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PETITIONER: THE WORKMEN OF H.M.T. & ANR.

       Vs.

RESPONDENT: THE PRESIDING OFFICER, NATIONALTRIBUNAL, CALCUTTA & OTHERS

DATE OF JUDGMENT03/04/1973

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. ALAGIRISWAMI, A. DUA, I.D.

CITATION:  1973 AIR 2300            1973 SCR  (3) 850  1973 SCC  (2) 277

ACT: Payment of Bonus Act, 1964-Payment of minimum bonus under s. 10  whether  subject to provisions of s. 16-Where  s.  16(1) applies  minimum  bonus under s.  10  not  payable-Different establishments  of H.M.T. treated separately each  having  a separate balance-sheet and profit and loss account-Exemption under s. 16(1) must be allowed.

HEADNOTE: Unit No. IV of the Hindustan Machine Tools, a public  sector undertaking, was started at Kalamassery, in Kerala in  1963. Production and sale at this Unit started in 1965-66.  In  an industrial  dispute  referred to the  National  Tribunal  at Calcutta  the workmen of Unit No. IV claimed bonus  for  the years  19  3-64 to 1966-67 at the same rate as was  paid  in Units  Nos. 1 and 11 and the Watch Factory of the H.M.T.  at Bangalore.   It was contended by the workmen of Unit No.  IV that  bonus  was payable on the basis  of  the  consclidated accounts  of  all  the  Units of  the  H.M.T.  The  National Tribunal held that bonus for the year 1963-64 was payable to the workmen of Unit No. IV at the same rate as in Units Nos. 1  and 11 and the Watch Factory at Bangalore, but  no  bonus were  payable  to them for the years  1964-65  1966-67.   In appeal  to this Court by special leave it wits contended  on behalf  of the workmen of Unit No. IV (appellants) (i)  that minimum  bonus was payable to the appellants for  the  years 1964-65  to  1966-67, Under s., 10 of the Payment  of  Bonus Act,  1964  and in applying s. 10 the provisions  of  s.  16 could not be taken into consideration: (ii) that the  H.M.T. had  in fact maintained a consolidated account for  all  its Units  and the claim of the management that separate  profit and loss accounts were maintained was falsely made to defeat the rights of the workmen.  The management, by leave of  the Court challenged the finding of the Tribunal that bonus  was payable to the appellants for the year 1963-64. HELD  :  (i)  The Tribunal was right  in  holding  that  the appellants were not entitled to any bonus for the year 1964- 65 to 1966-67. (a)  Though section 10 has not been made subject to  section 16  the two provisions will have to be read harmoniously  so as  to  give effect to the purpose of the Act.   Section  10

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will apply to all those units, which are otherwise bound  to pay  bonus, irrespective of the fact whether the units  make profit  or loss.  Section 16 has to be read as an  exception to section 10. Section 16(1) gives a total exemption to the  establishments in the circumstances mentioned therein from payment of bonus Which  includes  the minimum bonus also.  When  the  section says  that an employee of the establishment referred  to  in section  16 shall be entitled "to be paid bonus  under  this Act" only if the conditions mentioned therein are satisfied, it  is idle to contend that, notwithstanding  the  exemption granted  under  section 16, the  establishment  referred  to therein is sill bound to pay minimum bonus. If  section  16(1) applies, section 10 will not  entitle  an employee  to  get even the minimum bonus under  section  10. Therefore the contention of  851 the  appellants that in any event, the minimum  bonus  under section  10’  ought  to  have been  awarded,  could  not  be accepted.. [861 E-H] Alloy  Steel  Project  v. The Workmen, 1971  3  S.C.R.  629, referred to. (b)  In  this  case Units 1 and 11 alone  have  always  been treated  together  ,for the computation of bonus.   All  the other  three Units and the Watch Factory at  Bangalore  have each  been  treated  separately and each of  them  has  been having a separate balance-sheet and profit and loss account. This  is the evidence on record which has been  accepted  by the  Tribunal.   There  was no reason to  differ  from  this finding.  As Unit No. IV is a different establishment coming under the proviso and not falling under the exception to the proviso  to section 3, the main part of section 3  will  not assist  the  appellants.  Therefore  the  exemption  claimed under section 16(1) by the management for 1964-65 to,  1966- 67 in respect of Unit No. IV, has been correctly  acceptedly the Tribunal, [863E-G] Delhi  Cloth & General Mills Co. Ltd. v. Workmen,  [1972]  1 S.C.R. 594, referred to. (ii)  The  Tribunal  missed certain items  of  evidence  and proceeded on the wrong assumption that profit bonus for  the year  1963-64  was paid to the workmen of the Units  on  the basis of the Full Bench Formula. Hence the direction of  the Tribunal that profit bonus was to be paid to Unit No. IV  as was  paid to the Units at Bangalore was  clearly  erroneous. Even  otherwise  the finding of the  Tribunal-that  all  the Units Were treated as part of one establishment for purposes of  bonus for the year 1963-64 was also erroneous.  For  the above reason,. the direction of the Tribunal for payment  of bonus for the year 1963-64 to Unit No. IV must be set aside. [865E]

JUDGMENT: CIVIL  APPELLATE JURISDICTION             Civil Appeal  ’No. 389 of 1970. Appeal by special leave from the award dated April, 16, 1969 of  the  National Tribunal, Calcutta in Ref.  No.  NIT-6  of 1967 published in the Gazette of India dated May 10, 1969. N. Sreekantan Nair, appellant No. 1 in person. Urmila Kapoor and K. Bansal for appellant No. 2. G. B. Pai, P. P. Bopanna, K. N. Bhatt and M. M. Kshatriya,. for respondents Nos. 2 to 7. Ambrish Kumar and M. V. Goswami, for respondent No. 1. The Judgment of the Court was delivered by

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VAIDIALINGAM, J. This appeal by special leave by the workmen of  the Hindustan Machine Tools, Unit, IV,  Kalamassery,  is directed  against  the award dated April 16, 1969,  of  the, National  Tribunal  at Calcutta in Reference No.  NIT  6  of 1967,  holding that the appellants are not entitled  to  any bonus for the years.. 1964-65 to 1966-67. 852 By order dated October 17, 1967, the Central Government made a reference for adjudication of the disputes to the National ’Tribunal in the following manner :               "Whereas the Central Government is of  opinion               that an industrial dispute exists between  the               employers  in  respect of  the  establishments               specified  in Schedule I and their workmen  in               respect. of the matters specified in  Schedule               11 hereto annexed and that the said dispute is               of    such    a   nature    that    industrial               establishments situated in more than one State               are  likely to be interested in,  or  affected               by, such dispute;               And,  whereas  the Central  Government  is  of               opinion   ’that   the   dispute   should    be               adjudicated by a National ’Tribunal;               And,  whereas  the Central  Government  is  of               opinion that the said dispute is of  such  a               nature  that  the Hindustan Machine  Tools  it               Pinjore  and  the Hindustan Machine  Tools  at               Hyderabad  are likely to be interested in,  or               affected by, such disputes.               Now,  therefore,  in exercise  of  the  powers               conferred by section 7B, and sub-section  (1A)               and  5  of  section  10,  of  the   Industrial               Disputes  Act, 1947 (14 of 1947), the  Central               Government   hereby  constitutes  a   National               Tribunal of Calcutta, of which Shri S. K.  Sen               shall  be ’the Presiding Officer,  and  refers               the   said  disputes  to  the  said   National               Tribunal for adjudication and includes in that               reference,  the  Hindustan  Machine  Tools  at               Pinjore  and  the Hindustan Machine  Tools  at               Hyderabad.                                 SCHEDULEI               (1)   Hindustan Machine Tools, I, Bangalore.               (2)   Hindustan Machine Tools II, Bangalore.               (3)   Hindustan     Machine,     Tools     IV,               Kalamassery, Kerala.                         SCHEDULEII               (1)   Whether the demand of the workmen in the               Hindustan Machine Tools 1 and 11 at  Bangalore               for  payment  of bonus at the rate of  20  per               cent  of their salary for the year 1966-67  is               justified?   If not, to what quantum of  bonus               are they entitled ?               (2)   Whether  the  workmen of  the  Hindustan               Machine Tools at Kalamassery, Pinjode and                853               Hyderabad are entitled to any bonus and if so,               what should be the quantum of such bonus ?               (3)   Whether the demand of the workmen of the               Hindustan Machine Tools 1 and 11 of  Bangalore               and  of  the  Hindustan Machine  Tools  IV  at               Kalamassery  that  the bonus  should  be  cal-               culated on the basis of a consolidated  Profit               and  Loss  Account for all the units  and  all               activities and not on the basis of Profit  and

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             Loss   Account  of  the  separate  units   and               separate activities is justified ?" Although  in Schedule I of the order of reference only  the, Units  at  Bangalore  and  Kalamassery  were  referred   to, nevertheless,  copies  of  the reference were  sent  by  the Central  Government  to the labour unions of  the  Hindustan Machine  Tools  Limited, Unit No. III  at  Pinjore  (Haryana State)  and  Unit No. V at Hyderabpd as also to  the  H.M.T. Watch  Factory  at Bangalore.  The unions  representing  the workmen  of the five Units as well as the Watch Factory  had filed   statements  before  the  National   Tribunal.    The managements   of  these  different  Units  had  also   filed statements opposing the claims of the unions. Before  the  proceedings commenced,  the  National  Tribunal appears  to  have felt certain  difficulties  regarding  the scope  of the reference.  In respect of item 1  of  Schedule 11,  the  Tribunal  felt  a doubt  whether  it  should  also consider the question of bonus for any other year in respect of Units 1 and 11 at Bangalore.  Similarly the Tribunal felt a  doubt  as to what was the particular year for  which  the claim for bonus is to be considered under item 2 of Schedule II.  This doubt arose because no year had been mentioned  in the  reference under this item.  For the purpose of  getting clarification,  the  Tribunal invited the views of  all  the unions  as well as the management.  All parties agreed  that when the reference was ambiguous or doubtful,. the scope  of the  reference  can be gathered from the  pleadings  of  the parties.   Accepting  the  agreement  of  the  parties,  the Tribunal  found from the pleadings that the workmen  of  the Hindustan  Machine Tools, Units 1 and 11 at  Bangalore,  had been  paid bonus at the rate of’ 20 per cent for  the  years 1964-65  and 1965-66.  Therefore, it held that the claim  of these  two  Units  under item I of Schedule  II  has  to  be considered only for the year 1966-67.  Similarly in  respect of  item  2 of Schedule II of the  reference,  the  Tribunal found  that the workmen of Unit No. III at  Pinjore  claimed bonus  for  the years 1963-64 and 1964-65 according  to  the Full  Bench  Formula and for the years 1965-66  and  1966-67 under  the  provisions  of the Payment of  Bonus  Act,  1965 (hereinafter  to be referred to as the Act).  Similarly  the workmen of Unit No. IV’ 854 on  the  basis of bonus paid and payable  to  the  Bangalore workmen.   The  workmen of Unit No. Vat  Hyderabad  claimed. bonus  at  20 per cent for each of the  years,  1965-66  and 1966-67.  The workmen of the Watch Factory, who were getting bonus  at the maximum rate of 20 per cent, did  not  require any  further  bonus to be paid.  But that-Unit took  up  the position that the contention of the various unions who  were claiming  annual  bonus  on the basis  of  the  consolidated balance  sheets  and  profit and loss  accounts,  should  be rejected. Having crystallised the actual scope of the reference in the manner  indicated above, the Tribunal proceeded to  consider the  questions that arose for consideration.  At this  stage it  may  be  stated  that the workmen  of  Unit  No.  IV  at Kalamassery, the appellant before us, claimed bonus for  the year  1963-64  and ,onwards on the basis of bonus  paid  and payable  to the Bangalore workmen.  It must also  be  stated that  the  claim of the appellants, as well as that  of  the workmen of Units Nos.  1 and 11 at Bangalore was for payment of bonus on the consolidated profit and loss account of  all the units of the Hindustan Machine Tools Limited situated in Bangalore, Pinjore, Kalamassery and Hyderabad as well as  of the Watch Factory.

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In respect of item 1 of Schedule 11, the Tribunal held  that the workmen of Units Nos. 1 and 11 at Bangalore are entitled only  to the minimum bonus at 4 per cent under the Act  and that their claim for payment at 20 per cent of their  salary for  the  year  1966-67 has to be  rejected.   The  Tribunal answered items Nos. 2 and 3 of Schedule 11 as follows :-               My answer to item No. (2) is               The workmen of the Hindustan Machine Tools  at               Kalamassery  and Pinjore are entitled  to  the               same  rate  of bonus as is paid to  the  Watch               Factory and HMT 1 & 11 workmen during the year               1963-64.  The factory ’at Hyderabad not having               been  started  by  March  31,  1964,   becomes               disentitled  to  the provisions of  pre  Bonus               Act.   Since  during the Bonus Act  period  by               virtue of the maintenance of separate accounts               no  branch or undertaking becomes entitled  to               the prosperity of, the company, the  Hyderabad               is not entitled to any bonus at all under  the               provisions of the Payment of Bonus Act.               My answer to item No. (3) is               The  demand  of the workmen of  the  Hindustan               Machine Tools Ltd.  1 & 11 at Bangalore and of               the               8 55               Hindustan  Machine  Tools  Ltd.   No.  IV   at               Kalamassery that bonus should be calculated on               the  basis  of consolidated  profit  and  loss               accounts  for  all the units and for  all  the               activities and not on the basis of the  profit               and  loss accounts of the separate  units  and               separate activities is justified, for the year               1963-64  only and not for the  years  1964-65,               1965-66 and 1966-67." It  may be stated that none of the workmen aggrieved by  one or  other or all the findings of the Tribunal on items 1,  2 and 3, excepting the workmen of Unit No. IV at  Kalamassery, have come up in appeal.  The net result of the above finding so  far  as  Unit  No.  IV  at  Kalamassery,  which  is  the appellant,  is that its workmen are eligible for  bonus  for the  year  1963-64 at the same rate of bonus that  has  been paid  to the workmen of the Watch Factory and Units Nos.   1 and 11 at Bangalore for the said year.  The workmen of  Unit No. IV are not entitled to claim bonus for the years 1964-65 to 1966-67 on the basis of the consolidated profit and  loss accounts of all the Units of the Hindustan Machine Tools but only  on the basis of the separate profit and  loss  account maintained  for Unit No. IV.  After a consideration  of  the evidence,  oral and documentary, the Tribunal held that  the said  Unit  was not entitled to any bonus at all  for  these three years. The  workmen of Unit No. IV challenged the  disallowance  of bonus  for  the  year 1964-65 to 1966-67.  At  the  time  of granting  special  leave, the counsel  for  the  management, respondents 2 to 7 herein, appears, to have represented that there  are certain findings recorded in the award which  are challenged   by   the   management.    In   view   of   this representation,  this Court passed an order on February  24, 1970,  permitting the management to bring to the  notice  of the  learned Judges hearing the appeal the various  findings which  the management proposes to challenge provided  notice has  been given to the workmen concerned by putting them  in the  statement  of  case.  Accordingly  the  management  has raised  in  its  statement  of  case,  by-  way  of   cross- objections,  its  grounds  of attack  on  certain  findings.

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Mainly two matters have been referred, namely--               (1)   the  finding of the Tribunal that  there               was  functional integrality of all  the  units               for  the  period  1963-64  and  the  award  in               consequence  of bonus to all the units at  the               rate  that has been paid to Units Nos.  1  and               11, and               (2)   the  statement made by the  Tribunal  in               paragraph  25  of the award about  payment  of               bonus to the Watch Factory employees. 856 These  points  have been pressed before us  by  the  learned counsel for the management. We  will first take up the point regarding the  disallowance of  bonus  for the years 1964-65 to 1966-67 arising  in  the union’s  appeal.  Mr. N. Sreekantan Nair, the  President  of the  Employees Federation, Appellant No. 1, has  argued  the case  in  person on behalf of the appellants.   It  must  be stated  to his credit that he has placed the case before  us as lucidly and candidly as possible.  According to Mr.  Nair the  finding of the Tribunal that the various units  of  the Hindustan  Machine  Tools Limited located in  the  different regions,   are   different  establishments  and   that   the management has been having separate profit and loss accounts for  each of these Units and that it is only on  that  basis that  bonus  will  have  to  be  calculated,  is  erroneous. According to Mr. Nair the management, with a view to  defeat the  legitimate rights of the workmen, have made  it  appear that there are separate profit and loss accounts  maintained for  each  of  the Units, while in reality  it  is  not  so. According  to  him it is only a camouflage  adopted  by  the management  to circumvent the provisions of the  Act.   Even assuming  that separate balance sheets and profit  and  loss accounts are maintained for each of the Units, he  contended that  in law the workmen of Unit No. IV at  Kalamassery  are entitled to the minimum bonus for these years under  section 10  of  the Act.  The reliance placed on section 16  by  the Tribunal for disallowing such a claim is erroneous. Mr.  G. B. Pai, learned counsel for the management,  on  the other  hand, has referred to the material provisions of  the Act  and  also to the evidence on record in support  of  his contention that the five Units in the different regions  and the  Watch Factory are all different entities  having  their own  profit  and  loss accounts  and  balance  sheets.   The management, according to the counsel, has not done any thing to defeat the provisions of the Act.  The counsel urged that the  view  of the Tribunal that Unit No. IV is  exempt  from payment of bonus for the years 1964-65 to 1966-67 based upon section  16,  is  correct.  Section  10  also,  the  counsel pointed out, will not help the appellants. The  history of the Hindustan Machine Tools Limited and  the establishment  of  the  five Units  at  Bangalore,  Pinjore, Kalamassery  and Hyderabad as well as of the  Watch  Factory has been very elaborately dealt with by the Tribunal in  the award.  Nobody has raised any dispute regarding the  various matters  referred to by the Tribunal.  Therefore, we do  not propose to cover the ground over again.  From the  evidence, the following facts are also clear :-               The H.M.T. was incorporated in 1953.  The Unit               1  in  Bangalore  was  started  in  1953,  but               production and                857               sale  began  in  1956-57.   No.  11  Unit   of               Bangalore   was   started  in   April,   1960.               Production and sale from that Unit started  in

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             May,  1961.   The  third Unit  at  Pinjore  in               Haryana was started in May, 1962.   Production               and  sale  at that Unit started  in  the  year               1964-65.   The  4th Unit  at  Kalamassery  was               started  in  July 1963.  Production  and  sale               started  at that Unit from 1965-66.   The  5th               Unit of the H.M.T. at Hyderabad was started in               May, 1964 and production and sale at that Unit               started  in  1966-67.  The  Watch  Factory  at               Bangalore  was started in September, 1961  and               indigenous  production of watches  started  in               1963. From  what is stated above, it will be seen that Unit No.  4 at Kalamassery, with which we are concerned, was started  in July, 1963.  But that Unit commenced production and sale  of its.  articles  only from 1965-66.  This  aspect  will  have considerable bearing when we consider the impact of  section 16.  It is now necessary to refer to the material provisions of the Act.  The Act by virtue of section 1(4) applies to  a factory  or  department in respect of  the  accounting  year commencing  on  any day in the year 1964 and in  respect  of every  subsequent accounting year.  Therefore, there can  be no controversy that the periods with which we are concerned, namely,  1964-65 to 1966-67, are governed by the  Act.   The terms  ’employees’,  ’employer’, ’establishment  in  private sector’ and ’establishment in public sector’ arc, defined in clauses 13, 14, 15 and 16 respectively of section 2. Section 3 dealing with establishments, so as to include departments, undertakings and branches, is as follows :-               Establishments    to   include    departments,               undertakings and               branches               3.    "Where  an  establishment  consists   of               different  departments or undertakings or  has               branches,  whether situated in the same  place               or  in different places, all such  departments               or  undertakings or branches shall be  treated               as  parts  of the same establishment  for  the               purpose of computation of bonus under this Act               Provided that where for any accounting year  a               separate  balance-sheet  and profit  and  loss               account are prepared and maintained in respect               of  any  such  department  or  undertaking  or               branch,  then, such department or  undertaking               or  branch  shall  be treated  as  a  separate               establishment  for the purpose of  computation               of bonus under this Act for that year,  unless               such department or undertaking or branch  was,               immediately  before the commencement  of  that               accounting year treated as part               7-L797 Sup.  CI/73               8 58               of  the  establishment  for  the  purpose   of               computation of bonus." Section  8  dealing  with the eligibility for  bonus  is  as follows               Eligibility for bonus               8.    "Every employee shall be entitled to  be               paid  by his employer in an  accounting  year,               bonus,  in ’accordance with the provisions  of               this  Act,  provided  he  has  worked  in  the               establishment for not less than thirty working               days in that year." Section  13 relating to proportionate reduction in bonus  in certain cases is as follows :-

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             Proportionate  reduction in bonus  in  certain               cases               13.   "Where  an employee has not  worked  for               all  the working days in any accounting  year,               the  minimum bonus of forty rupees or, as  the               case  may be, of twenty five rupees,  if  such               bonus  is  higher than four per cent,  of  his               salary  or wage for the days he has worked  in               that accounting year, shall be proportionately               reduced." Section  10  dealing  with payment  of  minimum  bonus  runs follows :-               Payment of minimum bonus               10.   "Subject to the provisions of sections 8               and  13, every employer shall be bound to  pay               to  every  employee in an  accounting  year  a               minimum bonus which shall be four per cent  of               the  salary  or wage earned  by  the  employee               during  the accounting year or  forty  rupees,               whichever is higher, whether there are profits               in the accounting year or not;               ’Provided  that  where such employee  has  not               completed   fifteen  years  of  age   at   the               beginning   of   the  accounting   year,   the               provisions  of this section shall have  effect               in  relation  to such employee as if  for  the               words  "forty rupees", the words  "twenty-five               rupees" were substituted." We have earlier referred to sections 3 and 13 as section  10 is  subject to those two sections.  Section 11 provides  for payment of the maximum bonus of 20 per cent of the salary or wages  in the circumstances mentioned therein.  Section  16, which contains  859 special provisions with respect to certain  establishments, is follows               Special  provisions  with respect  to  certain               establishments               16  (1) "Where an establishment is  newly  set               up,  whether before or after the  commencement               of   this   Act,   the   employees   of   such               establishment  shall  be entitled to  be  paid               bonus under this Act only--               (a)   from  the accounting year in  which  the               employer    derives    profit    from     such               establishment; or               (b)   from the sixth accounting year following               the  accounting  year in  which  the  employer               sells  the goods produced or  manufactured  by               him  or renders services, as the case may  be,               from such establishment,               whichever is earlier :               Provided  that in the case of any such  estab-               lishment the employees thereof shall not, save               as  otherwise  provided  in  section  33,   be               entitled  to be paid bonus under this  Act  in               respect  of any accounting year prior  to  the               accounting  year commencing on any day in  the               year 1964.               Explanation  I  :-For  the  purpose  of   this               section. an establishment shall not be  deemed               to  be  newly  set up merely by  reason  of  a               change  in its location, management,  name  or               ownership.               Explanation  II---For  the purpose  of  clause

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             (a),  an employer shall not be deemed to  have               derived   profit  in  any   accounting-   year               unless---               (a)   he  has made provision for  that  year’s               depreciation to which he is entitled under the               Income-tax  Act, or as the case may be,  under               the agricultural income-tax law; and               (b)   the  arrears  of such  depreciation  and               losses  incurred  by  him in  respect  of  the               establishment  for  the  previous   accounting               years  have  been fully set  off  against  his               profits.               Explanation  III.-For  the purpose  of  clause               (b),   sale   of   the   goods   produced   or               manufactured  during the course of  the  trial               run of any factory or of the prospecting stage               of  any  mine  or an oil-field  shall  not  be               :taken   into  consideration  and  where   any               question arises               860               with regard to such production or manufacture,               the  decision of the  appropriate  Government,               made  after  giving the parties  a  reasonable               opportunity of representing the case, shall be               final  and shall not be called in question  by               any court or other authority.               (2)   The provisions of sub-section (1) shall,               so far as may be, apply to new departments  or               undertakings  or branches set up  by  existing               establishments :               Provided that if an employer in relation to an               existing establishment consisting of different               departments   or  undertakings   or   branches               (whether  or not in the same industry) set  up               at different periods has, before the 29th May,               1965,  been paying bonus to the  employees  of               all   such  departments  or  undertakings   or               branches,  irrespective of the date  on  which               such  departments or undertakings or  branches               were set up, on the basis of the  consolidated               profits  computed  in  respect  of  all   such               departments or undertakings or branches, then,               such employer shall be liable to pay bonus  in               accordance with the provisions of this Act  to               the  employees  of  all  such  departments  or               undertakings  or  branches  (whether  set   up               before or after that date) on the basis of the               consolidated profits computed as aforesaid." The  only  other  section, which requires to  be  noted,  is section 20, which makes the Act applicable to establishments in  public sector in certain cases.  The  Hindustan  Machine Tools Ltd. is an establishment in public sector and there is no controversy that by virtue of section 20, the Act applies and it will be liable to pay bonus, if circumstances justify the same. We  will now consider the contention of Mr. Nair that  under section 10 the Unit No. IV is bound to pay the minimum bonus of 4 per cent for the years in question without reference to any   other  circumstance.   According  to  him   the   only provisions, which have to be considered for applying section 10,  are, as mentioned therein, the two provisions,  namely, sections  8 and 13.  The contention of Mr. Nair is that  the workmen of Unit No. IV satisfy the requirements of  sections 8 and 13 and, therefore, they are, as of right, entitled  to get  the  minimum  bonus.  Mr. Nair  further  urged  that  a

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reference  to  section 16 is absolutely immaterial  for  the purpose  of  considering the applicability  of  section  10. Section 16, according to him, will come into play only  when the workmen claim bonus at a rate higher than the minimum of 4  per  cent  provided  under  section  10.   This   aspect, according  to  him, has not been at all considered  by  this Court, when dealing with section 16 of the Act.  861 A reading of section 10, isolated from the other  provisions of the Act, may appear to lend support to the contention  of Mr. Nair that an employee, if he satisfies the  requirements of  sections 8 and 13, will be entitled to get  the  minimum bonus.   No  doubt,  Mr. G. B.  Pai,  learned  counsel,  has pointed  out that the employees of Unit No. IV do  not  even satisfy the requirements of sections 8 and 13.  That  apart, though  section 10 has not been made subject to section  16, in  our  opinion, the two provisions will have  to  be  read harmoniously so as to give effect to the purpose of the Act. Section  10  will  apply  to  all  those  units,  which  are otherwise  bound  to  pay bonus, irrespective  of  the  fact whether the units make profit or incur loss.  Section 16, in our  opinion, has to be read as an exception to section  10. In  particular, it will be noted that section  16(1),  after referring  to an establishment newly set up, whether  before or  after  the commencement of the Act,  states  that  ",the employees of such establishment shall be entitled to be paid bonus  under this Act only...... It cannot  be  controverted that  payment of even the minimum bonus under section 10  or bonus  upto the maximum of 20 per cent, as per  section  II, will  both  be  "payment  of  bonus  under  this  Act",   as contemplated  by  section 16.   Similarly,  eligibility  for bonus under section 8 "in accordance with the provisions  of this  Act",  can be related only to those  cases  where  the bonus  is payable either under section 10 or  under  section 11.    Section  16(1)  gives  a  total  exemption   to   the establishments in the circumstances mentioned therein  from payment of bonus which include the minimum bonus also.  When the  section  says that an employee  of  the  establishment referred  to  in section 16 shall be entitled  "to  be  paid bonus  under  this  Act" only if  the  conditions  mentioned therein are satisfied, it is idle to contend that,  notwith- standing  the  exemption  granted  under  section  16,   the establishment  referred to therein is still bound to  pay  a minimum  bonus.  No doubt that liability to pay the  minimum bonus,  at  any rate, will certainly attach  itself  to  the particular establishment, if one or other of the  conditions mentioned  in sub-clauses (a) or (b) of section  16(1)  come into play.  Under such circumstances, it will be open to  an employee to claim not only the minimum bonus but also  bonus at  a  higher  rate  upto the maximum of  20  per  cent,  if circumstances  permit.   Mr. Nair is no doubt right  in  his contention that section 10 has not been referred to by  this Court,  when dealing with section 16.  The reason  for  such non-consideration  is  because no such argument, as  is  now placed  before us, appears to have been raised  before  this Court.  Now that such a contention has been raised, we  have dealt  with it.  According to us, if section 16(1)  applies, however, hard the result may be, section 10 will not entitle an employee to get even the minimum bonus under section  10. Therefore, the, contention of 862 Mr.  Nair that in any event the minimum bonus under  section 10 should have been awarded, cannot be accepted. In this connection we may also refer to the decision of this Court  in  Alloy  Steel  Project  v.  The  Workmen(1).   The

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question  was  whether the Alloy Steel  Project,  which  was started in 1961 and went into production in 1964-65 and  did not  earn profits upto 1967-68, was liable to pay  bonus  at the  minimum  rate under the Act for the year  1965-66.   On behalf of the Alloy Steel Project, exemption from payment of bonus  was  claimed’ under section 16(1) of the Act  on  the ground  that  it was a new establishment and  had  not  made profits.  This Court held that the said Unit was not  liable to pay even the minimum bonus, as claimed by the workmen, in view  of the provisions of section 16(1) of the Act.  It  is no doubt true that there is no reference in this decision to section  10,  That  is why we have  stated  earlier  that  a contention,  similar to that advanced by Mr. Nair,  was  not raised before this Court. The  next question that arises for consideration is  whether the Tribunal was justified in rejecting the claim for  bonus for the years 1964-65 to 1966-67.  We have already  referred to  the fact that Unit No. IV was started in July 1963,  but production  and sale started only from 1965-66.   Therefore, the  question is whether it is liable to be treated as  part of the establishment of H.M.T. under section 3 or whether it is entitled to exemption from payment of bonus under section 16.  We have already extracted section 3. It is to be  noted that  the  principal  part  of  section  3  lays  down  that different  departments  or undertakings or  branches  of  an establishment  are  to  be treated as  parts  of,  the  same establishment for the purpose of computation of bonus  under the Act.  From the main provision an exception is carved out by  the  proviso  and there is a further  exception  to  the proviso itself.  The sum and substance of section 3 is that an  establishment  initially takes  in  all  establishments, undertakings and branches for the purpose of computation  of bonus.  But if, in respect of any department, undertaking or branch  separate balance sheet land profit and loss  account are  prepared and maintained for any accounting  year,  then for that particular year; computation of bonus shall. be  by treating  it as a separate establishment.  But this will  be subject  to a further exception that immediately before  the commencement of that accounting year, namely, the accounting year  in which a separate balance sheet and profit and  loss account  is  prepared and maintained, such a  department  or undertaking  or branch has not been treated as part  of  the establishment  for the purpose of computation of bonus.   In this  , case Units 1 and 11 alone have been  always  treated together  for the purpose of computation of bonus.  All  the other three Units and (1)  [1971] 35.  C. R. 629  863 the Watch Factory at Bangalore have each been treated  sepa- rately  and each of them has been having a separate  balance sheet and profit and loss account.  This is the evidence  on record, which has been accepted by the Tribunal.  We see  no reason to differ from this finding. The Controller of Finance of the management, MW 1, has given in  detail the various dates when these several  units  were started and production and sales began.  He has deposed that H.M.T. Units Nos.  1 and 11 at Bangalore were alone  treated as  one for the purpose of maintenance of accounts and  that H.M.T.  Units Nos. 111, IV and V and the Watch Factory  were all having separate and independent profit and loss accounts and  balance sheets.  This practice has been  followed  from the  inception  of  the  different  Units.   A  consolidated balance  sheet  and profit and loss account was  only  being prepared for the purpose of the Companies Act.  There is  no evidence  that any of the units or undertakings fell  within

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the  exception to the proviso in section 3 and that in  such branches,   immediately  before  the  commencement  of   the accounting year 1964-65, separate balance sheets and  profit and loss accounts for purposes of computation of bonus  were prepared and maintained.  If that was the case, it may  well be stated that the appellant-unit was treated as part of the establishment,  in  this case the H.M.T.,  for  purposes  of computation of bonus.  In fact the evidence of MW 1 is  that no  profit  bonus was ever paid to any of the  employees  of even H.M.T. Units Nos.  1 and 11 prior to 1964-65.  What was paid  was only production bonus on the basis  of  individual performance.   Section 3 is the key to the Act, as it  fixes the  property which is to provide the allocable surplus  for the  distribution  of  bonus in terms of the  Act.   As  the different Units in this case had been treated separately for the  purpose  of computation of bonus and  separate  balance sheets  and  profit and loss accounts had been  prepared  in respect  thereof,  the Units will not  lose  their  separate identity as establishments because of the main provision  of section  3  (see  Delhi Cloth & General Mills  Co.  Ltd.  v. Workmen(1).   As  Unit No. IV is a  different  establishment coming under the proviso and not falling under the exception to the proviso to section 3, the main part of section 3 will not assist the appellants. Then the question is regarding the applicability of  section 16.   The evidence of MW 1, which has been accepted  by  the Tribunal,  is to the effect that Unit No. IV was started  in July 1963 and production and sale commenced only from  1965- 66.  Section 16(1) grants exemption from payment of bonus to establishments  newly  set  up for a  period  of  six  years following the accounting (1)  [1972] (1) S. C. R. 594. 8 64 year  in which the goods produced or manufactured  are  sold for  the first time and, in the alternative, upto  the  year when  the new establishment results in profit, whichever  is earlier.   Unit No. IV is to be treated as an  establishment newly  set up, as contemplated under section 16(1).  If  so, the  exemption claimed would be fully justified because  the contingency  contemplated  under  subclause (a)  or  (b)  of section  16(1) has not happened during the  relevant  years, 1964-65 to 1966-67.  Even if Unit No. IV is considered to be a  new  department,  undertaking or branch  set  up  by  the existing establishment, namely, the Hindustan Machine  Tools Ltd., section 16(2) makes the provisions of sub-section  (1) apply  to  such units.  The proviso to  sub-section  (2)  of section  16  does not stand in the way of  the  management’s claim  for exemption because there is no evidence  that  for any  year, after Unit No. IV was set up, bonus was  paid  to the employees of all the Units on the basis of  consolidated profits  of  all such Units.  In fact the evidence,  as  we. have already stated, is contra.  No doubt it is in  evidence that  the employees of the Head Office have been treated  at par  with the employees of Units 1 and 11 at Bangalore.   In the  case  of the Head Office, calculation of bonus  on  the basis of consolidated accounts is justified; but that does not affect the principle to be applied to the separate units for  which  separate accounts, separate balance  sheets  and separate  profit  and  loss accounts  are  maintained.   The proviso  to sub-section (2) of section 16 will come  in  the way  of the management only if bonus is paid in any year  to the  employees  of  all  the  Units  on  the  basis  of  the consolidated  accounts.   That is not the evidence  in  this case.   We may also state that the evidence in  this  regard has been very elaborately considered by the Tribunal and  we

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agree with the conclusions arrived at by it.  Therefore, the exemption claimed under section 16 (1) by the management for the years 1964-65 to 1966-67 in respect of Unit No. IV,  the appellant,  has  been correctly accepted  by  the  Tribunal. This  disposes of the points raised by the appellant in  the appeal. We  have already referred to the permission granted by  this Court  by  its  order  dated  February  24,  1970,  to   the respondents  to  attack certain findings.   Accordingly  the respondents  have attacked two of the findings  recorded  by the  Tribunal  which  we  have set  out  earlier.   For  the accounting year 1963-64, which is the pre-Bonus Act  period, the  direction  of  the Tribunal is that Unit  No.  IV,  the appellant, is to get bonus on the basis of the  consolidated profit and loss accounts of all the Units in the same manner as  was paid to the Watch Factory and H.M.T. Units  Nos.   1 and  11  for  the said year.  The Tribunal  has  recorded  a finding   that  during  this  period  there  was  unity   of ownership,  management  and  control  and  also   functional integrality and,  865 therefore,  all the Units as well as the Watch Factory  have to be termed as one establishment and bonus will have to  be calculated  according  to  the Full  Bench  Formula  on  the consolidated  profit  and loss accounts of  all  the  Units. This  finding is attacked by Mr. G. B. Pai, learned  counsel for  the  respondents.  But it is not necessary  for  us  to consider  the  correctness or otherwise of this  finding  in view of the fact that we are accepting another contention of his relating to this year.  According to the learned counsel the evidence that has been accepted by the Tribunal  itself, clearly  shows that there was no profit bonus paid prior  to 1964-65 to either H.M.T Units 1 and 11 or the Watch  Factory in Bangalore.  It was only from and after 1964-65 that bonus was  paid  to those Units in accordance with the  Act.   Mr. Pai’s contention is supported by the evidence of MW 1.  From the  evidence  of this witness it is clear  that  no  profit bonus was paid to the above Units prior to 1964-65 and  what was  paid  was  only production bonus  based  on  individual performance.  Apart from the evidence of this witness, there is  also an agreement Ext. 3 dated August 10, 1962,  between the  management and the workmen of Units Nos.  1 and  11  at Bangalore.  That agreement provides for payment of  deferred annual  bonus.   The quantum of such bonus as  well  as  the circumstances  under which it is to be paid to each  worker, has also been detailed in the said agreement.  The Tribunal, unfortunately,  missed  these  items  of  evidence  and  has proceeded  on the assumption that profit bonus for the  year 1963-64 was paid to the workmen of these Units on the  basis of  the  Full Bench Formula.  This reasoning  is  erroneous. Hence the direction of the Tribunal that profit bonus is  to be  paid  to  Unit  No. IV, as was  paid  to  the  Units  at Bangalore,   is   clearly  erroneous,  as  it   is   totally unworkable.  Even otherwise the finding of the Tribunal that all  the Units were treated as part of  one    establishment for  purposes  of  bonus  for  the  year  1963-64,  is  also erroneous.   For  the above reasons, the  direction  of  the Tribunal  for payment of bonus for the year 1963-64 to  Unit No. IV has to be set aside. The second finding that has been attacked by Mr. Pai is  the statement,  contained in paragraph 25 of the award that,  it appears  from Ext.  A(2), the balance sheet and  the  profit and  loss  account for the year 1963-64, an  amount  of  Rs. 18,80,902/- was paid as bonus to the employees of the  Watch Factory  and Units Nos.  1 and 11 at Bangalore.  A  personal

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of  the entry in Ext.  A(2) shows that the particular  entry regarding this amount relates to payments made to Units Nos. 1 and 11 and not to the Watch Factory.  It will be seen that no  claim whatsoever was put forward before the Tribunal  by the workmen of the Watch Factory.  We have already  referred to the stand taken by the workmen of the 866 Watch  Factory, who were getting bonus at the maximum  rate, that they wanted the claim of the other unions for bonus  on consolidated balance sheets and profits and loss accounts to be rejected. In the result the appeal is dismissed.  The finding recorded against  the management on the points referred to above  are also set aside.  The position will be that the claim of  the appellant,  Unit No. IV, for payment of bonus for the  years 1963-64 to 1966-67 will stand rejected.  There will be  no order as to costs G.C.                          Appeal dismissed. 867