  strength  as  well  as installation of new machinery. On  appeal the Labour Appellate Tribunal rejected the  claim for profit bonus for the year 1950-51 on the ground that  it was made too late.  It, however, disagreed with the view  of the  Fifth  Industrial Tribunal that  the  production  bonus scheme  fully satisfied the claim of the workmen for  profit bonus and therefore DO profit bonus should be given even for the  year 1951-52, with regard to which it %-as  of  opinion that  the claim was not belated.  It, therefore,  went  into the figures of profits and arrived at the available  surplus in  accordance  with  the formula known as  the  Full  Bench Formula  evolved in The Mill-Owners’ Association, Bombay  v. The Rashtriya Mill Mazdoor Sangh, Bombay(1).  Having arrived at the available surplus it granted one month’s profit bonus in addition to what. the workmen were entitled to under  the production  bonus  scheme  as  revised by  it.   As  to  the production bonus scheme, it was of the view that there  were reasons  for  revising it and therefore revised  (1)  [1950] L.L.J. 1247. 128 1018 it, providing for 112 days’ basic wage for each increase  of 460 tons over 30,000 tons up to the limit of 36,000 tons and two days’ basic wage for each increase of 460 tons in excess of  36,000  tons.  It may be mentioned,  however,  that  the change   in  the  production  bonus  scheme  was  not   made retrospective and would therefore come into force from after the judgment of the Labour Appellate Tribunal.  The  appeals of the workmen were therefore allowed in these two respects, which have led to the two appeals by the company be-fore us. The  workmen through their union have also filed  an  appeal against  those  portions  of  the  decision  of  the  Labour Appellate Tribunal which rejected their demands. In  the two appeals by the company two matters  relating  to (i) production bonus and (ii) profit bonus have been  raised before  us.   We shall first take up these two  matters  and then come to the appeal by the workmen. The  main contentions on behalf of the company with  respect to the production bonus scheme are threefold, namely, (1)The  Industrial Tribunal has no jurisdiction to  go  into the  question of production bonus scheme at all, for such  a scheme by its very nature can only be a matter of  agreement between the employer and the employees and cannot be imposed by a tribunal; (2)Even  where  a production bonus scheme is in  force,  its terms  cannot be varied by a tribunal and any variation  can only be the outcome of an agreement between the employer and the employees, because initiation or introduction of such  a scheme  is what may be called a I management function’;  and (3) Even if an industrial tribunal has the power to vary the

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production  bonus  scheme,  no material was  placed  on  the record in this case on the basis of which the tribunal could order  a variation in the scheme in force in the  company. As  to  the award of profit bonus for the year  1951-52  the attack was two-fold, namely, (4)It  was not open to a tribunal to award  both  production bonus and profit bonus and in any case it 1019 could  not  be done in the present case  as  the  production bonus here was nothing more than profit bonus; and (5) Even if both production bonus and profit bonus could  be awarded, there was no available surplus in this case out  of which profit bonus for that year could be paid. Re. (1). Before we go into the question of jurisdiction of a tribunal under the Industrial Disputes Act, 1947, (hereinafter called the  Act), we should like to consider what production  bonus essentially  is.   The payment of production  bonus  depends upon production and is in addition to wages.  In effect,  it is  an incentive to higher ’production and is in the  nature of an incentive wage. -There are various plans prevalent  in other  countries  for this purpose known as  Incentive  Wage Plans  worked  out  on various bases,  for  example,  Halsey Premium Plan, Bedaux Point Premium Plan, Haynes Manit System and Emerson Efficiency Bonus Plan; (see Labour Law by Smith, Second Edition, P. 723).  The simplest of such plans is  the straight piece-rate plan where payment is made according  to each  piece produced, subject in some cases to a  guaranteed minimum  wage  for so many hours’ work.   But  the  straight piece-rate system cannot work where the finished product  is the  result of the co-operative effort of a large number  of workers  each  doing a small part which contributes  to  the result.   In  such  cases,,  production  bonus  by   tonnage produced,  as  in this case, is given.  There is a  base  or standard  above  which  extra  payment  is  made  for  extra production  in  addition  to the basic wage.   Such  a  plan typically guarantees time wage up to the time represented by standard  performance  and  gives workers  a  share  in  the savings  represented by superior performance.  But  whatever may  be the nature of the plan the payment in effect  is  an extra emoluments for extra effort put in by workmen over the standard  that  may be fixed.  That is -the reason  why  all these plans are known as Incentive Wage Plans and  generally speaking have little to do with profits.  The extra -payment depends not on 1020 extra  profits but on extra production.  This extra  payment calculated  on  the basis of extra production is in  a  case like the present where the payment is made after the  annual production is known, in the nature of emoluments paid at the end  of the year.  Therefore generally speaking, payment  of production bonus is nothing more nor less than a payment  of further emoluments depending upon production as an incentive to the workmen to put in more than the standard performance. Production bonus in this case also is of this nature and  is nothing more than additional emoluments paid as an incentive for higher production.  We shall later consider the argument whether in this case the production bonus is anything  other than  profit bonus.  It is enough to say at this stage  that the  bonus  under  the  scheme in  this  case  also  depends essentially on production and therefore is in the nature  of incentive wage. Let  us  now  turn to the question of  jurisdiction  of  the tribunal under the Act to consider a production bonus scheme at  all.   The  argument  is  that  the  introduction  of  a

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production  bonus  scheme is purely discretionary  with  the employer and no tribunal can impose such a scheme.   Whether there should be increased production in a particular concern is  a matter to be determined entirely by the  employer  and depends  upon  a consideration of so many  complex  factors, namely, the state of the market, the demand for the product, the range of prices, and so on.  It is, therefore,  entirely for  the employer to introduce a production bonus scheme  or not.  There is good deal of force in the argument up to this point  ; but the argument goes further and it is  said  that even  after  the scheme is introduced, it is  for  the  same reasons  in  the  discretion  of  the  employer  whether  to continue  it  or  not.   Therefore, it  is  urged  that  the tribunal  cannot have jurisdiction to consider a  production bonus  scheme at all, for the tribunal would then  be  doing something   which  the  employer  can  set  at   naught   by withdrawing  the scheme or by nullifying the effect  of  the tribunal’s  order by so arranging that the  production  does not  reach  the  level at  which  production  bonus  becomes payable, for 1021 example,  by  not  providing enough  raw  material  for  the purpose.  It is further urged that if it is entirely in  the discretion of the employer to introduce or not to  introduce a  production  bonus  scheme, the  fact  that  the  employer introduces  a  scheme  will not  give  jurisdiction  to  the tribunal to interfere with it in any way, for otherwise  the tribunal would be compelling the employer in the guise of  a revision  of the scheme to do something which  the  tribunal could not initially do. Our attention in this connection was drawn  to  Shalimar  Rope Works  Mazdoor  Union,  Howrah  v. Messrs;  Shalimar  Rope Works Ltd.,  Shalimar,  Howrah  (1), where it was observed that though a production bonus  scheme may be desirable in the interest of harmonious  relationship between  the employer and employees, there is no  obligation on  the part of the management to give production bonus  and no  decision  had been brought to the notice of  the  Labour Appellate Tribunal holding that a scheme of production bonus was  obligatory on the part of the company ; (see  p.  504). We  are-,  however, not called upon to decide in  this  case whether a demand for the introduction of a production  bonus scheme  where there-was none before can be made  a  subject- matter  of industrial dispute as defined in s. 2 (k) of  the Act  or  whether a scheme of production bonus  can  for  the first  time be imposed on the employer by a  tribunal  under the  Act.   The  problem that is before us  is  whether  the tribunal tinder the Act will have jurisdiction to deal  with a  production  bonus scheme in a concern where it  has  been introduced.   The answer to this question depends  upon  the terms  of the Act and not on the consideration  whether  the scheme  can be initiated only by the employer in  the  first instance.  In order that the tribunal may have  jurisdiction all  that is necessary is that an industrial dispute  within the  meaning  of  s. 2 (k) of the Act  should  exist  or  be apprehended and there should be a reference of such  dispute by  the appropriate government to the tribunal under s.  10. Now  ’  industrial dispute’ has been defined  in  very  wide terms in s. 2 (k) and for our purpose it means any (1)..(1957) L.A.C. 496. 1022 dispute  or  difference between the  employers  and  workmen which is connected with the employment or non-employment  or the terms of employment or with the conditions of labour, of any person.  We have already held that the production  bonus scheme  in this case is an incentive wage plan and  what  is

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paid  under  the  scheme over and above the  basic  wage  is supplementary emolument depending upon annual production.  A dispute arising about such an emolument clearly comes within the  words " terms of employment ". As soon therefore as  an employer  introduces a production bonus scheme and the  same is put in operation and the workmen accept it becomes a term of  employment  of  the workmen working under  him  and  any dispute  with  respect to such a term of  employment  is  an industrial dispute and if it is referred to a tribunal under s.  10, as has been done in this case, it  has  jurisdiction under s. 15 to deal with it.  The argument therefore on this head must be rejected and it must be held that the  tribunal had  jurisdiction under the Act to deal with the  scheme  of production  bonus which had been introduced in this  company and was in force at all material times. Re. (2). This  brings  us  to the second question,  namely,  where  a scheme of this kind is in force and there is a dispute  with regard  to its terms, what is the extent of the powers of  a tribunal to deal with it.  The argument is put in this  way. The  introduction  and  continuance of  a  production  bonus scheme  is one of the functions of  management.   Therefore, when a question of revision of such a scheme comes up before a  tribunal,  all  that the tribunal  should  look  into  is whether this matter is an exclusive management function ? If it  comes  to  the  conclusion  that  it  is  an   exclusive management  function,  it  should  not  interfere  with  the details  of  the scheme, unless it also comes  to  the  con- clusion   that  the  employer  is  guilty  of  mala   fides, victimization,  fraud or unfair labour practice through  the introduction or continuance of the scheme.  It is said  that even  though the tribunal may have jurisdiction to  consider such a scheme, it should refuse to interfere 1023 with it as soon as it comes to the conclusion that it is  an exclusive  management function and there is no  question  of mala fides, etc. We think it unnecessary for present purposes to embark on  a discussion  of  what  is  and  what  is  not  an   exclusive management  function.  Basically, everything connected  with the  management  of an industrial concern  is  a  management function, except the internal affairs of any union which may exist.  The Act has made no distinction between what may  be called  exclusive  management functions and others.   It  is also  well  settled that the tribunals tinder the  Act  have power to interfere with management functions falling  within their  purview in the interest of industrial peace  and  the Act  was  enacted with that object.  Therefore, once  it  is conceded,  as  is  the  case here,  that  the  tribunal  has jurisdiction  to entertain such an industrial dispute  which comes  within the terms of s. 2(k) we see no reason why  the power  of  the  tribunal  to  take  into  consideration   an incentive  wage plan like a production bonus scheme  already introduced should be limited merely to the consideration  of the  question  whether the employer’s action is  mala  fide, etc.   Where a production bonus scheme is in force  and  has become  a  term of employment, there is no  reason  why  the tribunal  should  not have the power to vary  its  terms  if circumstances justify it.  Nor can the power of revision  be denied  to  the  tribunal in respect of  a  scheme  actually introduced  on  the ground that the introduction of  such  a scheme was an exclusive management function and therefore it should be immune from being touched at all.  Therefore, even assuming that the initiation of a production bonus scheme is an exclusive management function and the final decision with

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respect to its introduction rests initially with the manage- ment,  the right of the tribunal to take into  consideration such  an  initiated  scheme  (which has  become  a  term  of employment) and to revise it cannot for a moment be  doubted under  the  Act.   It is true that  the  tribunal  will  not lightly interfere with a scheme introduced by the management and  accepted  by  the  union.  It is  also  true  that  the tribunal would only 1024 make a change in the rates for good and sufficient  reasons. There  can  be  no doubt, however,  that  the  tribunal  has jurisdiction  under  the Act to take  into  consideration  a production bonus scheme which has been introduced and is  in operation and in proper cases to revise it, and if necessary to change the rates and other conditions on which such bonus is  payable.  Our attention in this connection was drawn  to Indian Iron & Steel Co. Ltd. v. Their Workmen(1), where  the limits of the power of a tribunal to interfere with an order of  dismissal were considered.  That case is in our  opinion of  no help to the appellant.  It was laid down  there  that undoubtedly the management of a concern had power to  direct its  own  internal administration and  discipline;  but  the power was not unlimited and when a dispute arose, Industrial Tribunals  had the power to see whether the  termination  of services of a workman was justified and to give  appropriate relief  It was further laid down under what  conditions  the Industrial  Tribunal  will  interfere  with  the  order   of dismissal.   On  a  parity  of  reasoning,  the   Industrial Tribunal  has  the  power  under  the  Act  to  revise   the production bonus scheme once it has been initiated.  It will do  so only for good and cogent reasons, such as a  material change  in  method,  product, tools,  material,  design,  or production  Conditions, or a saving in labour cost  and  the like,  maintaining  as  far  as  possible  the   established relationship between earnings and effort and avoiding  rates which  will give results out of all proportion to the  basic wage.   We are therefore of opinion that the argument  under this head must also be rejected. Re. (3). The  main  contention under this head is that there  was  no material  before  the  Appellate  Tribunal  to  justify  the increase  in  the rate which it ordered.   We  have  already pointed  out that the scheme put forward by the company  was to  pay  a  production bonus of 13 days’  basic  wage  on  a minimum  production  of 30,000 tons.  Thereafter  one  day’s basic wage was to (1)..[1958] S.C.R. 667. 1025 be  paid  for every 460 tons produced up to the  maximum  of 36,000 tons, the rated capacity of the mills being then said to be over 36,000 tons.  The Appellate Tribunal has kept the minimum  production at 30,000 tons with a bonus of 13  days’ basic  wage.  Between 30,000 and 36,000 tons it  has  raised the rate to 1-1/2 days’ basic wage for each increase-of  460 tons  over  30,000  tons to the limit of  36,000  tons,  and thereafter to two days’ basic wage for each increase- of 460 tons  in  excess of 36,000 tons.  It gave,, two  reasons  in support  of  this  increase,  namely,  (i)  that  the  great increase in production since the introduction of the  scheme was  attributable  to  a very  considerable  extent  to  the increase  of efforts on the, part of labour and therefore  a reasonable proportion of the increased _income on account of increased production should go to labour, and (ii) that  one day’s wage only as bonus for every 460 tons over 30,000 tons is  not commensurate with the actual increase of  income  on

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that  increased block of production.  It is not clear to  us what  exactly  the Appellate Tribunal had in  mind  when  it talked of the increase of income as a reason for increase in the  rate.  The question of increase in the rate has  to  be considered  in two stages, namely, (i) the increase  between 30,000 and 36,000 tons and (ii) the increase when production goes  beyond 36,000 tons.  It appears from what Mr.  Banerji said  in his award of 1949 that the basic principle  of  the scheme,  as it was put forward before him, was  accepted  by the  union as satisfactory, meaning thereby that  the  union considered that 13 days’ basic wage for a minimum production of  30,000 tons and one day’s basic wage for every 460  tons beyond  that  upto 36,000 was fair to labour.  It  has  been urged  that there was no agreement between the  workmen  and the company in connection with this scheme.  It does  appear that  all the terms, which were incorporated in  the  scheme communicated  to  labour in July 1950,  were  not  initially evolved with the agreement of the union ; but so far as  the rate  of bonus was concerned that was accepted by the  union as satisfactory.  In the company’s appeals, we are 129 1026 concerned  only  with the rate.  The question  therefore  is whether  the  Appellate Tribunal was justified  in  changing this  rate which was agreed to as satisfactory by the  union up  to a production of 36,000 tons.  We are of opinion  that in  view  of  the  agreement between the  parties  up  to  a production of 36,000 ’tons there was no such material before the  Appellate Tribunal as would justify  interference  with the  agreed rate.  The intensification of labour  must  have been taken into account when the union agreed to the rate up to 36,000 tons, and there is nothing to show that since then there  has been any change in the conditions to call  for  a change in the rate.  The order of the Appellate Tribunal  so far as it relates to production up to 36,000 tons cannot  be sustained, as no material was placed before it to warrant  a change in that agreed rate. Then  we  come  to the rate after 36,000  tons.   There  the considerations  in our view are different.  The scheme  only provided  for a production of 36,000 tons.  It is true  that thereafter the production has gone up beyond 36,000, and the company  has  been paying the same flat rate  of  one  day’s basic  wage for every 460 tons for the extra production  and the  workmen have been accepting that payment.  At the  same time  there  was no-collective acceptance by  the  union  on behalf  of  the workmen of this rate being  satisfactory  or fair  for  production above 36,000  tons.   Production  went beyond  36,000  tons  for the first time in  1951-52  and  a dispute  was raised in October 1953 by the workmen  of  Mill No.  1  not  very long after production for  that  year  was known.   There was no dispute as to the general revision  of the  rate by the workmen of Mill No. 2; but it was  conceded on behalf of the company that the two mills must be  treated on  the same footing in this matter.  The company  therefore cannot  say  that  the Appellate Tribunal  should  not  have interfered  with the rate above 36,000 tons,  because  there was  a  collective agreement by the union on behalf  of  the Workmen  and there was no material before it to  change  the rate even beyond 36,000 tons.  Two reasons were given by the Appellate Tribunan for the 1027 change  it  ordered.  Of these the second  is  difficult  to understand as it is not clearly or happily expressed, though the  first reason, (namely, increased effort on the part  of labour)  would certainly apply when we  consider  production

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beyond  36,000  tons.  It stands to reason  that  where  the labour force is more or less the same, production beyond the original   target   of   36,000.  tons   would   mean   more intensification  of  effort  by labour, for  it  is  not  in dispute  that  the  working hours have  remained  the  same. Other things being equal, the greater the production by  the same labour force in the same space of time, there is  bound to be more intensification of labour to achieve this result. This  is  certainly a matter which  the  Appellate  Tribunal could  take  into account in considering  whether  the  rate after 36,000 tons should be raised.  A comparison of figures of  production  and labour force employed between  1948  and 1952 (assuming other factors to be the same) would show that there must have been intensification of labour effort to got the  increased production.  In 1948, total labour  force  in the two mills was 5,860 (Exs.  F & H).  In 1952, it went  up to  6,213, an increase of just over 6 per cent.   Production on  the other hand was 28,244 tons in 1948-49 while  it  was 37,738 tons in 1951-52, an increase of slightly above 33 per cent.   So it is obvious that the increase in production  is much  more  than the increase in labour force.  It  is  true that  in 1950 a new paper-making machine was substituted  in one  of  the mills, and some bamboo-crushers  and  digesters were  also added during this period and other large  amounts spent  on machinery, and that fact certainly accounts for  a part  of  the  increase.  It is, however,  not  possible  to ascertain,  with anything like mathematical accuracy, as  to how  much of the increase in production is  attributable  to improved  machinery  and  how much of  it  is  referable  to intensification   of   labour  of   the   workmen.    It-may nevertheless be taken as fairly certain that the increase in production is referable to a great extent to intensification of  the  efforts  of  the workmen, for  there  has  been  no appreciable  increase in the labour force.  We have not  got the figures of labour force in the 1028 later years, though production has gone on increasing,  till it is said it will reach 54,000 tons mark in 1958-59.  It is apparent,  therefore, that there must have been  progressive intensification  of  labour as the  production  rose  beyond 36,000  tons,  and in the premises that was  a  circumstance which  the Appellate Tribunal was properly entitled to  take into  account  when  considering a change in  the  rate  for production over 36,000 tons. The  second  ground given by the Appellate Tribunal,  as  we have said above, is not quite clear to us.  Learned  counsel for  the  workmen  have, however, explained  that  what  the Tribunal means is that as the production increases more  and more the labour cost per ton goes down; and thus there is  a saving  in  labour cost to the company and the  workmen  are entitled to share in this progressive saving of labour cost. The  principle which is inherent in this explanation  is  in fact  the basis of progressive increase in production  bonus rates  as production increases.  This will be clear from  an illustration,  which  we shall give just now.   This  illus- tration is based as nearly as possible on the conditions  in these  two  mills with this difference that -we  have  taken round  figures for facility of multiplication ;  the  result will be more or’ less the same if actual figures are  taken. For the purposes of this illustration, we shall assume  that the labour force and other relevant factors remain constant. Let  us start with a basic production of 30,000 tons with  a labour  force of 6,000 and an average wage of all  kinds  at Rs. 110/per menses (Ex.  E).  The total labour cost on  this basis  for 30,000 tons per year comes to 79.2  lacs,  giving

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labour  cost  per ton as Rs. 264/-.   Now,  when  production increases to 36,000 tons and a production bonus of Rs.  25/- per year (Ex.  E) is added to the wage, labour cost for  the extra  production of 6000 tons comes to Rs. 1.5  lacs.   The total labour cost, therefore, for 36,000 tons is 80.7  lacs, which  works out to slightly above Rs. 224/- per ton.   When production goes up to 42,000 tons, the labour cost increases by  3 lacs, giving a labour outlay of 82.2 lacs; this  works out  to  just  below  Rs.  196  per  ton.   When  production increases 1029 to 48,000 tons, the extra labour cost is 4.5 lacs, making  a total of 83.7 lacs for 48,000 tons; thus the cost per ton is slightly above Rs. 174/-.  When production goes up to 54,000 tons,  labour cost increases by 6 lacs, giving a total  cost of 85.2 lacs for 54,000 tons, which works out to just  below Rs.  158/-  per ton.  When production reaches  60,000  tons, which  is  double the basic production, the  additional  sum paid to labour in bonus is 7.5 lacs and the total cost  86.7 lacs  for 60,000 tons which works out to Rs. 144.5 per  ton. This  is on the basis of the production bonus  above  36,000 tons being kept at the same rate at which it is provided  in the scheme in this case.  It will be clear, therefore,  that as  production  increases (if other factors  are  the  same, namely, labour force and machinery), there is a  progressive increase  in  the  saving  of labour  cost.   This,  in  our opinion,  makes out a clear case, where one is dealing  with tonnage production bonus, for a progressive increase in  the bonus.   We  know  that  in this  case  there  has  been  an increase,  but of a small order, in the labour force  during the period of increased production; we also know that a  new paper-making machine has been put in the place of an old one and new bamboo-crushers and digesters have been added ;  and we know that during the period from April 1, 1948, to  April 1,  1959,  there has been a total outlay  on  machinery  and plant,  worth 223.94 lacs including the above.  There is  no doubt, therefore, that when production is expected to  reach the  figure  of  54,000  tons in  1958.59,  this  outlay  on machinery  and plant must also have contributed to it.   The increase  in labour force, if any, after April 1, 1952,  may also have made its contribution.  But it appears to us  that it is still valid to say that there is saving in labour cost which  increases  progressively as production  goes  up  and labour  can  therefore legitimately  claim  a  progressively higher  rate.   Therefore, though the  Appellate  Tribunal’s second   reason  does  not  appear  to  have  been   clearly expressed, something like what we have said above must  have been  at the back of its mind when it decided to change  the rate  above  36,000 tons.  There can be no  doubt  that  the consideration we have 1030 set  out above, will be valid to support the view  taken  by the Appellate Tribunal that there should be a change in  the rate,  though  it  may not necessarily  support  the  actual change ordered by it.  We must not forget that there was  no collective bargaining resulting in an agreement between  the union and the company so far as production above 36,000 tons is  concerned  as  was the case so far  as  production  upto 36,000 tons went.  A case has, therefore, been made out  for a change in the rate when production goes above 36,000 tons. The  next  question is whether the flat rate  of  two  days’ basic  wage  for  every 460 tons allowed  by  the  Appellate Tribunal can be supported.  Usually, when tonnage production bonus  is worked out, the rates progressively increase.   We may in this connection refer to the illustration given in  "

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Payment  by Results " published by the International  Labour Office, Geneva, at p. 102.  We think, therefore, that though there is a case for increasing the rate when production goes above  36,000  tons,  it should be on  a  progressively  in- creasing  system.  The -present scheme, as we  have  pointed out earlier, was evolved as an admittedly rough basis  which was thought to be equitable.  Following the same rough basis and  using  the same block of 6,000 tons with slabs  of  460 tons,  we  think that on the data available at  present,  it would be fair to give progressive rates for production  from over  36,000 tons up to 60,000 tons.  We need not go  beyond this  for  the present, and if production  increases  beyond 60,000  tons,  the  matter  can  be  gone  into  again.   We consider,  therefore,  that the rate should  be  changed  as follows  for production over 36,000 tons: 1-1/4  days’ basic wage on the same scale as is provided  in the sebeme from 30,000 to 36,000 tons.1-1/2 days’ basic wage on the same conditions as above. 1-3/4 days’ basic wage -do- (i) From over 36,000 tons to 42,000 tons. (ii) From over 42,000 tons to 48,000 tons. (iii) From over 48,000 tons to 54,000 tons. 1031 (iv)  From over 54,000 tons to 2 days’ basic wage do  60,000 tons. We  therefore modify the change in the rate ordered  by  the Appellate Tribunal as above. Re. (4). The  contention under this head is that though this.  scheme is  called  a production bonus scheme, in reality it  is  no more than a profit bonus scheme; and therefore, the  workmen are not entitled to any profit bonus worked out on the  Full Bench formula referred to above in addition to what they get under  this  production bonus scheme.   In  this  connection reliance is placed particularly on clauses (14) and (18)  of the  scheme.  Let us therefore determine the true nature  of the scheme.  The scheme is headed " Tonnage Production Bonus Scheme " and not a scheme for profit bonus based on the Full Bench  formula.   It is true that this nomenclature  is  not decisive but is nevertheless a factor which may properly  be taken  into consideration.  The primary and basic object  of the  scheme,  as  given  in el. (2),  is  to  stimulate  the interests  and  endeavors of the clerks and workers  of  the company  in increasing the production of saleable paper  and to  ensure that the workers will get by way of incentive  an increased  return  for  their  labour  contributing  to  the benefits   which   would   accrue   from   such    increased productivity.   This again shows that this is  a  production bonus  scheme and nothing else.  Then comes cl.  (4),  which lays down that upto a minimum of 30,000 tons the bonus would be 13 days’ basic wage; thereafter there is increase of  one day’s  basic wage for every 460 tons till the figure  of  26 days’ basic wage is reached for a total production of 36,000 tons.  Here again there is no connection between profits and bonus that accrues under this clause.  If, for example, pro- duction  falls below the minimum of 30,000 tons, there  will be  no  bonus at all under the scheme whatever  may  be  the profits.  This one circumstance clearly brings out the  true nature  of  this  scheme, namely, that it  is  a  scheme  of production bonus and not of

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1032 profit bonus under the Full Bench formula.  That formula had nothing  to do with production.  Bonus tinder  that  formula depended entirely on the available surplus of profits worked out in the manner provided therein.  Then we come to  clause (14).  That clause lays down that the scheme will be subject to  one most important general exception, namely,  that  the profit earning capacity of the company, irrespective of  the volume of production of saleable paper, remains satisfactory during   the   financial  year.   Accordingly   the   clause prescribes  that the directors may at their sole  discretion either  cancel  altogether or reduce in  scale  of  monetary payments  the  bonus in any one or more financial  years  in which the gross profit earned by the company over the  whole financial year is not sufficient to meet fixed dividends and interest,  depreciation charges and taxation and  thereafter pay  for the whole year dividend not less than 10 per  cent. to  the  ordinary shareholders of the company.  It  is  said that  this makes the scheme a profit bonus scheme.   We  are unable  to agree with this contention.  It is true that  the scale  of payment is likely to go down or there may even  be no payment of bonus at all in the circumstances mentioned in cl.  (14).   But  the  circumstances  mentioned  there   are admittedly not the same which have to be taken into  account in  arriving at the available surplus according to the  Full Bench  Formula.   Clause (14) appears to us to be  just  one condition  upon which the payment of production bonus  would depend, like some other clauses in the scheme.  For example, cl. (5) seems to provide that workers who work for less than half the total number of working days in the financial  year for which bonus is being paid, shall not get any bonus,  for it only makes those workers who work for more than half  the total number of working days, worked out according to  other rules,  entitled  to bonus.  Clause (6)  says  that  certain kinds  of  workers will not be entitled  to  bonus,  namely, Bungalow servants, Budli clerks or workers, temporary clerks or workers, casual workers or clerks.  It also provides that any person guilty of any major misdemeanour may at the  sole discretion of the Mill Manager or the 1033 Cost Accountant not be given this bonus either in part or in whole  as  a punishment, and that this would be  done  after taking  proceedings in writing for the purpose.  Clause  (7) provides  another  condition as to what service  will  count towards earning bonus and what will not; for example,  leave on full or part pay shall count as bonus service while leave without  pay  will not count as Qualifying  service  towards bonus.   Again  cl.  (8) lays down that  a  worker  will  be entitled  to  the  maximum bonus if he  works  for  all  the working days during the financial year, for which the  bonus is declared.  Clause (9) then provides how the maximum bonus can  be  reduced,  if a worker does not  work  for  all  the working days.  Clause (14) therefore is also another  clause which may either lead to no payment of bonus or less payment than  prescribed under cl. (4).  Further the fact that  this is  not a profit bonus scheme but a production bonus  scheme will also be clear from what cl. (14) actually provides.  It says  that  if  the  conditions  mentioned  in  it  are  not fulfilled,  the workers would riot be entitled to  bonus  or may  get  less.   This  means that  if  the  conditions  are fulfilled,  workers  would  be  entitled  to  bonus.    Now, suppose,  that the gross profit in a year is  sufficient  to meet fixed dividends and interest, depreciation charges  and taxation   and   10  percent.  dividend  to   the   ordinary shareholders.   Theereafter  the balance of profit  left  is

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Only  (let  us say) Rs. 5/-.  But as the conditions  of  cl. (14)  are  fulfilled,  the  workers  would  be  entitled  to production  bonus,  though  the  amount  of  Rs.  5/-  which remains,  cannot  possibly meet the claim of bonus.   It  is clear  therefore that this bonus scheme is not the  same  as the  profit bonus worked out under the Full  -Bench  formula and  it cannot be called a profit bonus scheme  even  other- wise.  This is nothing more nor less than a pure  production bonus   scheme  based  on  tonnage,  depending  on   certain conditions  one  of which is related to profits  also.   The nature of this bonus, therefore, in our opinion, is entirely different  from  the nature of profit bonus under  the  Fall Bench formula and we do not see why if there is an available surplus of profits 130 1034 according to the Pull Bench formula, the workmen should  not get  profit bonus in accordance with that formula.  The  two things,  in  our opinion, are different.  Under  the  scheme what the workers get is a supplementary emolument worked out on  certain basis.  Under the Full Bench formula, what  they get  is  something  out  of the  profits,  if  there  is  an available surplus on the ground that both capital and labour contribute  to  the accrual of profits and it  is  only-fair that labour should get a part of it. In  this  connection our attention was drawn  to  Mathuradas Kanji  v.  Labour  Appellate  Tribunal  (1),  where  it  was observed that " one of the categories of bonus is  described as " incentive bonus ". The name indicates that it is  given as  a  cash incentive to greater effort on the part  of  the labour.   But  the essential condition for  the  payment  of incentive  bonus just like any other kind of bonus, is  that the  industry concerned must earn profits part of  which  is due to the contribution which the workmen made in increasing production." That was not a case of production bonus at all. The  bonus  dealt with there was included  in  an  agreement between  the  government and its contractors in  a  contract relating   to   clearing  and   transporting   of   imported foodgrains.   It was provided that if the rate of  discharge from  a  ship exceeded 1,500 tons per 24 hours and  no  shed demurrage  was  incurred, the government would  pay  to  the contractors  remuneration  at the prescribed  rates  plus  a bonus  of annas four per ton.  The workmen employed  by  the contractors claimed that this bonus should be given to them. That  claim  was negatived on the ground  that  the  workers could  not  claim, on the terms of the  contract,  that  the bonus  of  annas four-per ton was payable  to  them.   These observations  made in a different setting have therefore  no relevance in the context of the production bonus scheme with which  we  are dealing here and which has become a  term  of employment of the workmen. As for el. (18), it provides that if during the currency  of three years for which the scheme was to (1)..A.I.R. 1958 S.C. 899. 1035 remain  in force in the first instance, the  government  en- forced  by legislation any scheme or provision for bonus  or profit  sharing, the company may decide to cancel or  modify the  scheme  in its entirety.  It is urged that  this  shows that the scheme was one for profit sharing or profit  bonus, because  it  was  likely  to be  cancelled  or  modified  if legislation was introduced with respect to these.  It may be that  the  scheme might have been cancelled or  modified  if such  legislation was passed.  But that does not  mean  that

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the  scheme  itself provided for profit  sharing  or  profit bonus.  It is one thing to cancel or modify a scheme because the  legislature steps in to provide for extra  payment  for workmen.  But the nature of the provision of law, which  was then expected, cannot be imposed on this scheme, which  must be judged on its own terms; these leave no doubt that it  is not  a  profit  bonus  scheme but  an  incentive  wage  plan depending  upon  production  in the  main.   The  contention therefore that the bonus under the scheme is a profit  bonus and  therefore  the workmen are not entitled to  the  profit bonus under the Full Bench formula must fail. Re. (5). The contention under this head is that even if profit  bonus is  payable  in addition to production bonus, there  was  no available  surplus  of  profits  to  justify  the  Appellate Tribunal  in  granting one month’s bonus.  The  workmen  had asked  for  two month’s bonus; but  the  Appellate  Tribunal after working out the available surplus on the basis of  the Full Bench formula granted them one month’s bonus.  The Full Bench formula was evolved in 1950 in connection with a  case relating  to  the textile industry and has been  since  then generally applied to many- other industries.  The  necessity for  evolving that formula arose in this way:  When  prices. are  stable  or  falling, there is no  necessity  of  making further   provision   for  rehabilitation  for   the   usual depreciation,  provided for the purposes of  the  Income-tax Act,  is  sufficient to build up a fund for  replacement  of plant and machinery when they are worn out; but when  prices are  rising  the usual depreciation fund is  not  enough  to replace plant and 1036 machinery  which become useless.  This was  particularly  so after  the  end  of  the last  war,  when  the  question  of replacing  machinery purchased before the war, i.e.,  before 1939, came up before the Full Bench of the Labour  Appellate Tribunal  in  1950.   In  order,  therefore,  to  meet  this particular situation arising out of a steep rise in  prices, the Full Bench formula was evolved to provide for a  further sum  for  rehabilitation  out of  the  profits  besides  the statutory  depreciation.  This was on a notional  basis  and depended  upon a multiplier which was used to find  out  the current  prices  of machinery to be replaced and  a  divisor based  on the useful life of the machinery to find out  what sum  should  be  provided  each year  for  what  was  called rehabilitation.  In order, however, that this sum nationally provided  for  rehabilitation  each  year  has  a  realistic connection  with  the  amount  in  fact  necessary  for  the purpose, it is, in our opinion, necessary that what is known as  the total block of a concern including land,  buildings, plant  and  machinery, should be  properly  sub-divided,  as otherwise  a flat multiplier at the same rate for the  total block  might not give an accurate amount to be provided  for rehabilitation.   It  is, therefore, necessary in  order  to arrive   at   an   approximately   realistic   figure    for rehabilitation  that the total block should be divided  into three  heads,  namely,  (i) land,  (ii)  buildings,  railway sidings  and things of that nature which have a much  longer life and where imports are not needed, and (iii)  machinery. In  the  case  of  land, no  replacement  is  necessary  and therefore nothing need be provided for rehabilitation  under this  head.  Even where land is leasehold and the  lease  is expiring,  any  payment  for renewal of  lease  will  be  an expense   and   need  not  enter   into   calculations   for rehabilitation.  Further if there are buildings belonging to the  concern on leasehold land, their rehabilitation  charge

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be will allowable under the head buildings.  In the case  of building,-,,  railway sidings etc., the multiplier  will  be smaller while the divisor will be larger.  As for machinery, there  is  again  the  necessity  of  further  sub-division, according   to  when  the  machinery  was  purchased.    The machinery purchased 1037 before  the  last war stands on one footing and  thus  there will be a block of machinery which may be know as  pre-1939. The  second  block of machinery may well be  that  purchased during  the war and the last block that purchased after  the war.   The  last  two  are not  rigid  divisions;  but  they indicate  that  machinery  has to  be  divided  into  blocks according  to  years  of purchase to  arrive  at  a  correct multiplier and a correct divisor. Bearing  these principles in mind, let us see how  the  Full Bench formula works in this case.  We may mention that there is  no  dispute  in this case as to the  components  of  the formula,  the  only  dispute being confined  to  its  actual application.  The company claimed a multiplier of 4.5 and  a divisor  of  10, and on that basis gave a  chart  showing  a deficit   of   112   lacs  in  the   amount   required   for rehabilitation for 1951-52.  Another chart was also filed by the company in which the multiplier was taken as 3.5 and the divisor  as 10, and the deficit was worked out at  65  lacs. What the company did was to take the total block  consisting of land, buildings, railway sidings and machinery, valued at 468  lacs  and  multiply  it  by  4.5  or  3.5,  making   no distinction between land, buildings and railway sidings, and machinery.   The  divisor was also taken as  10,  making  no distinction  again  between  these  three  categories,   and further   making  no  distinction  between   the   machinery purchased  before  1939, during the last war and  after  the last   war.    This,  in  our  opinion,  was   a   completely unrealistic  way  of  working out the  amount  required  for rehabilitation, and that is why the company was able to show in its charts such a large deficit. The Appellate Tribunal did not accept these charts.  It left out  of  account land altogether, and rightly  so.   As  for buildings, it applied a different multiplier and a different divisor, and so far as that is concerned no dispute has been raised  before us.  As for machinery, consisting  of  plant, machinery,  bamboo  forest block,  furniture,  flotilla  and vehicles,  it  divided the block for this purpose  into  two parts, namely, the block as it existed on April 1, 1947, and the additions made 1038 between  April  1, 1947, to March 31, 1951.   It  applied  a multiplier of 3 so far as the block upto April 1, 1947,  was concerned and took the block of additions after 1-4-1947  at cost  price, thus using one as multiplier.  It is not  clear why  the  Appellate Tribunal did not include  the  additions made  in 1951-52.  The Appellate Tribunal also accepted  the divisor 10 for all this plant, machinery, etc., and made  no difference   between  the  useful  life  of  the   machinery purchased at different times.  Eventually, after making  the relevant calculations, it came to the conclusion that  there was  an available surplus of profits amounting to  22  lacs. It,  therefore,  awarded one month’s profit bonus  on  basic normal wage. It  is contended on behalf of the company that evidence  had been  produced  on  its behalf to show that  the  prices  of machinery  had  appreciated 4-1/2 times as compared  to  the prices in 1939, and therefore, the multiplier of 4.5  should have  been allowed at least on the block of machinery up  to

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1939.   Thereafter it is claimed that some multiplier  above one should be given for the block 1939-1947 and also for the block  1947-51.  It is further contended that the  additions made in 1951-52 should also have been taken into account. It may be mentioned that the Labour Appellate Tribunal which evolved  the  Full  Bench  formula  in  1950  had  used  the multiplier  2.7  in  that case for  prewar  block  and  that multiplier has been used since then in many other cases.  it is,  however,  contended  on  behalf  of  the  company  that multiplier is not sacrosanct, and if in fact there has  been a  greater  rise in price, there is no reason why  a  higher multiplier  should not be used.  It may be accepted that  if an  employer is able to prove that in fact there has been  a greater  rise  in  price,  he  should  be  given  a   higher multiplier.  But there has to be good proof tendered by  the employer for the multiplier which he claims. Let  us see, therefore, what proof the company has  tendered in this case for a multipler of 4.5 for the block upto April 1, 1939.  In its written-statement the company said that  it was a known fact that the 1039 price of plant and machinery had increased by 300 per  cent. to  400 percent. since before the war.  At that stage  there was no claim that the price had increased 4-1/2 times  after April  1, 1939.  The company’s claim, therefore, as  put  in the written-statement, was for a maximum multiplier of 4 for the  block  upto  April 1, 1939.  In  the  evidence  of  Mr. Taylor, who appeared as a witness for the company,  however, claim was made that prices had gone up by 4-1/2 times.  This was  based  on  Ex.  D produced by  the  company  which  was compiled  on the basis of inquiries about certain  machinery from certain firms and copies of the correspondence with the firms were also produced.  Nineteen items were mentioned  in Ex.   D and the average multiplier was worked out  as  4.56. Among  the  items  listed in Ex.  D  were  motors,  beaters, machine drive, paper-making machine, turbo-alternator, couch roll,  bamboo-crushers, bamboo-digesters,  boiler,  circular tanks  and three roaster smelter units.  The total price  of these  items  was 19 lacs, (we have  converted  pounds  into rupees  for  this purpose). Besides these, there  are  other items,  like steam piping., steam tee, galvanized  bend  and steam bends, which are probably required in large quantities and the price per foot or per piece has been mentioned.  The correspondence which was attached to Ex.  D consists of four letters,  one  of  September 1954 and three  of  June  1955, relating   to  one  paper-making  machine  similar  to   one installed  in Mill No. 2, a turbo-alternator similar to  one installed  in  Mill No. 1, a machine drive  similar  to  one installed  in  Mill  No.  I and  a  boiler  similar  to  one installed in Mill No. 1. Now, the cost of machinery block as at April 1, 1939, was of the order of 153 lacs while Ex.   D only  deals  with  machinery  of the value  of  19  lacs  as mentioned  above.   Mr. Taylor did not say in  his  evidence that Ex.  D was a sample and that other machines were of the same type as mentioned in Ex. D or that the prices of  other machinery bad gone up similarly or to the same extent.  Exs. D- 1 to D-4 indicate that the price of one out of ten paper- making machines was ascertained and nothing was  ascertained about nine others.  Similarly prices of one 1040 turbo-alternator,  one machine drive and one boiler of  Mill No.  I were ascertained.  We do not know how many more  such machines  are  in  the two mills; nor do we  know  that  the increase  in prices of these types of machines is also  four and  a half times.  In the circumstances, we feel  that  the

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company  has  failed to provide sufficient material  on  the basis  of which it can claim 4.5 as the multiplier.   It  is the  company which is claiming that a certain multiplier  be used for calculating rehabilitation reserve, and it was  its duty  to  produce  good and sufficient evidence  as  to  the correct  multiplier if it wants that multiplier to be  used. We  cannot  also forget that in  its  written-statement  the company  only  claimed a rise of 300 per cent.  to  400  per cent.  on prewar price.  In the circumstances, the  tribunal was not unjustified in not giving the multiplier of 4.5.  We also  feel  that  in these circumstances  we  shall  not  be justified in giving the company a multiplier higher than  4, for  that  was the maximum claim it had put forward  in  its written-statement.   We  should, however, like  to  make  it clear  that  though we are using the multiplier  4  for  the block as at April 1, 1939, this should not be taken to be  a precedent  for future years, even for this company,  and  it will  be open to either party to adduce proper  evidence  to show  what  the exact multiplier should be for  this  block, whether more than 4 or less. Then  we come to the block from April 1, 1939 to  March  31, 1947.   The  Tribunal gave the multiplier 3 for  this  block also.  But that was because it gave the same multiplier  for the  entire  block as at 1947, including the  prewar  block. As, however, we are giving a multiplier of 4 for the  prewar block, the multiplier 3 for the block April 1, 1939 to March 31,  1947, can only be justified, if the company has  proved that was the rise in the prices after 1939.  So far as  that is  concerned,  the  company did not  produce  any  evidence before  the  Industrial Tribunal.  It seems,  however,  that certain   documents  were  produced  before  the   Appellate Tribunal  on June 12, 1956, when the appeals were ready  for argument.  The order-sheet of June 12, 1956, shows that the 1041 Appellate Tribunal allowed four statements regarding certain machines  given  by  different, firms to  be  admitted  into evidence.   Learned  counsel for the workmen object  to  our looking into these statements on the ground that they  never knew  that  any such statements had been filed at  the  last moment  before  the Appellate Tribunal and nobody  seems  to have  relied  on  these  statements  before  the   Appellate Tribunal  and  the judgment also makes no mention  of  them. There seems to be a good deal of force in these contentions. However, looking at these statements, which have been  taken on  record, we find that they relate to ten items.  Four  of them  are  of the years 1945-48 and the  increase  of  price varies  from 60 per cent. to 75 per cent.  Two are  of  1950 and  the increase varies from 15 per cent. to 50 per  cent., three  are  of 1951 and the increase varies  from  99.5  per cent. to 116 per cent., and one is of 1954 and the  increase is  60 per cent.  The increased price is as of  1956.   Even taking  these  documents  into account,  we  feel  that  the company  cannot ask for a multiplier higher than 2  for  the block between 1939-1947.  But even this will not be taken as a  precedent for future and it will be open to either  party to give better evidence in order to vary this multiplier one way or the other. As  for  the block after 1947, it appears that  the  company added machinery to the tune of 87 lacs between April 1, 1949 and  March 31, 1952, while the prices quoted for  the  years 1950 and 1951 in these documents were only of machines worth 5  lacs.   We do not know whether this machinery is  of  the same  kind  as  that mentioned  in  these  documents.   They cannot, therefore, be a guide for arriving at any multiplier higher than one for this period relating to this block of 87

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lacs.  Here again we should like to make it clear that if in future  years better evidence is produced, the  question  of giving  a  multiplier higher than I for this  block  can  be considered. This  disposes of the multipliers on the blocks of  machines divided  into  three periods.  We now come to  the  divisor. Both the Tribunals have accepted 10 131 1042 as  the divisor on the evidence of Mr. Taylor.  We must  say that  it  looks  odd to us that there  should  be  the  same divisor  for pre 1939 machinery, and  post-1939-but-pre-1947 machinery,  and post-1947-but-pre1952 machinery.  It  stands to  reason that newer the machinery the larger must  be  the divisor  for the newer machinery would have a longer  useful life.   However, as both the Tribunals have accepted  to  as the divisor for the entire machinery in this case, we  shall also have to accept it; but we should like to make it  clear that this should also not be taken as a precedent for future years  and it will be open to either party to show that  the divisor  should be different, whether more or less than  10, for  various  blocks  of machinery  relating  to  the  three periods. Let  us now work out the figures on the basis of  the  above considerations.  We have taken the basic figures as supplied to us by the learned counsel for the company : REHABILITATIONCOST      In lacsIn lacs      of.Rs.of Rs. (a) Plant & machinery as153.43 x4 = 613.72      at 1-4-1939: Machinery added between22.41 x2 = 44.82      1-4-1939 and 31-3-1947: Additions between 87.27 x 1 = 87.27 1-4-1947 and 31-3-1952:      Total745.81 Less 5% breakdown value...13.15      Balance732.66 Less depreciation upto 31-3-1951176.03      Balance556.63 Less Reserves-      General Reserve25.49      Plant Replacement67.9893.47     Balance463.16      Dividing by 10.46.31 1043 (b)  Buildings: Value of building   42.85 x 2.596.41 as at 31-3-47: Additions between   21.1921.19 1-4-47 and 31-3-52:              Total 117.60 Less 5% breakdown   3.20    Balance                      114.40 Less depreciation upto                   47.21      31-3-1951:      Balance                              67.19 Dividing by 27                            2.48 Rehabilitation for-      (a) Plant & Machinery                 46.31      (b)Building                            2.48                               Total...48.79 Less depreciation for 1951-52.               16.50                               Balance  32.29 Rehabilitation Amount for 1951-52:32.29 Rehabilitation amount for 1951-52 thus comes to 32.29  lacs.

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In the charts supplied by the company the net profits  after deducting prior charges other than rehabilitation cost  were worked out air 36.09 lacs.  We find, however, that there  is one  mistake in this calculation inasmuch as 76.3 lacs  have been included in working capital, though this ’was merely  a book entry and there was no cash corresponding to it. 4  per cent. interest was allowed on working capital and this would mean  that the net profits should increase by 3.05  lacs  as that  interest  was  allowed extra in  the  company’s  chart before  the  Appellate  Tribunal.  Thus the  amount  of  net profits  available, before the allowance  of  rehabilitation charges, comes to 39.14 lacs (36.09 + 3.05). Deducting 32.29 lacs we arrive at the available surplus of profits amounting to  6.85  lacs  (39.14-32.29), which is  to  be  distributed equitably between the three sharers mentioned in the 1044 very decision of the Labour Appellate Tribunal which evolved the  formula.  The total cost of one month’s bonus on  basic wages  allowed  by the Appellate Tribunal is about  3  lacs. Taking all the circumstances of this case into consideration we  do  not  think  that any case  has  been  made  out  for interference with this order of the Appellate Tribunal.   We may  point out that we have not taken into  account  bamboo- mills  and  grass-block for reasons given by  the  Appellate Tribunal, which commend themselves to us. This  brings  us to the appeal by the workmen.   Only  three points  have been urged before us out of the many  taken  in the  grounds  of appeal, and we shall deal only  with  these three.  They are- (i)..The minimum basic wage should have been raised from Rs. 30 to Rs. 35; (ii).Clerical  staff as well as Buidl and temporary  workers should  have been included in the attendance  bonus  scheme; and (iii).....Profit  bonus  should  have been  allowed  at  two months’ basic wages for 1951-52 instead of one month’s. Re. (i). Both  the Tribunals have rejected the claim for raising  the basic wage on the principle of " Industrycum-Region Rate  of Basic  Wages ". The workmen relied on the wages paid in  the Bengal Paper Mills Ltd. at Raniganj, which is also a  paper- making  concern.  The minimum basic wage there is Rs.  38-3, dearness allowance Rs. 35 and the incentive wage is said  to work out to Rs. 7-5-6 per mensem, making the total Rs. 80-8- 6.   In the present company, minimum basic wave is  Rs.  30; dearness  allowance  is Rs. 35; house allowance  is  Rs.  2; attendance bonus works out to Rs. 8 and production bonus  is about Rs. 3, making a total of Rs. 78.  It will thus be seen that   the  difference  is  not  great.   Further,  if   the production  bonus  and  incentive wage are  not  taken  into account,  the present company pays Rs. 75 per  mensem  while the  Raniganj company pays Rs. 73-3.  In the  circumstances, we  see no reason for interfering with the concurrent  order of the two Tribunals. 1045 Re. (ii). The   Tribunals  rejected  the  claim  for   extending   the attendance bonus scheme to clerical staff, budli workers and temporary workers.  They were of the view that these workmen stand  on a different footing.  For the clerical  staff  the reason  given  was that they enjoyed the  advantage  of  the incremental  scales  which were till then  denied  to  other categories  of mill hands for whose benefit  the  attendance bonus scheme was introduced.  As for the budli and temporary workers,  the  Tribunals said that the scheme could  not  be

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applied  to them on account of uncertainty of the tenure  of their  service.  So far as the budli and  temporary  workers are  concerned,  the  reason  given  by  the  Tribunals  for treating  them  differently appears to us to  justify  their being  excluded.  As to clerical staff, it appears from  the correspondence  which  ensued  between  the  union  and  the company on the introduction of attendance bonus scheme  that the  scheme was introduced primarily in connection with  the installation  of  a  time keeping office.   The  clerks  are obviously  in a different category from the workmen  engaged in actual production.  In the circumstances, apart from  the considerations  which were considered by the two  Tribunals, there is, in our opinion, justification for treating  clerks in  a  different way from other workmen.  The  company  also told  the  union  that  so far as they  knew  no  scheme  of attendance  bonus had ever been applied to clerks,  probably because  absenteeism among clerks is not so great  as  among other workmen.  We see no reason, therefore, to disturb  the concurrent finding of the two Tribunals in this matter. Re. (iii). We  have already worked out above the available  surplus  of profits, from which profit bonus can be given, The amount of available  surplus comes to 6.85 lacs and one month’s  basic wages,  which  have been allowed as profit  bonus,  come  to about   3  lacs.   The  percentage  therefore   is   already sufficiently high and if profit bonus is allowed at the rate of two months’ basic wages it will come to about 6 lacs and 1046 would be more or less equal to the entire available surplus. It  is  well settled that the available surplus  has  to  be divided   in  a  fair  manner  between  the  industry,   the shareholders  and  the workmen.  We cannot forget  that  the workmen  have also got production bonus for this  Year.   In the  circumstances,  there  is no scope  for  grant  of  any further  profit bonus beyond that allowed by  the  Appellate Tribunal. We,  therefore, partly allow the appeals of the company  and vary  the  production  bonus rate in  the  Manner  indicated above.   We dismiss the appeals of the company with  respect to profit bonus.  We also dismiss the appeal of the workmen. In  view of the fact that the parties have partly  succeeded and partly failed, we order them to bear their own costs  of this court in all the appeals. Appeals Nos. 450 and 451 allowed in part. Appeal No. 514 dismissed.