Podar Plastics(p) Ltd v. Its Workmen

- GAJENDRAGADKAR J .-This appeal arises from an Gajendragadkar /. Industrial diSQute between the appellant Podar Plastics (P) Ltd. and the respondents, its workmen, and it has reference to the claim made by the respondents for bonus for the year 1959. The respondents claim that for the relevant year they. should get bonus equivalent to three months' salary includ­ ing dearness allowance. On hearing the parties and on con­ sidering the evidence adduced by them, the Tribunal has directed that the appellant shall pay to the respondents bonus at the rate of half month's basic wages excluding allowances and overtime for the said year. It is against this award that the appellant has come to this Court by special leave. The appellant is a private company and its registered office is situated at Podar Chambers, Parsee Bazar Street, i Fort, Bombay. It owns a factory at Supari Baug Road where it manufactures plastic products. The appellant's case before the Tribunal was that if proper accounts are made in accordance with the Full Bench Formula, it would be found that there is no available surplus from which any bonus can be paid to the respondents. On the other hand, the respondents urged that the working of the Formula would show a substantial available surplus from which three months' wages as bonus can be easily paid. As usual, the controversy between the parties centered round prior charges ~ which the appellant claimed ought to be deducted from the gross profits. One of the points of dispute between the 134-159 S.C.-2. 18 SUPREME COURT REPORTS [1964) 1963 parties was whether depreciation which has to be deducted P<Hl•r p;;;;;ic• (P) as a prior charge should be statutory depreciation or Ltd. notional normal depreciation. The figure of the profit was 11, .;~rkmen admitted at Rs. 2 · 70 lacs. The Tribunal made alternative calculations, one on the basis that statutory depreciation G•i•ndra1adk17 1· alone should be deducted, while the other was prepared on · the basis that notional normal depreciation as claimed by the appellant should be deducted. On the first calculation the available surplus was found to be Rs. 0 · 44 lac. On the alternative calculation, it was found to be Rs. 0 · 33 lac. For the purpose of this appeal we will accept the latter calcula­ tion which is made on the basis that the notional normal depreciation has to be deducted. It. has been conceded before us by the learned Addi. Solicitor-General for the appellant that there are two mis­ takes in this calculation. The amount of notional normal depredation which has been shown as Rs. 0 · 78 lac ought to be Rs. 0 · 73 lac. Similarly the amount of income-tax which is shown as Rs. 0·96 lac ought to be Rs. 0·95 lac. Thus, the two mistakes accounting for nearly Rs. 6,000 have been made in favour of the appellant by the Tribunal in making this calculation, and that would make the available surplus as Rs. 0·39 lac; that is .one aspect of the matter which has to be borne in mind iii dealing with the appeal before us. The main point which has been urged before us hy the learned Addi. Solicitor-General relates to the claim made by the appellant for the deduction as a prior charge of Rs. 60,000 by way of notional remuneration for Mr. K. R. Podar, one of the Directors of the Company. We have already seen that the appellant is a Private Ltd. Co. and four of the major shareholders are members of the Podar family; they are: R.A. Podar, G.R. Podar, K.R. Podar and B.J. Podar; the 5th shareholder is M/s. Podar Trading Co. Private Ltd., 6th is Jay Agents Private Ltd., 7th is the National Traders Private Ltd. and the 8th is Ratilal B. Desai. According to the appellant, K.R. Podar devoted the whole of his time to the supervision and management of the appellant concern, and so, he was entitled to charge remuneration at th.! rate of Rs. 5,000 a month. In sup- { 6 S.C.R. SUPREME COURT REPORTS I9 port of this claim, Mr. Gupta, the Manager of the concern, - If'3 made an affidavit and offered himself for cross-examination. Podar pT.;ics (P) He stated that Mr. Podar attends the factory from 9 A.M. to l Ltd. P.M. and 2-30 P.M. to 6-30 P.M. In his cross-examination, it Its ;;,kmen was brought out that when the previous Director was paid G . d-dk 1 . . a Jen raga -ar • Rs. 1000 per month as remunerat10n, a resoluhon had been passed by the Board of Directors in that behalf; but no such resolution has been passed in regard to the remuneration of Mr. K. R. Podar. Besides, the appellant itself has urged that Mr. Podar did not actually charge any remuneration because it was thought that the financial posi- tion of the appeUant was n'ot very satisfactory, and so, Mr. Podar wanted to save expenditure on account of his re- muneration. It may be conceded that in a concern like the appeUant's if one of the Directors spends his time in supervising and managing the affairs of 'the concern, he would be entitled to charge a reasonable remuneration. This position has not been and cannot be disputed in view of the decisions of this Court in Gujarat Engineering ClJmpany v. Ahmedabad Misc. Industrial Workers' Union('). and Kodaneri Estate v. Its Workmen and Another('). Relying on these decisions, it is urged on behalf of the appellant that, \he Tribunal was in error in not allowing any deduction on account of remuneration to Mr. Podar. In our opinion, the appellant cannot seriously quarrel with the finding of the Tribunal, because it is conceded that Mr. Podar in fact has not charged any remuneration. The working of the Formula is no doubt notional in some res­ pects, but we think it would not be permissible for the employer to make it still more notional by introducing claims for prior charges on purely hypothetical and almost fictional basis. If Mr. Podar had been paid remuneration regularly and it had been duly shown in the books of account, a claim in that behalf could have been made by the appellant, and subject to the scrutiny by the Industrial Tribunal as to reasonableness of the said payment, such a claim would have been allowed; but if for any reasons Mr. Podar did not charge any remuneration, it would be unfair t<i allow a deduction on that account to be made notionally ('J [19611 II L.L.J 660. (1) [1960! I L.L.J. 273. 1963 Podar Plastics (P) Ltd. v. Its Workmen Gajendragadkar J. 20 SUPREME COURT REPORTS because the working of the Formula is sometimes described as notional. The inclusion of such an item solely for the purpose of depressing the available surplus cannot, in our opinion, be allowed. Besides, the Tribunal does not ap­ pear to have accepted the evidence for Mr. Gupta and it has made a significant comment that Mr. K. R. Podar has himself not stepped into the witness-box to make a claim for his remuneration. Mr. Gupta was asked whether Mr. Podar was going to give evidence, and he answered the question in the negative. Therefore, i[ in the circumstances proved in this case, the Tribunal did not feel justified in allowing the claim for deduction made by the appellant in regard to the notional remuneration of Mr. Podar, the appellant cannot make a serious grievance. The other point in controversy is in regard to the direc­ tion of the Tribunal that the appellant was not entitled to make any claim for rehabilitation. It appears that the Tribunal was inclined to take the view that since the ap­ pellant had begun its business with second-hand machinery, it was not entitled to make a claim for rehabilitation on the basis of replacement of the said machinery by brand new machinery. In other words, the Tribunal seems to be of the opinion that in cases where an employer is carrying on his business with second-hand machinery, rehabilitation should be calculated on the basis that the said second-hand machinery would be replaced by second-hand machinery and not by new machinery. This view has been rejected by this Court in the case of South India Mil/owners' Association and Ors. v. Coimbatore District Textile Workers' Union and Ors('). Therefore, the appellant is right in contending that the approach adopted by the Tribunal in dealing with the question of rehabilitation is erroneous. That, however, does not help the appellant because in the present case. the Tribunal has considered the evidence given by Mr. Dinshaw on behalf of the appellant in sup­ port of its claim that the rehabilitation requirement of the appellant would be of the order of Rs. 8,84,629. It is true that one of the reasons given by the Tribunal is that the (1) [I9f'] l!L.L.J. 223, '• 6 S.C.R. SUPREME COURT REPORTS 21 appellant is not justified in making a claim for rehabilita- 1961 " tion on the basis that new machinery would be purchased Podar Plastics (P) by him for rehabilitating his old one; but there are several Ltd. other reasons which the Tribunal has discussed and these Its w:rkmen reasons indicate that the Tribunal was not satisfied with -- the accuracy of the statements made by Mr. Dinshaw and Giiiendragadkar l their reliability. Incidentally, it appears that the appellant made a novel claim for rehabilitating his dead stock as· one of the items under rehabilitation, and the Tribunal has re- jected that claim. In the result, the finding of the Tribunal i is based on its appreciation of the evidence led by the appellant and that cannot be disturbed having regard to the material which is available on the record. The Tribunal has taken the precaution of adding that if the appellant leads better evidence in future, its claim for rehabilitation would have to be judged on the merits and the present decision will not create any bar against it. In our opinion, that is all that can be done in the present appeal. The learned Addi. Solicitor-General, however, attempted to argue that the Tribunal should have made some allow­ ance for rehabilitation on an ad hoc basis and in support of this contention, he has referred us to some of the obser­ vations made in the case of South India Millowners' Associa­ tion('). It appears that in that case, the appellant Mills had not adduced relevant evidence about the original price and subsequent depreciation of the machinery prior to its purchase by the appellant, and so. acting on the evidence available on the record, the Tribunal adopted some ad hoc basis. No grievance was made about the ntl hoc basis adopted by the Tribunal; the only grievance made was against certain observations made by the Tribunal that if the existing machinery is >ccond hand. it should be rehabili­ tated only by second hand machinery. and this Court held that the said observations did not represent the true legal position in the matter. It would, we think, be erroneous to assume that this Court approved of or affirmed the ad hoc basis adopted by the Tribunal in that particular case. On what material the said ad hoc basis was adopted is not known, and it would, we think, be unreasonable to suggest that if the employer does not adduce sufficient evidence to (1) [1962] I L.L.J. 223. 22 SUPREME COURT REPORTS [rg64J 196J justify his claim for rehabilitation and the Tribunal is in­ Podar Pla.<tics (P) clined to reject the evidence which has been adduced, the Ltd. Tribunal must nevertheless award some rehabilitation on a v. Its Workmen purely hypothetical and imaginary ad hoc basis. In such .Gai•nd-;;;,dkar J. a case all that the Tribunal can do is to safeguard the posi­ tion of the employer by giving him opportunity to adduce better evidence in future, and that is what the Tribunal has done in the present case. An attempt was then made by the learned Addi. Solici­ tor-General to make a claim for the deduction of the wealth tax. It has been consistently held by this Court that in bonus calculations the employer is entitled to claim a deduc­ tion of the income-tax as well as wealth tax; but, in the present case, there is no material to determine what the amount of wealth tax charged or paid is, and so, no relief can be granted to the appellant on that account. In the result, the appeal fails and is dismissed wi!h costs. Appeal dismissed. BOMBAY UNION OF JOURNALISTS & ORS. v. THE STATE OF BOMBAY & ANR. (P. B. GAJENDRAGADKAR, K. N. WANCHOO AND K. C. DAS ' GUPTA JJ.) Industrial Dispute-Reference by Government-Discretion of Govern· ment-Industrial Disputes Act (XIV of 1947), s. 25F-Scope of-Duty of Government to make a reference. The appellants 2 and 3 were working journalists and they 14-:re retrenched on payment of three months salary in lieu of notice. The first appellant took up their case and alleged that the retrenchment was not bona fi.de and they were in fact victimised. On the failure of conci· liation procee'din.gs a report was submitted to the State Government (respondent No. I). After hearing the parties concerned the Govem­ a111t pup<! aa order rofusi•I to refor Iha dispute. The reasons given J