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PETITIONER: THE MANAGEMENT OF MARINA HOTEL

       Vs.

RESPONDENT: THE WOREMEN

DATE OF JUDGMENT: 04/08/1961

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GUPTA, K.C. DAS

CITATION:  1962 AIR 1258            1962 SCR  (3)   1  CITATOR INFO :  D          1970 SC 245  (9)  D          1972 SC1738  (32)

ACT: Industrial   Dispute-Bonus-Hotel  workmen  getting   service charges  and  tips-If disentitled to  get  bonus-Casual-cum- sickness    leave-Amount    of   leave-Delhi    Shops    and Establishments Act, 1954 (Delhi 7 of 1954 ), s. 22.

HEADNOTE: The  award  made by the Industrial Tribunal,  to  which  the dispute between the appellant, a hotel in new Delhi, and its workmen was referred, was challenged by the appellant on the grounds  inter alia (1) that the workmen got a share in  the service charges and also some amount by way of tips from the customers and so no bonus could be awarded to them, and  (2) that  the  Tribunal was not justified in  awarding  15  days casual-cum-sickness leave in view of the fact that s. 22  of the Delhi Shops and Establishments Act, 1954, provided  only for  a  maximum  of  12 days for such  leave.   It  was  not disputed   that  the  workmen  in  the  present   case   had contributed  to  the  earning of profits for  the  years  in question,  that on a consideration of the wages paid to  the workmen by the appellant there was a wide gap between  their existing  wages and the living wages, and that  the  amounts received  through  the distribution of service  charges  and tips  were quite inadequate to bring the wages to the  level of a living wage. Held, that it is well-settled that bonus is paid to  workmen out of the available surplus of profits in order to fill  in the  gap  between  the existing wage and  the  living  wage, provided that the workmen have contributed to the earning of profits,  and  that, in the present case, if  there  was  an available  surplus  of profits in accordance with  the  Full Bench formula, the workmen would be entitled to bonus. Voltas  Limited  v.  ItS Workmen, (1961) 3  S.  C.  R.  167, distinguished. Held, further, that the Tribunal was in error in awarding 15 days’  casual-cum-sickness leave contrary to the  provisions of s.     22  of  the Delhi Shops  and  Establishments  Act, 1954,  and  that the amount of leave must be reduced  to  12 days as provided in the Act.

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2 Messrs  Dalmia Cement (Bharat) Limited, New Delhi  v.  Their workmen, A. 1. R. 1960 S. C. 413, followed.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 393 of 1960. Appeal  by special leave from the Award dated July 1,  1958, of the Industrial Tribunal, Delhi, in I.D. No. 99 of 1958. S. P. Varma, for the appellant. Janardan Sharma, for the respondent. 1961.  August 4. The Judgment of the Court was delivered by WANCHOO,  J  -This is an appeal by leave  in  an  industrial matter..  There  was a between the  appellant,  namely,  the Marina  New Delhi, and its workmen, which was  referred  for adjudication to the Industrial Tribunal, Delhi.  The matters in  dispute comprised a number of items; but in the  present appeal we are concerned only with the following 1.    Bonus for the years 1953-54 and  1954-55. 2.    Leave.. 3.   Provident Fund. 4.   Scales of Pay. 5.   Deamess Allowance. We shallideal with these points one by one.  Bonus. The  first  contention of the appellant in  this  regard  is that, as the workmen get a share in the service-charges  and also some amount by way of tips from the customers, no bonus can  be  awarded to them.  Reliance in  this  connection  is placed on the observations of this Court in Voltas.  Limited v. Its Workmen(1),where in dealing with salesmen it (1)  [1961] 3 S. C. R. 167, 3 was  said that salesmen being paid commission on  sales  had already  taken a share in the profits of the appellant on  a fair  basis  and therefore there was  no  justification  for granting them further bonus out of the available surplus  of profits.   The  contention  is  that  the  workmen  of   the appellant   also  get  a  share  in  the  profits   on   the distribution  of  service charges among them  and  therefore they  are  not entitled to any further bonus.   Now  it  if; wellspring  that  bonus  is  paid  to  workmen  out  of  the available  surplus  of profits in order to fill in  the  gap between  the existing wage and the living wage provided  the workmen  have contributed to the earning of profits.  It  is not  disputed  that  the workmen in the  present  case  have contributed  to the earning of the profits ; nor can  it  be disputed on a consideration of the wages paid to the workmen by  the  appellant that there is a wide  gap  between  their existing wage and the living wage.  In the circumstances, if there is an available surplus of profits in accordance  with the  Full  Bench  formula, the  workmen  would  be  normally entitled to bonus. The  appellant, as we have already mentioned, relies on  the observations  of  this Court in the case of  Voltas  Limited (1).   However,  we are of opinion that  those  observations cannot help the appellant.  It cannot be disputed that  even taking  into  account  the amount received  by  the  workmen through  distribution of service charges and tips, there  is still  a  gap between their existing income and  the  living wage.  The observations on which reliance is being placed on behalf  of  the appellant were made in a  different  context altogether.   When dealing with salesmen of  Voltas  Limited (1)  this Court pointed out that the commission of  salesmen on  an average worked out to about Rs. 1,000 per  month  and

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therefore  their total emoluments were quite  adequate.   It was in that context that the observa- (1) [1961] S.S. C.R.167. 4 tions  in  question on which reliance has been  placed  were made.: - Besides, salesmen in that case were a small part of the  total number of workmen of Voltas Limited and that  was the reason why this Court observed that as the salesmen  had already  taken a share in the profits of the appellant on  a fair  basis  as contrasted with the majority  of  the  other workmen there was no justification for granting them further bonus  out  of  the  available  surplus. The  observations therefore on which reliance has been placed were conditioned by two circumstances, namely, (i) that salesmen in that case were  getting adequate wages after taking into  account  the commission  received  by them, and (ii) that  salesmen  were only  a small part of the workmen in that case and  as  they bad already partaken of a share in the profits they were not entitled to any further share from the available surplus  to the  detriment  of the other workmen who  formed  the  large ajority.   Neither  of  these two conditions  apply  in  the present case.  The evidence shows that the amounts  received through  the  distribution of service charges and  tips  are quite  inadequate  to bring the wages to the  level  of  a living  wage.   Besides, all the workmen  of  the  appellant share in the distribution of service charges and thus  stand on the same footing so far as the distribution of bonus from the available surplus, if any, is concerned.  The  appellant cannot therefore take advantage of the observations made  in the case of Voltas Limited (1) torn out of their context. Coming  now to the Available surplus for the  year  1953-54, the Tribunal found that the net profits were RE;. 98,343 and was  of opinion that taking into account the  prior  charges three months’ bonus would be justified as the monthly  wage- bill was about Rs. 5,500 per month.  The Tribunal,  however, did  not  make  a chart in accordance with  the  Full  Bench formula  to work out the available surplus., It  said  that, even making allowance for 5 the  prior charges there was a substantial surplus to  allow payment  of  three months’ bonus.  The main  attack  of  the appellant  is directed to this infirmity in  the  Tribunal’s judgment. It appears, however, that the appellant also.  did not submit a chart showing the available surplus,  according to its calculations as is usually done in all such cases  by an  employer.  The reason for this apparently was  that  the balance-sheet  and  the  profit  and  loss  account  of  the appellant are maintained in a rather peculiar way from which it  was  not easy to work out the figures according  to  the Full  Bench formula.  There is no doubt, however,  that  the net profits were above Rs. 98,000 in 1953-54.   Depreciation was already provided for in the profit and loss account  and as  the Tribunal had taken into account net profits  it  was not necessary to allow any further depreciation, for the net profits had been arrived at after charging depreciation.  As for  rehabilitation it seems to us that there is hardly  any scope  for rehabilitation in the. present case, for we  find from   the  profit  and  loss  account  that   repairs   and replacements  which  would include ’what  is  understood  as rehabilitation are charged ,as expenses.  As for income-tax, it  appears  that  the  rate was 45  per  centuries  in  the relevant year.  The income-tax would thus work out to  about Rs.  44,000  leaving a balance of about  Rs.  54,000.   Then comes 6 per centum return on paid-up capital. , The balance- sheet  shows  RE;.  6,000 as paid-up capital  on  which  the

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appellant  would be entitled to Rs. 360.  But, it  has  been urged  before  us that the business was  purchased  for  Rs. 60,000  and that should also be treated as capital.   It  is enough  to  say  that even if this is a fact  there  was  no evidence of it before the Tribunal and the balancesheet  did not  show this figure as capital.. In the circumstances  the appellant  cannot  in the absence of  proof claim  that  the capital  on which 6per centum interest should be allowed  is Rs. 60,000, It will, 6 however,  be  open  to  the  appellant  to  prove  this   in subsequent  years if it can.  The last of the prior  charges is  return  on working capital.  On that also there  was  no evidence  worth  the  name as to what  amount  was  used  as working  capital.  In the circumstances the award  of  three months’ bonus cannot possibly be challenged before us. We asked the appellant to furnish a. chart before us showing what  was  the surplus according to  the  appellant’s  case. That  chart  has  been furnished and shows  an  ’  available surplus of Rs. 28,550.  The respondents dispute a number  of items  in that chart ’and perhaps rightly.  But even  if  we were to accept the figure of available surplus for this year at  Rs. 28,550 the award of three months’ bonus which  would come to Rs. 16,500 would not be unjustified, particularly as Rs.  8,100 would come back to the appellant out of  that  as rebate  on  income-tax.   In the  circumstances  we  are  of opinion  that the order of the Tribunal in respect of  bonus for the year_153-54 is correct. Then  we  come  to  the year 1954-55.   For  that  year  the appellant  did  not even produce the  balancesheet  and  the profit  and loss account.  It was, however, conceded  before the  Tribunal  that  there were profit,%  in  1954-55.   The Tribunal  therefore  held that there was  enough  profit  to warrant  the payment of three months’ wages as bonus.   This view of the Tribunal is being attacked and it is urged  that in  the  absence  of  figures it was  not  correct  for  the Tribunal to award any bonus for this year.  We consider that the  figures are not available because of the fault  of  the appellant.   We find that the balance-sheet and  the  profit and  loss  account  for the year 1956-57  were  produced  in another connection.  It is obvious that the accounts for the year  1954-55  were  available.  The fault  for  their  non- production obviously therefore, lies on the appellant.   We find,  however,  from am affidavit filed on  behalf  of  the respondents in 7 this court in connection with the stay application that  the profits for the year 1954-55 were over Rs. 85,000.  We asked the  appellant to produce the accounts for the year  1954-55 and  the  original accounts were brought and  shown  to  us. These accounts confirm the figure of profit mentioned in the affidavit  filed on behalf of the respondents.   We  further find that in the profit and loss account for the year  1953- 54, there is an item of over Rs. 13,000 for refund of  water charges  which  has  been  claimed  as  extraneous   ’income unrelated  to  the  efforts of labour.  If  this  amount  is deducted from the profit of 1953-54 the profit in that  year would  ,also come to Rs. 85,000 or so.  Thus the profits  in the  year 1954-55 appear to be more or less the same  as  in the  year 1953-54.  In the circumstances there is no  reason to interfere with the award of three months’ wages as  bonus for the year 1954-55. Leave. The  contention of the appellant in this connection is  that the Tribunal was not justified in awarding 15 days’  casual-

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cum-sickness leave in view of the provisions of s.22 of  the Delhi  Shops and Establishments Act, (No.  VlI of 1954),  as that  provides  for a maximum of 12  days  for  sicknesscum- casual  leave.  This matter was considered by this Court  in Mesrs  Dalmia  Cement (Bharat) Limited New  Delhi  v.  Their Workmen  and  another (1) and it was pointed  out  that  the position  with regard to sickness-cum-casual leave was  that s.22 fixed a maximum of 12 days total leave for sickness or casual  leave  with full wages, and it was not open  to  the Tribunal  to  disregard  this peremptory  direction  of  the Legislature.   In  this case the Tribunal was aware  of  The provisions  of s. 22 of the Delhi Shops  and  Establishments Act;  but  in spite of: that ’it decided to  grant  15  days sickness-cum-casual leave instead of 12 days, which ’was the maximum (1) A.I.R.  [1960]  S. C. 413 8 provided under the Act.  This in our opinion was illegal and the  amount of casual-cum-sickness leave must be reduced  to 12 days as provided in the Act. It  was urged on behalf of the respondents that the  kitchen of  the  hotel would be a factory and the  Delhi  Shops  and Establishments  Act would not apply to the kitchen staff  at any rate.  This point however was not raised in the written- statement  where the respondents’ case was that the Act  did not  debar the workmen from demanding more leave  than  what was  provided therein.  It is not in dispute that the  Delhi Shops and Establishments Act applies to this hotel.  Whether the  kitchen of the hotel would be a factory and  thus  the, staff  working  in  the kitchen would  be  exempt  from  the operation  of  the Delhi Shops and Establishments Act  is  a question  which cannot be decided in the present  appeal  in the absence of facts.  ID the circumstances the order of the Tribunal  with  respect  to  casual-cum-sickness  leave   is modified as indicated above. Provident Fund. Learned  counsel  for  the appellant  has  stated  that  the Employees’  Provident  Funds Act (NO.XIX of 1952)  has  been extended  to the hotel industry and in the circumstances  he is not pressing the appeal so far as it relates to provident fund,  as the provisions in the award relating to  provident fund are in accordance with the provisions of the Employees’ Provident Funds Act. Scales of Pay. The  workmen  had demanded certain scales of  pay;  but  the Tribunal  has  fixed scales which are  somewhat  lower  than those demanded by the workmen.  The Tribunal was of  opinion that  the  scale’s fixed by it were in accordance  with  the scales  prevailing  in  some hotels in the  Delhi  area;  in particular it referred to the scales in the Cecil and  Grand Hotels, which are more or less similar.  The 9 appellant, however, relies on the statement of Lakshmi Chand Narula, Hony.  Secretary of the Delhi Caterers’ Association, who  stated  that the Marina Hotel was in B  category.   Our attention  was also drawn to the statement of D.  D.  Singh, Secretary, Hotel Workers’ Union on behalf of the respondents who  stated  that  the workers placed the  Marina  Hotel  in category  A,  which included almost all the  hotels  in  New Delhi and Civil Lines Delhi.  The Grand and Cecil Hotels are in  Civil Lines Delhi and Singh’s contention was  that  they were comparable, though he did not say so in so many  words. The  appellant  contends that as the Marina Hotel  is  in  B category,  according to Narula, it cannot be  compared  with the  Grand and Cecil Hotels.  The evidence of  Shri  Narula,

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however, does not show in which category the Cecil and Grand Hotels  are.  But on the whole Singh’s evidence  shows  that the  Marina Hotel is in the same category as the  Cecil  and Grand Hotels.  In any case in this state of the evidence, we see no reason to disregard the view of the Tribunal that the Marina Hotel was not inferior to the Cecil and Grand  Hotels in  any  way.   If that is so, scales of pay  fixed  by  the Tribunal which are more or less similar to the scales in the Cecil  and Grand Hotels cannot be objected to; nor  are  the scales  intrinsically so high as to call for reduction.   We also  see  no reason to disregard the view of  the  Tribunal that the appellant has the capacity to pay the scales of pay fixed  by it.  It is true that profits have gone down  since 1954-55.   Even  so  there is no reason  to  hold  that  the ’Tribunal was wrong in the view that the hotel would be able to   bear  the  increase  in  the  wage-bill  due   to   the introduction  of these scales of pay.  We therefore  see  no reason to interfere with the scales fixed by the Tribunal. Dearness Allowance. The dearness allowance fixed by the Tribunal 10 is  in accordance with the present scale.  The workmen  were demanding  Rs.  35, but the Tribunal has fixed  Rs.  20  per month and has ’provided that where a workman takes his meals at the hotel the amount will be reduced by Rs. 15; but where he lives in accommodation provided by the hotel but does not take  his meals there the amount will be reduced by  Rs.  5; further  where  he’ both lives and takes his  meals  in  the hotel  there will be no dearness allowance paid to him.   We see  no  reason  to  disagree with the  view  taken  by  the Tribunal  in  this  behalf,  particularly  when  it  is   in accordance with what was prevalent in the hotel from  before according to the award of Shri Dulat of May 17, 1950. The appeal therefore fails except in the matter   of     the modification in the casual- cum-sickness     leave        as indicated above and it is hereby dismissed   with costs. Appeal dismissed except for slight modification.