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PETITIONER: PETLAD TURKEY RED DYE WORKS LTD.

       Vs.

RESPONDENT: DYES & CHEMICAL WORKERS’ UNION,PETLAD & ANR.

DATE OF JUDGMENT: 03/02/1960

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS GAJENDRAGADKAR, P.B. SUBBARAO, K.

CITATION:  1960 AIR 1006            1960 SCR  (2) 906  CITATOR INFO :  R          1962 SC1221  (24)  R          1969 SC 612  (8)  RF         1971 SC2567  (8)  R          1972 SC 330  (11)

ACT:        Working capital-Reserve fund utilised as such-Return, if any        available-Balance  sheet, if proof of reserve actually  used        as working capital.

HEADNOTE: The Industrial Tribunal, in the process of ascertaining  the available  surplus,  disallowed  a claim  of  the  appellant employer for interest on a certain sum of money standing  in the  depreciation  fund  and alleged to have  been  used  as working  capital.  If this claim was allowed and the  amount claimed deducted as a prior charge, the employees would  not be entitled to any bonus as there would be no surplus.   The Industrial  Tribunal  was  of  opinion  that  even  if   the depreciation  reserve  was utilised as  working  capital  no return thereon was allowable in deciding what amount was  to be  deducted  as  prior charge.   On  appeal  the  appellant contended,  inter  alia,  that  the  balance  sheet  of  the employer  company  placed  before  the  Industrial  Tribunal itself showed that.,the entire sum of depreciation fund  was used as working capital. Held, that any portion of the reserve fund actually utilised as working capital in the year under consideration should be treated  as entitled to a reasonable rate of return and  the amount  thus  ascertained  deducted as  a  prior  charge  in ascertaining the available surplus. The  balance  sheet  did not by itself  prove  the  fact  of utilisation  of any reserve as working capital and  the  law required  that such an important fact as the utilisation  of the  reserve  as  working capital had to be  proved  by  the employer by evidence on affidavit or otherwise after  giving opportunity  to  the workmen to contest the  correctness  of such evidence by cross-examination. Management  of  Trichinopoly Mills Ltd. v.  National  Cotton Textile  Mills  Workers  Union, C.A. NO. 309  Of  1957,  and Khandesh  Spg.  & Weaving Mills Co. Ltd.  v.  The  Rashtriya

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Girni Kamgar Sangh, jalgaon, C.A. No. 257 Of 1958, followed. Indian Hume Pipe Co. Ltd. v. Their Workmen. (1959) 11 L.L.J. 357, explained.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 258 of 1958.        Appeal  by  special leave from the Award  dated  August  17,        1957, of the Industrial Tribunal, Bombay, in Reference  (IT)        No. 15 of 1957.        I.M.  Nanavati, S. N. Andley, J.B. Dadachanji and  Rameshwar        Nath, for the appellant.        907        B.K.B. Naidu and I. N. Shroff for respondent No. 1.        I.  N. Shroff for interveners Nos.  1 and 2. 1960,  February        3. The Judgment of the Court was delivered by        DAS  GUPTA, J.-The only point raised in this appeal  by  the        employer, Petlad Turkey Red Dye Works Ltd., Petlad,  against        the  award of an industrial Tribunal of a sum of  Rs.  9,839        equivalent  to  one month’s basic wages is  as  regards  the        correctness   of  the  disallowance,  in  the   process   of        ascertaining  the  available  surplus,  of  a  claim  of  4%        interest  on Rs. 2,27,000 standing in the depreciation  fund        said  to .have been used as working capital.  If this  claim        was  allowed  and  the amount claimed deducted  as  a  prior        charge  no surplus would remain so that the employees  would        not  be entitled to any bonus.  The Industrial Tribunal  was        of  opinion  that  even  if  the  depreciation  reserve  was        utilized as working capital no return thereon was  allowable        for the purposes of deciding on the amount to be deducted as        prior  charges in applying the Full Bench Formula.  In  this        view it was clearly wrong.  Numerous decisions of this Court        make  it  abundantly clear that any portion of  the  reserve        actually  utilized  as  working capital in  the  year  under        consideration should be treated as entitled to a  reasonable        rate of return and the amount thus ascertained deducted as a        prior  charge in ascertaining the available surplus.   There        is  no  reason whatsoever for making an  exception  in  this        respect as regards depreciation reserves.        The  question remains, however, whether this amount  of  Rs.        2,27,000  in  the  depreciation fund was  actually  used  as        working capital.  The Tribunal did not think it necessary to        consider  this question, as in its view even if this  entire        amount  has been utilised as working capital no  return  was        allowable.   If  on  the  materials on  the  record  it  was        possible  to  reach  a conclusion that any  reserve  or  any        portion of it was used as working capital during the  period        under  consideration we would have thought fit to  calculate        the  amount  allowable as return thereupon and  deducted  it        from the amount ascertained as surplus        908        by  the  Industrial  Tribunal.  On  an  examination  of  the        record, however, we cannot discover any such   material. All        that  we have is that the employer  Company in  its  written        statement  claimed interest on  reserves as working  capital        at Rs. 32, 000 the rate of     return being mentioned as 4%.        It  ",as  not mentioned therein in so many  words  that  the        depreciation  fund  was  part of the  reserves  employed  as        working  capital.   It  is  claimed  however  that  such  an        averment  was  implicit in the claim of Rs.  32,000  as  the        amount  allowable as return on reserves employed as  working        capital.   Assuming  that this is so it still  remained  the        duty  of  the  Company  to prove that  any  portion  of  the        depreciation fund was actually utilised as working  capital.

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      It was suggested before us that this averment by implication        that the depreciation fund was also used as working  capital        was  not  challenged  by the workers.   This  suggestion  is        obviously  incorrect.   We  find  that  in  Exhibit  U/I   a        statement  submitted  on behalf of  the  workers  containing        calculations  for the available surplus Rs. 3,000 was  shown        as the amount deductible on working capital at 2%.  That is,        a sum of Rs. 1,50,000 out of the reserves was stated to have        been  used as working capital.  The employer’s statement  in        Exhibit  C/3  dated  July 12, 1957,  shows  a  deduction  of        "Interest at 4% on Reserves employed as working  capital-Rs.        32,000".    A  similar  claim  is  made  in  Ex.   C/4,   an        alternative  statement  filed on behalf of the  employer  on        July,  12,1957.  The workmen also filed a statement  showing        calculations  of bonus made by them on the same  date  i.e.,        July,  12, 1957.  This is marked as Ex.  U/3.  According  to        this,  return  at the rate of 4% on working capital  of  Rs.        1,66,000  was  allowable as deduction.  Thus,  according  to        workmen, the reserves used as working capital was stated  to        be Rs. 1,66,000 while according to the employer this  amount        was no less than 8 lakhs.  It is quite clear therefore  that        the workmen had at no stage admitted either expressly or  by        implication  the  employer’s claim that any portion  of  the        depreciation fund was utilized as working reserve.        On  behalf  of the appellant it was  strenuously  contended,        however, that the balance-sheet of the        909        Company which was placed before the Industrial Tribunal will        itself show that the entire sum of depreciation fund of  Rs.        2,27,000  was  used as working capital.   The  balance-sheet        does  show a sum of Rs. 2,27,000 as the  depreciation  fund.        Assuming for the purposes of the present case that this  was        the  actual  sum standing in the  depreciation  reserve  the        further  question is whether the balance-sheet  proves  that        this sum was utilized as working capital.  Assuming  further        for  the  -purposes of this case that the  analysis  of  the        statement made in the balance-sheet might indicate that this        sum could not but have been utilised as working capital,  it        has  to  be remembered that no such conclusion  is  possible        unless it is known as a fact that the statements made in the        balancesheets   under  the  different  heads   are   correct        statements.   On that there is absolutely no evidence.   All        that the balance-sheet, as submitted, shows is that  certain        statements  were  made.  The mere fact that  the  statements        were made can never be taken as proving that the  statements        were correct.        That  is a distinction which the courts of law  have  always        been careful to make.  Thus, if a person is to prove that he        was  ill  on  a  particular  date,  the  mere  filing  of  a        certificate of a medical man that he was ill on that date is        not  accepted  as  evidence to show that he  was  ill.   The        correctness of the statement made in the certificate has  to        be proved by an affidavit or oral testimony in court by  the        Doctor  concerned  or by some other evidence.  There  is  no        reason  why  an  exception should be made  in  the  case  of        balance sheets prepared by Companies for themselves.  It has        to be borne in mind that in many cases the Directors of  the        Companies may feel inclined to make incorrect statements  in        these  balance-sheets for ulterior purposes.  While that  is        no reason to suspect every statement made in these  balance-        sheets,  the  position is clear that we cannot  presume  the        statements made therein to be always correct.  The burden is        on the party who asserts a statement to be correct to  prove        the  same  by relevant and acceptable  evidence.   The  mere        statement of the, balance-sheet is of no assistance

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      910        to  show  therefore  that any portion  of  the  reserve  was        actually utilized as working capital.        The  question whether a balance-sheet can be taken as  proof        of a claim of what portion of reserve has actually been used        as  working capital -was very recently considered by  us  in        Khandesh  Spg.  & Weaving Mill Co., Ltd.  v.  The  Rashtriya        Girni Kamgar Sangh.  Jalgaon (Civil Appeal No. 257 of 1958).        As  was  pointed  out  by Subba Rao, J.  in  that  case  the        balancesheet  of a Company is prepared by the Company’s  own        officers  and when so much depends on the  ascertainment  of        what portion of the reserve was utilized as working capital,        the  principles  of  equity  and  justice  demand  that   an        Industrial  Court  should insist upon a clear proof  of  the        same  and also give a real and adequate opportunity  to  the        labour  to  canvass  the  correctness  of  the   particulars        furnished by the employer.  In that case we also  considered        an  observation  in Indian Hume Pipe Company Ltd.  v.  Their        Workmen  (1) which was relied upon for an argument that  the        balance-sheet  was good evidence to prove that amounts  were        actually  used  as working capital.  As was pointed  out  in        Khandesh Spg. @ Weaving Mills Case (Supra) this  observation        was not intended to lay down the law that a balance-sheet by        itself  was good evidence to prove any fact as  regards  the        actual  utilisation  of reserves as  working  capital.   The        observation  relied  on  was  a  sentence  at  page  362  :-        "Moreover,  no objection was urged in this behalf,  nor  was        any finding to the contrary recorded by the Tribunal." If it        had  been  intended  to state as a matter of  law  that  the        balance-sheet itself was good evidence to prove the fact  of        utilisation of a portion of the reserve as working,  capital        it would have been unnecessary to add such a sentence.        This  question  as regards the sufficiency of  the  balance-        sheet itself to prove the fact of utilization of any reserve        as  working capital was also considered by us in  Management        of Trichinopoly Mills Ltd. v. National Cotton Textile  Mills        Workers Union (Civil Appeal No. 309 of 1957) and it was held        that  the  balance-sheet does not by itself prove  any  such        fact and that the law requires that such an important        (1)  [1959] II L.L.J- 357.        911        fact  as  the  utilisation of a portion of  the  reserve  as        working capital has to be proved by the employer by evidence        given  on  affidavit  or  otherwise  and  after  giving   an        opportunity  to  the workmen to contest the  correctness  of        such evidence by cross-examination.        We  must therefore reject the contention urged on behalf  of        the  employer-appellant that the balancesheet that has  been        filed  is  sufficient  to prove that  Rs.  2,27,000  of  the        depreciation  fund  was actually used  as  working  capital.        There  is,  as we have already stated, no  material  on  the        record  from which any conclusion can be reached as  regards        the  utilisation  of the whole or any portion  of  this  sum        lying in depreciation fund as working capital.        The appellant’s counsel finally asked that the matter may be        sent  back  to the Industrial Tribunal  and  an  opportunity        given to him to adduce proper evidence on this point.  We do        not  see any circumstance that will justify us in making  an        order of remand in a case of this nature.        The appeal is accordingly dismissed with costs.                                          Appeal dismissed.