Summary
A dispute for Bonus was raised by the workers of the Appellant company before the Tribunal for the Bonus year 1962-63, as the appellant company which made profit during the year, did not pay any bonus to the workers; but only a gratuity of one month was paid to them. According to revised returns filed by the workers, there was an available surplus of Rs. 5.34 lakhs; but according to the management, there was a deficit. There were two main points of dispute
: (1) the workers challenged the deduction of Rs. 4.1 lakh received as dividend by the company as extraneous income.According to the management however, as the company invested part of the paid up capital in hares which earned an income of Rs. 4.1 lakh, the company was entitled to claim this amount as an extraneous income because the workers had made no contribution in its earning and so this amount should be deducted from the gross profit. (2) The workers also disputed Rs. 75.89 lakhs shown by the management as the annual share required for rehabilitation. The management divided the plant and machinery of the company into two blocks. The original cost of the plant and machinery for firdt block was 133.00 lakhs and Rs. 15.0 lakhs for the second block. The appellant company claimed the `multiplier'(which is the probable increase in the price of assets at the time of rehabilation over the original cost) for each of the two blocks as 6 and the `deviser' (number of years after which the asset require s replacement) for the first block as 10 and for the second block as 11.The Tribunal decided the first point against the management because even though there was share capital available to the appellant, instead of utilising it as working capital, it had borrowed amounts to work the Nylon factory for which it bad to pay an interest of over Rs. 5 lakhs. In these circumstances, it disallowed the claim for deduction on the ground that it would be unfair to allow the management to treat the income from investments as extraneous income and still reduce the profits by raising loans and pay interests resulting in diminution of the surplus. On the second point the Tribunal admitted only a fraction of the total amount as annual share required for 'rehabilitation. It held the'Multipliee as 4 for the first block and 2 for the second block and the 'deviser' as 13 and 14 respectively. After deducting the prior charges from the gross profits, the tribunal computed the available surplus to be Rs. 3.25 lakhs and of this, 60 per cent payable as bonus would come to Rs.2,11,000/-. As the company bad already distributed Rs.90,000 the tribunal directed payment of the balance of Rs.1,21,000/- a# bonus. In appeal by special leave, a further point was agitated before the Court as to whether the Respondent can challenge a finding by the Tribunal in the absence of an appeal by it. Dismissing the appeal,HELD, : (i) Since the dividend in the present case is the return from investment-, of part of the paid up capital of the company which is invested for the purpose of earning an income, it cannot be construed as 652,extraneous income and the Tribunal is justified in disallowing tile dividend on shares as a valid deduction.The return on paid up capital is one of the prior charges admissible as a valid deduction and if any amount is .earned from the employment of capital unconnected with the business of the company, the labour cannot claim the right to participate in its returns. Further if any reserve is utilised for working capital, whether this .reserve is depreciation reserve or any reserve, a return in respect of they are also allowed as prior charges, at a reduced rate.The company has the discretion to invest its capital in various activities; but it cannot deprive the workmen of the benefits of the returns derived therefrom unless the investments in such activity is extraneous to the activities of the company, in the earning of which the workers had not made any contribution. In the present case, the return from the investments is a return on a part ,of the paid up capital which is invested for the purpose of earning an income and therefore, it is not extraneous income as claimed by the management. [656 G-B](ii) The elements which are important for the computation of annual rehabilitation is the price of the asset at original cost, the period for which these assets can be used before requiring rehabilitation due to rise in prices, devaluation etc. In other words, for computation of annual rehabilitation, the 'multiplier' and the 'deviser' is to he found out. In the present case, the management failed to place satisfactory evidence before the Tribunal to arrive at a proper 'multiplier' and 'deviser' and in absence of any proof as to how and on what basis the Tribunal had arrived at its own 'multiplier' and 'deviser' on a pure conjecture and guess work, the appeal cannot be sustained. Further, the Tribunal is not justified in including the trading investments to be available for the purpose of re- habilitation as these investments were made prior to 1960 when the company was an investment company and as such these investments were not connected with the activities of the present company, which was floated only in 1960. [666 G](iii)In appeal, the respondents are entitled to challenge or support the judgmentin his favour given before the High Court even upon grounds which are negatived in the judgment.Workmen of M/s. Hindustan Motors Ltd. v. M/s. Hindustan Motors Ltd. & Anr. [1968] 2 S.C.R. 311, M/s. Gannon Dunkerley & Co. v. Their Workmen, [1971] 22 F.L.R. 158, Management of Northern Railway Cooperative Society Ltd. v.Industrial Tribunal, Rajasthan, [1967] 2 S.C.R. 476, Ramabhal Ashabhai Patel v. Dabhai Ajit Kumar Fulshingji[1965] 1 S.C.R. 712, Associated Cement Co. Ltd. v. Its Workmen, [1959] S.C.R. 925, Khandesh spinning & Wvg. Mills Co. Ltd. v. Rashtriya Gir Kamgar Samiti Jalgoan, [1960] 2S.C.R. 841, Bengal Kagazkar Mazdoor Union v. Titaghar Paper Mills Co. Ltd., [1964] 3 S.C.R. 38, National Engineering Indnstries Ltd. v. Its Workmen, [1968] 1 S.C.R. 779 and Honorary Secretary, Coimbatore District Textile Workers Union [1962] Supp. 2 S.C.R. 926, referred to.See the full content of this document
Extract
J. K. Synthetics Ltd. VS. J. K. Synthetics Mazdoor Union
PETITIONER: J. K. SYNTHETICS LTD.Vs.RESPONDENT: J. K. SYNTHETICS MAZDOOR UNIONDATE OF JUDGMENT09/09/1971BENCH: REDDY, P. JAGANMOHANBENCH: REDDY, P. JAGANMOHANVAIDYIALINGAM, C.A.CITATION: 1972 AIR 1954 1972 SCR (1) 651 1971 SCC (3) 509CITATOR INFO : RF 1976 SC 611 (15)D 1976 SC1207 (218)ACT: Bonus-When dividends on shares are extraneous income for the purpose of payment of Bonus Act, 1965 The principle for determining the share required for rehabilitation.JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1675 of 1970.Appeal by special leave from the Award dated February 18, 1970 of the Industrial Tribunal, Rajasthan, Jaipur in Case No. 1.- T. 12 of 1967.G. B. Pai, P. N. Tiwari and O. C. Mathur, for the appellant.M. K. Ramamurthi and Vineet Kumar, for the respondent, 653The Judgment of the Court was delivered by P. Jagamohan Reddy, J.-This Appeal is by Special'. Leave against the Award of the Industrial Tribunal, Rajasthan directing the payment of a bonus of Rs. 1,21,000/- apart from an amount of Rs. 90,000/- already disbursed to the workmen of the Appellant for the year 1962-63. The dispute for the bonus year beginning 1st July '62 and ending 30th June '63 was raised by the workmen because the Company which had admittedly made profits, did not pay them a bonus though a gratuity of one month was given to them. The following dispute was therefore referred to the Tribunal: "Whether workmen of M/s. J.K. Synthetic Ltd., Kota are entitled to any bonus for the year 1962-63 and whether payment of one month's wages as gratuity by the management can be regarded as payment towards bonus for the, year in question?".The Mazdoor Union (hereinafter called 'the Union') on behalf of the Workmen contended that on the basis of the calculation,; of available surplus they were entitled to a bonus of 60% in accordance with the bonus formula which will entitle them to a five months wages apart from the one month's wages already paid to them. The first statement of computation filed on behalf of the workers was obviously incorrect because it did not take-into account the various prior charges such as Income Tax, return on reserves, rehabilitation reserve etc. which are deductible under Full Bench formula as approved and accepted by this Court from%time to time. It therefore filed another revised return showing an available surplus of Rs. 5.34 lakhs. The management on the other hand challenged the validity of the claim as according to it there was no available surplus for distribution even though they had already paid one month's bonus wrongly styled as gratuity. The calculations given by it were also found to be equally wanting. As such it...
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