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PETITIONER: THE INDIAN HUME PIPE CO., LTD.,

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT: 05/05/1959

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

CITATION:  1959 AIR 1081            1959 SCR  Supl. (2) 948  CITATOR INFO :  R          1960 SC 571  (10)  E&D        1960 SC 826  (19)  R          1960 SC1006  (5)  RF         1966 SC1754  (11)  R          1972 SC 330  (10)

ACT: Industrial   Dispute--Bonus -- Available Surplus -  Previous losses   written   off-Expenditure   on   parents    written off--Debenture redemption reserve--If Proper Prior  charges- Preference  shares,  return  on-Calculations  on   All-India basis, whether proper.

HEADNOTE: The  appellant manufactured hume pipes and had factories  in different   parts  of  India,  Pakistan  and  Ceylon.    For determining  the available surplus for the payment of  bonus for  the  year 1954-55 the appellant claimed  deductions  as prior  charges  on  account of (i) losses  suffered  on  the Lahore  factory  written off, (ii)  expenditure  on  patents written  off,  and (iii) debenture redemption  reserve.   It also claimed 6% return on the preference shares as return on paid up capital.  The losses on the Lahore factory had  been incurred  in  the  previous years  which  had  been  carried forward  from  year  to year and had  been  written  off  as irrecoverable  in the bonus year.  The amounts spent on  the purchase  of  the patents which had been worked off  in  the previous years had also been written off in the bonus  year. The appellant had issued debentures in 1942-43 redeemable in 1962-63 and claimed Rs. 3,50,000 as the annual  contribution towards  the redemption reserve.  The appellant  bad  issued preference shares on which the shareholders, under the terms of  the  issue, were not entitled to more than 5%,  but  the appellant  claimed  a return of 6% on these hatres  also  as return on paid up 949 capital as provided in the Full Bench formula.  The  dispute regarding bonus had been raised by the workmen of the Wadala factory alone, the workmen of other factories having settled

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the matter had been paid the agreed bonus.  The  respondents claimed  that the bonus calculations should not be  made  on the  basis  of  All-India figures but on the  basis  of  the actual  amounts paid or payable by the appellant  under  the settlements. Held, that the losses on the Lahore factory and the  patents written  off could not be allowed as prior charges  as  they were  merely  debits  in  connection  with  the  working  of previous  years.   Nor could the amount on  account  of  the debenture redemption reserve be allowed as a prior charge as no  such charge was envisaged by the Full Bench  formula  of the  Labour  Appellate Tribunal ; but this amount  could  be taken  into  consideration when distributing  the  available surplus  among the various interests entitled  thereto.   In determining  the  available surplus the Full  Bench  formula must be adhered to in its essential particulars as otherwise there would be no stability or uniformity of practice. A deduction of more than 5% return on the preference  shares could  not be allowed as that was the maximum  return  which the shareholders could get on these shares.  Even though the Full Bench formula mentioned 6% return on paid up capital it was not to be literally construed and the Tribunal could, if the circumstances warranted, increase or decrease the rate. In calculating the actual amount of bonus to be paid  calcu- lations  had  to be made on the basis of  All-India  figures otherwise the respondents would have an advantage over those workmen  with whom settlements had been made and  would  get larger  amounts of bonus merely by reason of the  fact  that the  appellant  had managed to settle the  claims  of  those workmen at lesser figures.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 54 of 1958. Appeal  by  special leave from the Award dated  January  14, 1957, of the Industrial Tribunal at Bombay in Reference  (I. T.) No. 75 of 1956. M.   C. Setalvad, Attorney-Generalfor India and I. N. Shroff for the appellants. N.   V.  Phadke, T. S. Venkataraman K. R. Sharma and  K.  R. Chaudhury, for respondent No. I and the Intervener. 1959.  May 5. The Judgment of the Court was delivered by 950 BHAGWATI,  J.-This appeal with special leave challenges  the award made by the Industrial Tribunal, Bombay, in  Reference (IT)   No.  75  of  1956  between  the  appellant  and   the respondents  whereby the Industrial Tribunal awarded to  the respondents 4 1/2 months’ basic wages as bonus for the  year 1954-55 (year ending June 30, 1955). The  appellant is a subsidiary of the  Premier  Construction Co., Ltd., and manufactures Hume Pipes.  It has factories in different   parts  of  India,  Pakistan  and  Ceylon.    The respondents  are  the workers employed  in  the  appellant’s factory at Antop Hill, Wadala, Bombay. In October 1955, respondent I who are workmen represented by the Engineering Mazdoor Sabha made a demand for the  payment of  six-months’  wages as bonus for the year  1954-55.   The matter  was  also  referred  to  the  Conciliation   Officer requesting  him to initiate Conciliation  Proceedings.   The Conciliation  Proceedings  went on before  the  Conciliation Officer upto March 23, 1956, on which date both the  parties arrived at and executed an Agreement to refer the matter  to an  Industrial Tribunal for adjudication.   Accordingly,  on April 30, 1956, both the parties drew up and signed a joint-

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application for referring the dispute for adjudication to  a Tribunal and the Government of Bombay thereupon in  exercise of  the  powers  conferred by sub-s. (2) of  s.  10  of  the Industrial  Disputes Act, 1947, by its order dated June  11, 1956, referred the following dispute to the Tribunal :- "  DEMAND: Every Workman (daily rated) should be paid  bonus for   the  year  1954-55  (year  ending  30th  June,   1955) equivalent  to  six-months’ wages without it  attaching  any condition thereto ". Respondent No. I filed their statement of claim before  -the Tribunal on June 29, 1956.  They alleged that the profits of the appellant during the year 195455 were higher than  those during  the  year 1953-54 for which year the  appellant  had paid  four months’ basic wages as bonus.  They also  alleged that  the wages paid to them by the appellant fell short  of the,  living  wage and therefore the  appellant  should  pay the  in  six months’ basic wages as bonus for  the  relative year. 951 The  appellant  filed  its written statement  in  answer  on August  14,  1956.   The  appellant  submitted  that,  after providing for " the prior charges " according to the formula laid down by the Labour Appellate Tribunal the profits  made during  the  year  under consideration did  riot  leave  any surplus  and  tile,  respondents were not  entitled  to  any bonus.   It denied that it bad made huge profits during  the year  in question and submitted that the profits  made  were not  even sufficient to provide for " the prior  charges  ", etc. The   Tribunal  after  hearing  the  parties  came  to   the conclusion  that even if payment of a bonus equal to  4  1/2 months’  basic wages were made a fair surplus would be  left in  the hands of the appellant to the tune of Rs. 3.30  lacs and  therefore  awarded the same subject  to  the  following conditions:- (a)  Any  employee  who has been  dismissed  for  misconduct resulting  in  financial loss to the company  shall  not  be entitled to bonus to the extent of the loss caused. (b)  Persons  who  are  eligible for bonus but  who  are  no longer  in  the service of the company on the  date  of  the payment  shall  be paid the same provided that they  make  a written  application  for the same within  three  months  of publication of this award.  Such bonus shall be paid  within one  month of receipt of application provided that no  claim can  be enforced before six weeks from the date  this  award becomes enforceable. Being  aggrieved  by  the said award of  the  Tribunal,  the appellant  applied for and obtained from this Court  special leave  to  appeal  against the same under Art.  136  of  the Constitution and hence this appeal. The  formula  evolved  by  the  Full  Bench  of  the  Labour Appellate  Tribunal  in Millowners’ Association,  Bombay  v. Rashtreeya  Mill Mazdoor Sangh, Bombay(1) is based  on  this idea  that  " as both labour and capital contribute  to  the earnings of the industrial concerti, it is fair that  labour should  derive  some benefit, if there is  a  surplus  after meeting  " prior or necessary charges ". The following  were prescribed as the first charges on (1)  (1950) L.L.J. 1247 952 gross  profits,  viz., (1) Provision for  depreciation  ;(2) reserves for rehabilitation ; (3) a return at 6%on the  paid up capital; (4) a return on the working capital at a  lesser rate than the return on paid up capital and (5) an estimated amount in respect of the payment of income-tax.  The surplus

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that remained after making the aforesaid deductions would be available  for distribution among the three  sharers,  viz., the  shareholders,  the industry and the workmen  [See  Muir Mills Co., Ltd. v. Suti Mills Mazdoor Union, Kanpur (1)  and Sree Meenakshi Mills Ltd. v. Their Workmen (2)]. This Full Bench -Formula has been working all throughout the country  since  its enunciation as aforesaid  and  has  been found  to  be,  in the main,  fairly  satisfactory.   It  is conducive to the benefit of both labour and capital and even though  certain  variations have been attempted to  be  made therein from time to time the main features thereof have not been  substantially departed from.  We feel that  a  formula which  has been thus adopted all throughout the country  and has so far worked fairly satisfactorily should be  adhered,’ to,  though  there is scope for certain flexibility  in  the working  thereof  in accordance with the exigencies  of  the situation. In the working of the said formula, however, regard must  be had  both  to the interests of capital and labour.   In  any given industry there are three interests involved, viz., the shareholders,  the  Company and the workmen  and  all  these interests have got to get their proper share in the  surplus profits ascertained after due provision is made for these  " prior  charges  ".  The  shareholders  may  look  to  larger dividends commensurate with the prosperity of the industrial concern,  the company would, apart from  rehabilitation  and replacement of buildings, plant and machinery, look  forward to expansion and satisfaction of other needs of the industry and  the  workmen would certainly be entitled to ask  for  a share  in the surplus profits with a view to bridge the  gap between the wages earned by them and the living wages.   All these interests (1) [1955]1 1,s.C.R. 991, 998. (2) [1958] S.C.R 878, 884, 953 have,  therefore, got to be duly and properly  provided  for having  regard to the principles of social justice and  once surplus  profits  available for distribution  amongst  these respective   interests  are  determined  after  making   due provision  for  the  "  prior charges  "  as  aforesaid  the Industrial Tribunal adjudicating upon the dispute would have a  free hand in the distribution of the same having  regard, of course, to the considerations mentioned hereinabove.  But so  far  as  the determination of  the  surplus  profits  is concerned  the formula must be adhered to in  its  essential particulars  as  otherwise there would be no  stability  nor uniformity of practice in regard to the same. It maybe noted, ’however, that in regard to the depreciation which  is  a prior charge on the gross profits earned  by  a concern  there  is  always a difference  in  the  method  of approach which is adopted by the income-tax authorities  and by  the industrial tribunals.  It was pointed out by  us  in Sree  Meenakshi  Mills Ltd. v. Their Workmen  (1)  that  the whole  of the depreciation admissible under  the  Income-tax Act was not allowable in determining the available  surplus. The  initial  depreciation and the  additional  depreciation were  abnormal additions to the income-tax depreciation  and it  would not be fair to the workmen if these  depreciations were rated as prior charges before the available surplus was ascertained.   Considerations on which the grant of  initial and  additional depreciations might be justified  under  the Income-tax Act were different from considerations of  social justice  and  fair  apportionment on which  the  Full  Bench Formula  in  regard to the payment of bonus to  workmen  was based.   This was the reason why we held in that  case  that

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only   normal   depreciation   including   multiple    shift depreciation,  but  not initial or  additional  depreciation should rank as prior charge.  We approved of the decision of the Labour Appellate Tribunal in U. P. Electric Supply  Co., Ltd.  v.  Their  Workmen  (2)  in  arriving  at  the   above conclusion and disallowed the claim of the company there  to deduct  the  initial  or additional  depreciation  as  prior charge in bonus calculations. (1) [1958] S.C.R. 878. 120 (2) (1955) L.A.C. 659. 954 When  this  decision was reached we had not  before  us  the decision   of  the  Labour  Appellate  Tribunal   in   Surat Electricity  Company’s Staff Union v. The Surat  Electricity Co., Ltd. (1) where a Bench of the Labour Appellate Tribunal had  negatived  the contention that if only the "  normal  " depreciation  allowed by the Income-tax law were  allowed  a company  would  be able to recoup the original cost  of  the assets and observed that: "  For  the  purpose  of  bonus  formula  the  initial   and additional  depreciation,  which  are  disallowed  by   that formula,  must be ignored in fixing the written  down  value and  in  determining  the  period  over  which  the   normal depreciation will be allowed.  The result will be a notional amount  of  normal  depreciation  ; but,  as  we  have  said repeatedly the bonus formula is a notional formula." We have already expressed in the judgment delivered by us in Associated Cement Co., Ltd. v. Its Workmen (1) that for  the purpose   of   the  bonus  formula   the   notional   normal depreciation  should  be  deducted from  the  gross  profits calculated on the basis adopted in Surat Electric Supply Co. Staff  Union  v.  Surat Electricity Co., Ltd.  (1)  and  not merely  the  normal depreciation  including  multiple  shift depreciation allowed by the income-tax authorities as stated in U. P. Electric Supply Co., Ltd. v. Their Workmen (3). It is well settled that the actual income-tax payable by the company  on  the basis of the  full  statutory  depreciation allowed  by  the  income-tax authorities  for  the  relevant accounting  year  should be taken into account  as  a  prior charge irrespective of any set off allowed by the Income-tax authorities  for prior charges or any  other  considerations such  as building up of income-tax reserves for  payment  of enhanced  liabilities of income-tax accruing in future.   It is  also well settled that the calculations of  the  surplus available  for distribution should be made having regard  to the working of the industrial concern in the relevant (1) (1956) L.A.C. 443.          (2) [1959] S.C.R. 925. (3)  (1955) L.A.C. 659. 955 accounting  year  without  taking  into  consideration   the credits or debits which are referable to the working of  the previous years, e.g., the refund of excess profits tax  paid in  the past or loss of previous years carried  forward  but written  off  in the accounting year as also  any  provision that  may have to be made to meet future liabilities,  e.g., redemption  of debenture stock, or provision  for  Provident Fund and Gratuity and other benefits, etc., which,  however, necessary they may be, cannot be included in the category of prior charges. If  regard be had to the principles enunciated above  it  is clear  that  the  items of Rs. 1.14  lacs  representing  the Lahore  factory  balance written off, Rs.  0.34  lacs  being patents written off, and Rs. 0.09 lacs shown as loss on sale of  Tardeo property cannot be allowed as  proper  deductions

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from   the   gross  profits  for  the  purposes   of   bonus calculations.   The  first two items represented  debits  in connection with the working of previous years.  Loss of  the Lahore  factory had been incurred during the three  previous accounting  years and had been carried forward from year  to year and the only thing which was done during the year under consideration  was  that it was then written  off  as  irre- coverable.  The patents also had been worked off in previous years  and  the amounts spent in the purchase  thereof  were therefore to be written off but had reference to the working of the company during the previous years.  The last item  of Rs. 0.09 lacs was trivial and was therefore not pressed with the  result  that all these three items were  rightly  added back  in  the  calculations  of the  gross  profits  of  the appellant and the figure of gross profits taken at Rs. 36.21 lacs was correctly arrived at by the Tribunal. The  depreciation allowed by the Tribunal was Rs. 9.82  lacs which  was  the full statutory depreciation allowed  by  the Income-tax authorities.  That should not have been done  and the only depreciation allowed should have been the  notional normal  depreciation  which was agreed between  the  parties before us at Rs. 6.23 lacs. Working the figure of income-tax deducted by the 956 appellant on the basis adopted in Shree Meenakshi Mills Ltd. v. Their Workmen (1) the income-tax on the gross profits  of Rs.  36.21 lacs less the statutory depreciation  allowed  by the  income-tax  authorities, viz., Rs. 9.82 lacs  would  be equivalent to 7 annas in the rupee on Rs. 26.39 lacs,  i.e., Rs. 11.55 lacs thus leaving a balance of Rs. 16.82 lacs from which  the other prior charges would have to be deducted  in order to ascertain the distributable surplus. 6% return on the ordinary share capital and 5% return on the preference  share capital would come to Rs. 4.30 lacs.   The appellant,  however,  claimed that even  on  the  preference shares  6% return should be allowed and not 5%  even  though preference shareholders were not entitled to anything beyond 5% under the terms of issue.  The appellant obviously relied upon the wording of the formula: " return at 6% on the  paid up  capital " and contended that the preference shares  also being paid up capital it would be entitled to a return of 6% on  the  preference  shares for the purposes  of  the  bonus formula  even  though in fact it would have to pay  only  5% return on the same.  We cannot accept this contention.  Even though the bonus formula is a notional one we cannot  ignore the  fact that in no event would the appellant be  bound  to pay to the preference shareholders anything beyond 5% by way of  return.  The Full Bench Formula cannot be  so  literally construed.   There is bound to be some flexibility  therein, the  6% which is prescribed there as the return on  paid  up capital  is not inexorable, and the Tribunals could  if  the circumstances  warrant vary the rate of interest  either  by increasing  or  decreasing the same.  On the facts  of  this case  however  there  is no warrant  for  allowing  anything beyond 5% return on preference share capital and the  amount of  Rs.  4.30 lacs should therefore be deducted  as  another prior charge from the grsos profits of the appellant. 4% return on reserves used as working capital was calculated merely  at a figure of Rs. 0.29 lacs worked out on  a  total figure of Rs. 7,42,139.  The Tribunal (1)  [1938] S.C.R. 876. 957 did not take into consideration another sum of Rs. 41,81,196 which  represented the depreciation fund which according  to the  appellant had been used as working capital  during  the

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year.   If that had been allowed a further sum of  Rs.  1.67 lacs  should have been added to Rs. 0.29 lacs and the  total amount  of  4% return on reserves used  as  working  capital would have amounted to Rs. 1.96 lacs. Two  arguments were advanced against this contention of  the appellant.    One  was  that  there  was  nothing   like   a depreciation fund, that it merely represented a credit  item introduced in the balance-sheet as against the value of  the fixed   capital  at  its  original  cost  and   would   have disappeared as such if the proper accounting basis had  been adopted,  viz.,  the  fixed block bad  been  showed  at  its depreciated value after deducting the amount of depreciation from   the  original  cost.   Such  book  entries,  it   was contended,   did  not  convert  that  credit  item  into   a depreciation  fund  available to the company and  there  was therefore   no  basis  for  the  contention  that   such   a depreciation fund ever existed and could be used as  working capital  in  the  business.  The other was  that  there  was nothing on the record to show that such a depreciation fund, if  any, had been, in fact, used as working capital  in  the business during that year. The  answer  furnished by the appellant in  regard  to  both these contentions was that on a true reading of the balance- sheet  Rs. 41,81,196 were reserves used as working  capital, vide   calculations   in  Exhibit   C-12.    Provision   for depreciation was Rs. 1,10,29,954 and the paid up capital was Rs.  80,00,000 thus totaling to Rs. 1,90,29,954.  The  total capital  block as shown in page 5 of the  balance-sheet  for the  year ending June 30, 1955, was Rs. 1,48,48,758 and  the working capital therefore was Rs. 41,81,196.  This was apart from Rs. 7,42,139 which was the total of the three items  at page  4 of the balance-sheet: Rs. 98,405  capital  reserves, Rs.  4,73,734 other reserves and Rs. 1,70,000 provision  for doubtful  debts  as  also the  investments,  cash  and  bank balance.   This  being the true position it follows  on  the facts of the present case that this 958 amount  was  available for use as working  capital  and  the balance-sheet showed that it was in fact so used.  Moreover, DO objection was urged in this behalf nor was any finding to the contrary recorded by the Tribunal. We are, therefore, of the opinion that the reasoning adopted by  the  Tribunal  was not correct  and  the  appellant  was entitled  to  4%  return on the  reserves  used  as  working capital  including the sum of Rs. 41,81,196.  The  appellant was  thus  entitled  to Rs. 1.96 lacs as the  4%  return  on reserves  used  as working capital and not merely  Rs.  0.29 lacs as allowed by the Tribunal. The  provision  for rehabilitation bad been claimed  by  the appellant  at Rs. 1.10 lacs on the basis of 10% of  the  net profits relying upon para. 20 of the Report of the Committee on  Profit Sharing in which the Committee had proposed  that 10% of the net profits should compulsorily be set aside  for reserves to meet emergencies as well as for  rehabilitation, modernization and reasonable expansion.  No evidence was  at all  led  by the appellant before the Tribunal  showing  the cost  of  the  machinery  as  purchased,  the  age  of   the machinery,  the estimate for replacement etc., in  order  to substantiate this claim for rehabilitation and the appellant was  content merely to rely upon this recommendation of  the Committee on Profit-sharing.  This was rightly considered by the  Tribunal  as insufficient to  support  the  appellant’s claim, though it allowed for rehabilitation, in addition  to the  statutory  depreciation,  the  amount  for  which   the appellant  had  actually made provision, viz.,  the  sum  by

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which the depreciation written off for the year exceeded the statutory  depreciation  (i.  e., Rs.  10,00,000  minus  Rs. 9,82,799Rs.  17,201).  The amount was really small  and  did not affect the bonus to be awarded.  The Tribunal, in  fact, allowed  the same, though it appears that in the absence  of evidence  of the nature above referred to even that  sum  of Rs. 0.17 lacs ought not to have been allowed.  In this state of  affairs  it  is really impossible for us  to  allow  the appellant’s claim for rehabilitation in anything beyond  the sum of Rs. 0.17 lacs actually 959 allowed  by the Tribunal and the claim of the appellant  for any further provision for rehabilitation must be  disallowed for the purpose of the bonus calculations for the year under consideration.  It will however be open to the appellant  to claim  higher rehabilitation for subsequent years if it  can substantiate its claim by adducing proper evidence. In  addition to these various sums allowed to the  appellant by  way  of prior charges against the gross  profits  earned during the accounting year the Tribunal also allowed to  the appellant  Rs. 2.50 lacs by way of provision  for  debenture redemption  fund.  The claim of the appellant was for a  sum of  Rs.  3.50  lacs  for the same and  it  arose  under  the following   circumstances.    The   appellant   had   issued debentures  of the value of Rs. 30 lacs in the year  1942-43 and  they  were redeemable in the year 1962-63.   No  annual provision  had been made from profits for redemption of  the same  inasmuch as until the year 1949 the appellant was  not working   at  a  profit.   Such  provision  was  made   only thereafter.   For  the year 1950-51, the  appellant  made  a provision for Rs. 75,000 for debenture redemption fund,  for 1951.52, Rs. 1,50,000, for 1952-53 Rs. 1,50,000, for 1953-54 Rs.  75,000  and  further  provision  had  to  be  made  for redemption  of debentures in a sum of Rs. 24,50,000.  In  so far  as  7  more years were left before  the  due  date  for redemption the appellant claimed Rs. 3,50,000 as the  annual sum  to  be  set apart, though as a matter of  fact  in  the balance-sheet only a provision of Rs. 2,50,000 had been made by  it  for  debenture  redemption  reserve.   The  Tribunal pointed  out  that when the appellant had  in  its  accounts appropriated Rs. 2,50,000 for the debenture redemption  fund the  claim  to have Rs. 3,50,000 for the purposes  of  bonus formula  was  clearly  untenable.  It  however  was  of  the opinion  that  a reasonable provision  for  redemption  fund should be allowed as a prior charge and actually allowed the sum of Rs. 2,50,000 which had been actually provided for the purpose  in the balance-sheet, negativing the contention  of the  respondents  that no provision should  be  allowed  for debenture redemption fund in the bonus formula. 960 We are of the opinion that the Tribunal was not justified in allowing the sum of Rs. 2,50,000/- for debenture  redemption fund as a prior charge in the bonus calculations.  The  Full Bench  Formula does not envisage any such prior charge.   It is  no  doubt true that capital is shy and it would  not  be practicable  for  the  industrial  concern  to  raise  large amounts by way of fresh debentures when they become due.  It is also true that the debentures do not stand on a par  with other debts of a concern because the debentureholders  would in a conceivable situation be able to enforce their security by  bringing  the industry to a stand-still by  taking  over charge of the whole concern.  It would therefore appear that the  redemption  of  these debentures would be  one  of  the primary  obligations  of  the  industrial  concern  and  due provision has of necessity to be made for redemption thereof

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on  due  date.   This  however does not  mean  that  in  the calculations of the distributable surplus the provision  for such  redemption  should  be given the  status  of  a  prior charge,  though  of  course that would be  a  relevant  con- sideration while distributing the available surplus  between the various interests entitled thereto.  We are therefore of opinion  that  the  Tribunal  was  wrong  in  allowing   Rs. 2,50,000/- as a prior charge in the bonus calculations. This  disposes of all the contentions which have been  urged on behalf of both the parties and calculating the figure  on that basis we arrive atthe following                                         Rs. in lacs. Gross Profit as per Tribudal’s calculations         36.21 Less: Notional Normal Depreciation                    6.23                                                29.98 Less: Tax @ 7 as. in a rupee                          11.55                                                18.43 Less:     6% return on ordinary share capital and 5% on preference share capital                     4.30                                                14.13 961 Less:     4% Return on reserves used as working capital:                      7,42,139              29                  + 41,81,196              1.67                ---------------------                   49,23,335                    1.96                                            -------------                                                12.17 Less:Provision for Rehabilitation                      0.17                                             ------------      Available Surplus                                12.00 This would bring the available surplusfor distribution  to a sum of Rs. 12 lacs and this would be distributable amongst the shareholders, the company and the workmen concerned. It is not feasible to lay down any rigid formula as to  what the  proportion of such distribution amongst  these  various interests  should  be.   The shareholders  as  well  as  the company  would  both be naturally interested inter  alia  in providing the debenture redemption reserves as also  meeting the  needs  of  the industry  for  further  expansion.   The workmen would no doubt be interested in trying to bridge the gap  between  their actual wage and the living wage  to  the extent feasible.  This surplus of Rs. 12 lacs would have  to be  distributed amongst them having regard to the facts  and circumstances  of  the case, of course bearing in  mind  the various considerations indicated above. Before we arrive at the figure of the actual bonus which  it will  be  appropriate in the circumstances of this  case  to allow  to the workmen, we may advert to one  argument  which was pressed before us. on their behalf and that was that the bonus  calculations should not be made on the basis  of  the All-India figures which were adopted by the Tribunal but  on the basis of the actual amounts which the appellant had paid and  would  have to pay to the workmen  concerned.   It  was pointed out that the respondents here were only the  workmen in the Wadala Factory of the appellant.  The appellant  had, however, paid to the various workmen elsewhere as and by way of bonus sums varying between 4% and 29% of the basic  wages for  the year in question.  The sum of Rs.  1,23,138/-  only had been 121 962 paid in full and final settlement to the workmen in some  of the  factories  and the bonus calculations on  an  All-India basis  would thus work to the advantage of the appellant  in

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so  far as they would result in saving to the  appellant  of the  difference between the amounts to which  those  workmen would  be  entitled on the basis of  the  All-India  figures adopted  by  the Tribunal and the amounts actually  paid  to them   as   a   result  of   agreements,   conciliation   or adjudication.    It   was  therefore  contended   that   the calculations  should be made after taking into  account  the savings thus effected by the appellant and only a sum of Rs. 1,23,138  /- which was the actual sum paid to those  workmen should be taken into account and no more.  We are afraid, we cannot  accept  this  contention.  If  this  contention  was accepted  the respondents before us would have an  advantage over those workmen with whom settlements have been made  and would get larger amounts by way of bonus merely by reason of the fact that the appellant had managed to settle the claims of  those workmen at lesser figures.  If this contention  of the  respondents was pushed to its logical extent  it  would also  mean  that in the event of the non-fulfilment  of  the conditions  imposed  by the Tribunal in the award  of  bonus herein  bringing in savings in the hands of  the  appellant, the respondents would be entitled to take advantage of those savings also and should be awarded larger amounts by way  of bonus,  which  would really be the result of  the  claimants entitled  to  the  same  not  receiving  it  under   certain circumstances-an  event which would be purely an  extraneous one and unconnected with the contribution of the respondents towards  the  gross profits earned by  the  appellant.   The Tribunal  was, therefore, right in calculating the bonus  on an All-India basis. By our order dated April 12, 1957, the appellant was ordered to  pay to the respondents within a fortnight from the  date thereof bonus for the year 1954-55 equivalent to two months’ basic wages; that amount has already been paid and works out at Rs. 3.39 lacs on an All-India basis. The  only question which therefore survives is what  further bonus, if any, would the respondents be entitled 963 to  from the distributable surplus of Rs. 12 lacs.  The  sum of  Rs.  3.50 lacs required for building  up  the  debenture redemption   reserve  is  an  all-engrossing  need  of   the appellant  and that is a factor which must of  necessity  be taken  into  consideration while arriving  at  the  ultimate figure,   particularly  because  such  redemption   of   the debentures  would  enure  not only for the  benefit  of  the Company  and  its  shareholders  but  also  of  the  workmen employed therein.  Having regard to all the circumstances of the case, we feel that an award of four months’ basic  wages as  aggregate bonus for the year 1954-55 (which by  the  way was  the bonus awarded for the previous year  1953-54  also) would  give a fair share to the labour in the  distributable surplus,  leaving  to  the shareholders and  the  company  a balance  of  Rs. 5.22 lacs to be utilised by them  not  only towards building up of the debenture redemption reserve  but also for building up other reserves, which would be utilised for  various other purposes indicated above.  The  appellant would no doubt get also the refund of the income-tax on  the bonus  payments  made  by it.  This  rebate  would  also  go towards  the fulfilment of the very same  objectives,  which would  ultimately enure both for the benefit of the  capital as well as labour.  We  have,  therefore,  come. to  the  conclusion  that  the appellant should pay to the respondents, in addition to  the two months’ basic wages already paid to them in pursuance of this  Court’s order dated April 12, 1957, an additional  sum equivalent  to two months’ basic wages by way of  bonus  for

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the year 1954-55 subject to the same conditions as were laid down in the award of the Tribunal above referred to, all the dates  mentioned therein being calculated from the  date  of this judgment. We  accordingly  allow the appeal, modify the award  of  the Industrial  Tribunal to the extent mentioned above,  but  in the circumstances of the case we make no order as to  costs, each party bearing and paying its own costs thereof. Appeal allowed. 964