The Honorary Secretary, South India Millowners' Association and Others v. the Secretary, Coimbatore District Textile Workers' Union
Thi Honaraty
Secretory, South
India Milt-owners'
Association
v.
T~ 8ecrttt#y,
Coimhator• District
Textili Workeis'
Union
GAJENDRAGADKAR, J.-These three appeals arise Gajendrafadkor J.
out of an industrial dispute between the industrial
employers who are the appellants and their res-
pective workmen who are the respondents in
respect of the latters' claim for bonus. They have
been heard together because they raise some com-
mon questions of general importance. We would first
set out briefly the material facts in the three
respective· appeals.
The Honorary Secretary, The South India
Millowners' Association, and other mills are the
appellants in Civil Appeal No. 419/60. A dispute
arose between 44 mills and their respective employ
ees in regard to the bonus for the year 1956. The
said dispnte wns referred for industrial adjudication
to the Industrial Tribunal, .l\fadras.' State Govern
ment on the 13th March 1958. To this reference,
the different mills and three unions which represen
ted the employees were made parties. It appears
that for the four years prior to 1956, the question
of bonus had been disposed of by a tripartite Boan!
of Arbitration appointed for each year by the
Government. For the year 1956, negotiations were
1962
TAI H.-ary
8e&r11-,, Btidia
/Adi. J1Ulou.11s'
AssO<ialion
...
TA. 8«t1l4r:1,
o~Dislric1
r.mu w ... m,, u,.;,,,,
Glfi-.,.il4• J ·
930 SUPREME OOURT REPORTS (1962] SUPP.
held at governmtnt&l level to evolve & &&tiafaotory
solution by consent but since the eaid negotiation11
failed, the parties agreed on some interim payment
leaving the rest of the dispute to be adjudicated
upon by the Industrial Tribunal. That Li the genesis
of the reference
On the 5th of September, 1958, the Tribqnal
made its award. It considered the several rival
contentions raised by the parties in support of their
respective claims and awarded bonus ranging from
7 months' basic wages to I month's basic wagoa
according to its finding as to the available 8Urpln1
in respect of each mill. It is against lriis award
that the appellants have come to this Court by
special leave.
At the time when the award was pronounoed
tho decision of this Court in the Assooiated Cement
Cos. Lt.d., Dwarka Cement Works, Dwarka v. lt8 Work
men (') h&d not been pronounced, In that
decisioi;i, this Court has considered all the rele
vant probloms which arise in the working of the
Full Bench formula governing tho award of bonus
to industrial labour :ind some of the points which
the appella.nts wanted to raise againllt the award in
question are now concluded by that decision. That
is how in the present appeal, the appellants have
oonfined themselves to the points on whioh the
Industrial Tribunal has deoided oontrary to the
deoision of this Court in the case of Assooiated
Cement Companies Ltd. or which are not oovered
by that Judgment.
Civil Appeal No, 159/61 arises out of & referen
ce made by the State Government of Madras on the
3rd October, 1959, in respeot of an industrial dispute
for bonus for the year 1958 between 51 mille and
their respeotive employeee. The Industrial Tri
bunal whioh heard this dispute pronounoed its award
on the 11th of January, 1960. In dealing with this
(I) (1!159] S.C.R. 9'l5. (
2. s.c.R. SUPREM~ COURT REPORTS 931
dispute, it naturally followed the same Iirle of app·
roach which it had adopted in dealing with a similar
dispute for the year 1956 from whi<.Jh Civil Appeal
No. 419160 arises. As a re~ult of its finding, the.
Tribunal has directed 24 mills to pay bonus to their
re8pective employees, the rate for the same ranging
from 6 months' to half a month's basic wages accord
ing to the available surplus in each case. It is
against this award that the 23 mills have come to
•this Court by special leave in this appeal.
Civil Appeal No. 3(2/59 arises from an industrial
dispute for bonus between the appellant, the Manage
ment of the Express Newspapers (rrivate) Ltd. and
its employees, the respondents. i Tl)e claim for
bonus which has been referred by the State Govern
ment for adjudication to the Industrial Tribunal at
Madras on the 19th.August 1957, relates to the years
1954-55 and 1956-1957. The appellant in this case
carries on the business of publishing certain news
papers and periodicals in English and in theverna
cular from four centres in India. viz., Madras,
Madurai, Bombay and Delhi. After hearing the
PIJ!ties an<l considering the evidence adduced by
them in support of their respective contentions, the
Tribunal disallowed the respondents claim
for bonus for the years 1954-55 but allowed it for
the years 1956·57. It has found that for the year
1956-57, the appellant had in its hands Rs. 1,60,000
as available surplus and so, it has directed that not
less than 80 per cent of the said surplus should be
made available for bonus; that is to say, it has held
that Rs. 1.25 lakhs should be distributed by way
of bonus which worked roughly@ halfa month's
total wages including dearness allowance. It is
a~fust this award that the appellant has come to
t~is Court by special leave.
In Civil Appeal No. 419/00, the first P"int
which has been raised by Mr. Sastri on behalf of the
appellant relates to the question of rehabilit tion. In
the working of the formula the multiplier has been
IHI
TA,lil_.,.,,
8'&r1lor~, Snlh
lndi• JlUltwt"1'1•
A.SJ..W...
•• Thi Sur,,.,.7,
Ooimb•tor• Dislri<I
_Tex'til.-Wtriets'
Unitn
Gajentlr•t.&Ur J.
TluH-ory
S#r1t11ry, 80Mlb
/Wia Millownns~
A s.st¥Uttioll
v.
~ S,c-r1ttll'_,,
c..ln.Neo. 1 Diahiel
TtJdil1 Wod.,r1'
u,.;.,,
932 SUPREME OOURT REPORTS [1962] SUPP.
duly determined by the Tribunal and there is no
dispute about it before us. It is against the divisor
adopted by the Tribunal that the appellant is
aggrieved and so, the question to consider is whether
the Tribunal was right in holding that the life of
the textile machinery should be taken to be 25
years and not 15 as alleged by the appellants, Mr.
Sastri contends that the appellants had examined
two experts Mr. K. Srinivasan and Mr. Seetharaman
and their evidence consistently was that the life of
the machinery would be 15 years and no more. It is
urged that this evidenoe should have been accepted
by the Tribunal bee&Ul!ll it has not been shaken in
crQBS-examinatien. We are not impressed by this
argument. The Tribunal has carefully examined the
evidence of the two experts and has given .satisfao.
tory reasons for holding that the estimate made by
them in regard to the life of the machinery is too
modest. In fact, as the Tribunal has pointed out,
though the experts purported to eay categorically
that the lifo of the machinery could not be more
than 15 years, they had to admit that in several
cases machinery which was muoh older than 15 years
was working not llll8&tisfactorily and so the
statement about the estimated life of the machinery
made be the witnesees could not be accepted at its
face value. Indeed, as the Tribunal observes, experts
while giving evidence about the estimated life of
the machinery are apt to be too teehnioal and
sometimes dogmatic but their evidence has to be
judged in the light of tho probabilitee, the admiaeione
made by them in crOBS-examination and other
evidence about older machinery which wae found
working in the different mills. Therefore, we do not
think that on the question as to the estimated life
of the textile machinery in question we would be
justified in interfering with the conolueion of the
Tribunal that the said life oan be reasonably
estimated at 25 years.
2 s.c.R. SUPREME COURT REPORTS 933
It is then contended that the estimate made by
the experts a.bout the life of the textile machinery was
consistent with the period of 15 years allowed for
the rehabilitation of textile machinery be the Labour
Appellate Tribunal which evolved the formula in
the case of The, Mill Owne,rs' Associatian, Bamhay v.
The, Rashtriya Mill Mazdoor Sangh, Bamhay('). The
argument is that since 15 years' period was allowed
for rehabilitating the machinery, that should be
taken to the normal estimate about the life of the
machinery. On the other hand, it is urged by the
respondents that 15 years' period was allowed by
the Labour Appellate Tribunal in the case of The,
J1 ill OW'Mrs Association (') even though the
machinery was more than 25 years old and that
would suggest that the life of the machinery is
40 years. We are not prepared to accept either
argument because, in our opinion, the life of the
machinery in every case has to be dete1mined in
the light of evidence adduced by the parties. What
the Labour Appellate Tribunal did in the ca8e of The,
Mill Owne,rs' 4ssociation(')wa.s to adopt an adhoo basis
for allowing rehabilitation within 15 yea.rs because
it was obvious, and indeed not disputed, that the
textile machinery with which the Tribunal was
dealing had become obsolescent and very badly
needed rehabilitation. Indeed, it was because of this
admitted position, that the problem of rehabilitation
assumed an important place in the discussion before
the Tribunal when it evolved the formula. Therefore,
from the decision in the case of The, Mill OW'Mrs'
Associatian(1) no rule can be safely evolved as to the
probable life of the textile machinery.
An attempt was then made to suggest that
the rate of 15 per cent at whioh depreciation is
allowed under s.10 (2l(vi) of the Income-tax Act for
machinery which is used in multiple shift would
approximate to the estimate of 15 years made by
the experts in the present case. But when the actual
(I) [1950] L.L.J. 1247.
1969
Th• Honorory
Becrltary, ~
India M illomturs'
Association
••• Th. Stcr1tarJ,
Coim6at0re Disltiet
Textile Work.rs'
U11ion
G•ftndrfllll"fkar· J.
IHI
n.H-"'7
....... &u<J.
IW Millffl'"lf'I' ,, __
v.
n. ll ..... .,,
c.w.i..1 District
T,_,U. W•iw,'
u-
934 SUPREME COURT REPORTS [1962) SUPP.
calculations were ma.de, it was conceded that the
rate of 15% at which depreciation is allowed in
respect of machinery used under multiple shifts
works at 18 yea.rs and not 15 years. Therefore, even
the argument based on the depreciation rate
permitted by the Income-tax Act is of no avail. In
conclusion, we confirm the finding of the Tribunal
that tho estimated life of the textile machinery in
question should be taken to be !!5 years.
The next contention which has been seriously
pressed before us is in regard to the finding of the
Tribunal tbat some addition should be made to the
estimated life of the machinery by reference to
practical considerations as to when the employer
would be able to make rehabilitation in fa.ct. The
Tribunal oonsidbrcd the financial position of the
respective mills, the availability of the new textile
machinery, the difficulty about the foreign exchange,
and so it came to certain ad hoc conclusions while
deteqnining the divisor to be adopted. It held that
in' the C&&e of machinery purchased before 1947
whose life expired by that year, the period for
rehabilitation should be 15 year from 1917. In
regard to machinery purchased prior to 1947 whose
life does not terminate by that year, the period for
carrying out modernisation would be fixed at 10
years after the expiration of the life and in the case
of machinery purchased after 1947, that period will
be 5 years nfter its normal life. In other words, the
Tribunal decided that the rehabilitation requirement
a.bout· the first category of machinery should be
lipread over 15 years, that1for the second category
should be spread over the remainder !lf its life plus
JO years and for tho third category, the normlll life
of 25 years plus 5 years. Mr. Sastri contends
that this ad hoc addition made to the lifo of the
machinery determined by the Tribunal o~
hypothetical or practical considerations 1s
justified. In our opinion, this contention is well
founded. It is now well settled that in determining J •
. '
2 S.C.R. SUPREME COURT REPORTS 935
the claim of the employer for rehabilitation, two
factors essential to ascertain; first the muJt.iplier and
that has to be done by reference to the purchase
price of the machinery, and the price which has to
be pa.id for rehabilitation or replacement; the second
problem is the determination of the divisor and
that has to be done by deciding the probable life
of the machinery. Once the probable or estimated
life of the machinery is determined there is no
scope for making any. additions to the number of
yea.rs thus determined on any extraneous
considerations as to the financial position of the
employer or the availability of the machinery. If
the amount awarded for rehabilitation for any
given year is not utilised for that purpose, the same
may be ta.ken into account the next year-that is
a.II. But when determining the divisor, it is not
open to the Tribunal to add to the estimated life
of the machinery on the ground that the employer
may, in fact, not bl' able to rehabilitate or replace
his machinery. Therefore, there is no doubt that the
Tribunal was in error in ma.king further additions
to the estimated life of textile machinery. The
divisor must be adopted on the basis of the finding
that 25 years is the estimated life of the machinery
and no more.
The next contention raised by Mr. Sastri is
in regard to the rehabilitation allowed by the
Tribuna.l in respect of the second hand machinery
purchased by Lotus Mills Ltd., one of the appellants
before us. The Tribunal thought that in the case of
old machinery purchased, only half the claim for
rehabilitation should normally be allowed and it
added that whether more or less should be allowed
would depend upon the age of the machinery at
the time of the purchase. 'J'hen it considered the
evidence in respect of items I to M as disclosed in
the rehabilitation statement Exhibit M. 47 (B)
furnished by the Lotus Mills Ltd. It appears that
the item~ of machinery in question had all been
I96a
Tiu HonotlllJ
S1cr1tary, 8outA
India M illOWllffs'
AastWitllion
•• TM Seeretary,
Coimbator1 DUtriet
T .xtik WorUr1
1
Unioii
~M!
!'AIR__,
8HT1t.:/, SINIA
l.&MiU.,_,l
AssoA•INtt
•• Tl» 81nt'4r7,
C,.,..1or, Di11rict
T11tli/1 Woritri'
u,.;,,,
G•jm<lrq.U.• J,
purchased prior to l!HO and so, the Tribunal fixed
the rehabilitation at 30%. In dealing with this
question, however, the Tribunal has observed that
full rehabilitation requirement cannot he allowed
in respect of second hand machinery without the
depreoi'l.tion being deducted from out of the total
requirement. Acting on this basis, the amount has
been fixed at 30%. Mr. ~astri contends that if tho
Tribunal proceeded on the bal!is that second hand
machinery must ho replaced only by second hand
machinery. It was obviously wrong. We think this
contention is well founded. It no doubt appears that
in the case of Associated lndustrie.~ Ltd., and Its
Workmen (1) the Industrial Tribunal has observed
that in the case of second hand machinery it would
be reasonable that the employer should meet half
the cost of the rehabilitation of the plant from
other sources, either by increasing its share capital,
Qr from other reserves that may have accumulated
in the course of years. Indeed, it iii on this decision
· that the Tribunal has founded its decision in dealing
with the question about the second hand machim·ry
purchased by the Lotus Mills Ltd. in I!HO.
In our opinion, it would not be right to
insist that an employer who purebases second ham!
machinery must r~habilitnte it by purchasing
second hand machinery in tum. Tnat would be
obviously unreasonable and unjust, for ought
one knows second hand machinery may not be
available. BeBidee, the employer is entitled to say
that he wants ro purchase now machinery by way
of replaeement. Therefore, if thn Tribunal
intended to lny down a general rule that in dealiug
with the question of the rehabilitation of a scccmd
hand machinery purchased by an cmplciycr only
50% of rehabilitation amount should Ii<' all.med,
that would bo e1·ro11cou8. 011 the otl11•r hand, it is
true that in determining tho amount of r<•habilita
tion and rleciding the q111•Htio11 of mult.ipli"r, thi:
(ll [1951!]2 L.LJ. 1311, H".
, ..
2 S.C.R. SUPREME OODR.T REPORTS 937
cost price of the machinery must be ascertained and
this can be done only by enquiring for how much
the machinery was originally purehased when new,.
Depreciation amount accruing due after the first
purchase must also be ascertained. If the purchas~
money is determined but it is difficult to ascertain
the depreciation amount thereafcer, then at the
highest the whole of the purcha.se money could b3
adopted as depreciation amount and then the
amount of rehabilitation can be determined.
Whatever relevant facts are required to be
considered in dealing with this question must no
doubt be ascertained. But if all relevant factors
are ascertained, then it cam1ot be said that because
rehabilitation is claimed in respect of second hand
machinery, therefore only half or one-third of the
amount should be allowed. In the present cabe,
the relevant material about 'the original price and
subsequent depreciation prior to the purchase by
the appellant mills has not been adduced before
the Tribunal and so, the Tribunal was justified in
adopting some ad hoc basis. But grievance is made
not so much against the particular ad hoc basis
adopted by the Tribunal in the present case as
against the general principle about which the
Tribunal has made certain observations. As we
have already made it clear, those observations do
not correctly represent the true legal position in
the matter.
That takes us to the last point raised in this
appeal on behalf of Saroja Mills Ltd. which is one
of the appellants. Saroja Mills Ltd. is a compauy
which runs two mills, viz., Saroja Mills Ltd.,
Coimbatore. and Thiagaraja Mills at Madura.
The latter has been started in 1956, while
the former has been in existence for many
years. It was urged on behalf of the appellant
befor? the Tribunal that in dealing with tho
question of bonus payable to the employees in the
~wo respective mills, the two mills should be
1902
T/,. Hwt!'Y
S1cr1tat,, Botti A:
India MjJJewrurs'
iJ.saotiilt Oii
v.
The 8w1lar_v,
Ca~ot1.Dist1icl
T1x1ile Wor1trs•
um..
Gojendrogadhr J.
lHB
938 SUPRJDIE OOURT REPORTS (1962) SUPP.
treated as 11eparate unitR and not as one. The
Tribunal has rejected this contention and it has
held that the two mills constitute 0no unit and tho
question of bonus payable to the employees
working in the two respective mills, must be oon·
sidered on that basis. It iB against th is finding that
Mr. Sastri has made a serious grievanca before us.
He <'ontends that there are several factol'B which
militate against tho validity of the conclusion of
the Industrial Tribunal that the two mills consti·
tute one unit. The two mills are situated at two
different places separated by a dishnce of nearly
150 to 200 miles; in starting the Thiagaraja Mills,
the necessary cotton, stores and personnel were
secured by the Company from Mcenakshi Mills at
Madura; the workers working in the two mills are
different and they arc not transfcrablo from one
mill to the other; the two mills manufacture
different counts of yarn and diffrrent qualities
and the raw material required !Jy them
is different; they maintain different accounts
and their Tex-marks are differ1·nt; when the
Thiagaraja Mills was started in I 9;i6, the Co.,
b'.lrrowed an amount uf nearly Rs. 3~.:iO lakhs
from the Indian Finance Corporation and Pudu
kottai Co. Ltd. and the same WBB debited to the
Thiagaraja Mills. Therefore, all these factors
inclicato that the two mills are different units, they
work as such and sh011ld not b1• takon to constitute
one unit for the purpose of determining tht• question
of bonus.
On the other hand, Mr. Ramamurthy contends
that there aro sevt•ral other conoiderations which
jw;tify the conclusion of the Tribunal that the two
mills constitute one unit. Ho argues that it is
important to bear in mind that the two mills are
owned and conducted hy one Company, the Saroja
Mills Ltd. in fact, the Thiagarnja Mills at Madura
has no independ1·nt l1·gal existence except a~ a
noucern run by tho Company; ultimately, the profit
•• ,
I t
>
2 S.C.R. SUPREME COURT REPORTS 939
and loss aCC<?,~nt for both the Companies is one
consolidated account and dividend would be paid
on the said account; separate accounts are no doubt
kept for convenience because the two mills are situa
ted in two different places; but the maintennnce of
separate cash hook and ledger are not behalf as
important as the maintenance of one profit and loss
account which the Company has to keep as a whole;
the borrowing on which the appellant reliPR is the
borrowing of the Company and as such, the
Company is the debtor and not the mills at Madura;
the distance between the two mills can hardly be
important because the features on which the
appellant relies may well be present in the case of
two mills owned and run by the same Co. though
the mills may be situated side by side in the same
locality; what is important in this connection is the
fact that the business carried on by the two mills
is of the same type and character though the
quality of yarn produced may not be the same.
Therefore, it is urged that the Tribunal was right
in holding that the two mills constituted one unit.
The question thus raised for our decision is
not always easy to decide. In dealing with the
problem, several factors are relevant and it must
be remembered that the significance of the several
relevant factors would not be the same in each
case nor their importance. Unity of ownership and
management and control would be relevant factors.
So would the general unity of the two concerns;
the unity of finance may not be irrelevant and
geographical location may also be of some
relevance; functional integrality can also be a
relevant a.nd important factor in some cases. It
is also possible that in some cases, the test would
be whether one concern forms an integral part of
another so that the two ·together constitute one
concern, and in dealing with this question the nexuR
of integration in the form of some essential
dependence of the one on the other may assume
1962
The Honoraf'y
Secretary, South
India Millownn•'
Association
v.
The SecrelO'l'y,
Coimbatore District
Textile Worker1l
Union
GnjendragadkJr J.
19"
TitH_.,,
Bm1tar,, &1111'
loii• Milloam'
Au«ictiOfl
v.
T/I, s,.,.i.ry,
CoiwtHton Di•lriet
Tuli/1 Workers'
Unit>•
940 SUPREME OOURT REPORTS [1962] SUPP.
relevance. Unity of purpose or design. or even
parallel or co-ordinate activity intended to achieve
a common object for the purpose of carrying out
the busineSB of the one or the other can also
aasumo relevance and importance, r;ide Ahm~
M anuja.cturitl{J & Oalioo Printing Co. LU. v. Their
If orkrnen (').
Mr. Sastri, however, contends that functional
integrality is a very important test and he went so
far as to suggest that if the said test i~ not satisfied,
then the claim that two mills constitute one unit
must break down. We are not prepared to accept
this ar1mment. In tho complt1x and complicated
forms which modern industrial enterprise assumes
it would be unreasonable to suggest that any one
of the relevant tests is decisive; the importance and
si,iDifica11ce of the tests would vary according to
the facts in each caoe and so, the question must
always be determinetl bearing in mind all the
relevant tests and co-relating them to the nature of
tho enterprise with which the Court is concerned.
It would be soen that the test of functional inte
grality would be relevant and very significant when
the Court is dealing with difforenl. kinds of busi·
nesses run bv the samo industrial cstabli~hmt>nt or
employer. Where an <-mployer runs two different
kinds of businell8 which are allied to each other, it
is pertinent to enquire whether the two lines of
businel!ll are funotionally integrat!>d or are mutually
inter dependent. If they arc, that would, no doubt,
be a very important factor in favour of the plea
that the two lines of business constitute one unit.
But the test of functional in'.egrality would not be
as important when we are dealing with the case of
an employer who runs the sam11 business in two
different plaotll!. Tho fact that the test uC fun<•·
tional integrality ie not and generally cannot be
satisfied by two such concerns run b;v the i.ame
(I )[1951] 2 L.l.J. ~7.
,
'
"
2 s.c.R. SUPREME COURT REPORTS 941
employer in the same line, will not necessarily
mean that the two concerns do not constitute one
unit. Therefore, in our opinion, Mr. Sastri is not
justified in elevating the test of functional
integrality to the position of a decisive test in
every case. If the said test is treated as decisive,
an industrial establishment which runs different
factories in the same line and in the same place
may be able to claim that the different factories
are different units for the purpose of bonus.
Besides, the context in which the plea of the unity
of two establishments is raised cannot be ignored.
If the context is one of the claim for bonus, then it
may be relevant to remember that generally a
claim for bonus is allowed to be made by all the
employees together when they happen to be the
employees employed by the same employer. We
have carefully considered the contentions raised
by the parties before us and we are unable to
come to the conclusion that the finding of the Tri
bunal that the two mills run by the Saroja Mills
Ltd. constitute one unit, iil erroneous in law.
In this connection, it would be necessary to
refer to some of the decisions to which our atten
tion was drawn. In the case of Asaociatbl CemR,nt
Campanies LUl. and their Workmen (1), this Court
held that on the evidence on record, the limestone
quarry run by the employer was another part of
the establishment (factory) run by the 11ame emplo
yer within the meaning of Section 25E (iii) of the
Industrial Disputes Act. It would thus be seen
that the question with which this court was
concerned was one under s. 25E (iii) of the Act
and it arose in reference to the limestone quarry
run by the appellant Company and the cement
tactory owned and conducted by it which are
normally two different businesses. It was in dea
ling with this problem that this Court referred to
several tests which would be relevant, amongst
(1) [1960] l.S.C.R. 703,
1162
The Bonorazy
Secree.r,,- South
India M illowners'
Association
v.
The Swrd"'1f,
Coia1"tor1 Di$hid
T .xti/1 W erM•'
UniMI
GqjendragAl/br J,
1962
'l'IN Hooarory
Bmll!'li.!:.:," hdia Mil s'
A.ss°'*ioft
v.
:flw !it<rolary,
Coimb_, District
T ,.1;i, Wtriers'
u.Um
them being the test of functional intogrality. In
dealing with tho question, S. K. Das, J., who spoke
for the Court, observed that it is perhaps impoBBible
to lay down any one test as an absolute and invari·
able test for all cases. The real purpose of these teats
is to find out thl' true relation betwee:Q the parts,
brancbAs, units, et-0. If in their true relation they
constitute one integrated whole, we say that the
establishment ie one; if, on the contrary, they do
not constitute one inter<,rated whole, each unit is
then a separate unit.. It was also observed by the
Court that in one case, the Wlity of ownership,
management and control may be tho important
test; in another case, functional integrality or gene·
ral unity may be nn important test; and in still
another case, the important test may be the unity
of employment. Therefore, it is clear that in
applying the test of functional integrality in deal·
ing with the question about the interrelation bet
ween the limestone quarry and the factory, this
Court has been careful to point out that no test
can be treated as decisive and the relivance and
importance of all the test will have to be judged
in the light of the facts in each case.
In the oase of Pratap Pr(',88, m. and Their
Workmen,(') this Court had to deal wit.h the ques
tion as to whether the Pratap Press started by tho
proprietor, Narendra, in 1951 and the newspaper
'Vir Arjun' started by him in 1954 constituted one
unit. It appeared in evidence that the Press also
printed and published Daily Pratap which was
ownod by Narondra and his partner. Thus, the
problem raised before this Court was whl'ther the
business of running Vir Arjun which is distinct and
different from tho business of running a Pl'f'8B, con
stituted a part of the same unit as tho Pratap Press
itself and in dealing with this question, this Court
reiterated the same principle that the applicability
and the signifi0&noe of the relevant tests would
(I) [1960J I LJ.J. •97.
2 S.C.R. SUPREME COURT REPORTS 943
depend upon the facts in each case. Where the
Court is dealing with two different kinds of busi -
ness conducted by the same owner, th1> test of
functional integrality naturally aesumes importance
and it was that the test which was empha.11ised by
this Court in coming to the conclusion that the Press
and the Paper did not constitute one unit. Be
sides, the conduct of the proprietor in dealing with
the two businesses and other relevant facts were
taken into account in reaching that conclusion.
In Palcshiraja Studios v. Its Workmen, (1) this
Court was dealing with a case of the managem('nt
of a cinema studio which also carried on the busi
ness activities of producing films and taking dist,ri
bution rights of pictures, and in coming to the con
clusion that the two lines of business were not dis
tinct but together constituted one single industrial
unit, this Court emphasised the importance of the
\est as to whether there is functional integrality
and unity of finance and employment of labour.
Thus, it would be seen that the question as
to whether two different concerns run by the same
employer constitute one industrial unit for the
purpose of bonus, has to be determined in the light
of facts in each case. As we have already indica
ted, after carefully considering the relevant facts
in the present case, we are unable to hold that
the conclusion of the Tribunal is erroneous in
law.
That takes us to Civil Appeal No. 159/61.
The first point which has been raised in this appeal
relates to the claim made by the Coimbatore Cotton
Mills Ltd., one of the appellants, in respect of the
development rebate "llowed to it to the extent of
Rs. 1,25,000. Before the Tribunal it was urged
that this amount should be treated as a prior charge
but the Tribunal rejected the contention and we
think, rightly. In this Court, the argument has
(I) (1961] 2 L.L.J. 380.
J96S
1h1 Ho1uw•f"J
St&rttar_1, South
India Millownera•
As•oet.Nn
•• Tiu r1er1l•r.J,
~m/Jattll'I Dlffricl
Te~tih Wor.bfos•
Uniott
Gajrndrattvl/oar J,
11161
'1At llottoraty,
/he•""'· S...1' I .Uc Ji tlltwtUrJ •
. 4Hl!Ci9'io•
• 7".&.n-11•')',
Co"""'11tte Diltricl
Te.dill Worier•'
u111 ..
G.;-k•,.,,.... J.
944 SUPREME COURT REf()RTS [1962] SUPP.
ta.ken another form. It is urged that this rebate
must ho loft out of account in determining the avai
lable surplus because there is a statutory bar which
precludes thu appellant from utilising this
amount for the payment of bonus. This argument
~ ba.sed on the provisions contained in proviso (b)
to explana.tion ( 2) of Section IO (2 )(vi) as intro·
duoed by the Finance Act XI of 1958. The rele
vant portion of the statutory provision on which
reliance has been placed reads thus :-
"Provided that no allowance under this
clause shall be made unless :-
(a) .................... ··········· ............ .
(b) o.xcept where the asset!Seo is a
company being a licensee within the mea·
ning of the Electricity (Supply) Act, 1948
or where th(l ship has been acquired or
the machinery or plant has been installod
before the I st day of January, 1958, an
amount equal to 75% of the develop
ment rebate to be actually allowed is
debited to the profit and loss account of
the relevant previous year and credited
to a reserve account to be utilised by him
during a period of ten yea.rs next follow
ing for the purpos~ of the business of the
undertaking, except :
(i) for distribution by way of divi·
donda or profits : .................. "
It is the last clause which is the b11.11is of the present
argument. Mr. Saatri contends tba.t bonus is awarded
out of profits available in the bands of the emplo·
yer and the statutory provision just quoted prohi
bits the employer from distributing tho develop
ment rebate a.mount allowed to him by way of
profits. There is no substance in this argument.
What the statute prohibits is the distribution of
the amount in question by way of dividends to
the ahare-holdere or profits to the partners. In the
...
(
~ S.C.R. SUPREME COURT REPORTS 945
context, the distribution by way of profits means
nothing else than the distribution of profits to
the partners. Besides, it is obvious that the
amount of bonus paid by an employer to his
errployees is allowed to be treaterl as admi
ssible expense under s. llJ(2)(x) of the Income
tax Act. It is clear that the ,development
rebate allowed is in part recognition of the
claim for depreciation and the provision in ques
tion cannot, therefore, be treated as constituting
a bar against taking the said amount into consider
ation in ascertaining the available surplus in the
hands of the employer during the year in question.
Therefore, the argument which has been urged be
fore us in respect of the development rebate of
Rs. 1,25,000 cannot be upheld.
It is true that in support of this argument Mr.
Sastri has relied on the decision of this Court in
The Central Bank of India v. Their Workmen (1).
In that case, section lO(i) of the Banking Compa
nies Act prior to its amendmPnt in 1956 fell to be
construed. Section (I) (b) ;ii) provides, inter alia
that: "No banking company shall employ any per
son whose remuneration or part of whose remune
ration ta.kes the form of a share in the profits of
the company". It was held that this provision
prohibited the grant of industrial bonus to bank
employees inasmuch as such bonus is remuneration
which takes the form of a share in thf' profits of
the banking company. We do not see how this
decision can assist the appellant a.t all. What we
are called upon to construe in the present case is
the expression "for distribution by way of divid
ends or profits" and, as we have pointed out, the
context makes it perfectly c!ear that the distribu
tion by way of profits which is prohibited is the
distribution by way of profits amongst the part
ners. Therefore, the decision in the case of
I. (I) [1960] I s.c.R. 200.
~il1 ll"1trO.r:1
B1cr11a,, 6•utla
Indi• .Mitl.rorurs'
Asstci•tiM
•• Tlte Stcrelo1,J,
Cfttnllallf'1 Distric
T1Xtil1 W trklf's'
UniMJ
t1.;entra1U/i.,. J.
\\
\
\
1962
Th. HMorary
81crtklry, South
India Al illownn1"
Associ4tion·
v.
Tiit Sut'etary,
Coimbale11 District
T "'tit. W .,l:ns'
u.,;..,
Central Bank of India is of no assist&nce to the a.pp·
ellant in the present case.
Thor<· is one more point which needs to be
considered in this appeal and that is in regard to
the claim for interest made by one of the appell·
an ta, the Coimbatore Cotton ~fills Ltd., in respect
of the amount of depreciation used by it by way
of workin-' capita.I. The interest claimed a.mounts
to Rs. 33.42!1. The Tribunal has held that the
appellant is not entitled to claim any retum on
depreciation and in that connection, it has referred
to its earlier d<·cieion in the case of Deccan Sugar
Abkhari Co. Ltd.(1 ), and ha.s observed that it ha.d
nothing to add tn the reasoning adopted in that caee.
Mr. Sai;tri contends that this view is clearly inoon·
sistcnt with the decisions of this Court a.nd this
contention id well founded.
In Petlad Turkey Red Dye Works Ltd. v. Dye;J
& Chemical, Workers' Union, Pet/ad ('J, this
Court has held tha.t if a.ny portion of the reserve
fund is found to have been actually utilised as
working ca.pita.I in the y£-ar under consideration, it
should be treated as entitled to a. reasonable rate
of return a.nd the a.mount thus ascertained deducted
a.a a. prior charge in ascertaining the a.va.ilable sur·
plus. To the sa.mo effect is the decision of this
Court in Mysore KirWJ/aJr LUl. v. Its Workmen (3 ).
In that case, thi.1! Court has held th.it the a.mount
in the depreciation reserve proved to have been utili·
scd a.s working capita.I during the year in question
should he taken into consideration for tho purpose
of making provision for return on working ca.pita.I.
It is thud clear that if a.n employer shows that the
a.mount of depreciation wa.s actually available a.nd
has, in fact, been uied a.a working capital during
tho relevant year, ho would be entitled to claim a
reasonable return on tho said amount. The contrary
(I) [1958] I L.L.J.653. (21 [19fi0] 2 S.f'.R. 906.
(3) [ 1961] 2 L.L.J. 657.
(
I
I_
2 S.C.H. SUPREME COURT REPORTS 947
view expressed by the tribunal in the present case
must, therefore, be reversed.
In the two Civil Appeals No. 419/60 and 159/61,
we have dealt with the general points rnised before us
not beaause the appellants wanted any relief in rrs
pect of their contentions which we h 1ve upheld but
because they wanted that the points in question
should be decided for the> guidance of the Tribunal
when it may have to deal with similar disputes bet
ween the parties fo future. Therefore, these two
appeals are, in substance dismissed. Parties will bear
their own costs.
That leaves Civil Appeal No. 302/59. In this
appeal, as we have already noticed, the Tribunal
has found the available surplus to be Rs.1,60,000
and it has directed that out of it Rs. 1.25 lakhs
should bA distributed as bonus for the relevant
year. One of the points which the Tribunal had to
consider in dealing with the respondents' claim for
bonus in this case was in regard to the life of the
machinery and it held that the normal economic
life of the printing machinery can be easily fixed at
20 year8. Then it proceeded to consider what
should be the period of spread over after the total
rehabilitation requirement is ascertained, and follow
ing its decision in the award from which Appeal
No. 419/60 arises, it purported to divide th" machi
ner.v into three categories and proceeded to make
ad hoc additions to the normal life of 20 years alrea
dy determined by it. We have already held that
this ad hoc addition to the normal life of the machi
nery as determined by the Tribunal is not justified.
It is conceded before us by the respondents that if
the addition thus made by the Tribunal is set aside,
then there would be no available surplus in the
hands of the appellant for the relevant year. In
that view of the matter, it is unnecf'ssary to con
sider the other points which the appellant wa.nteGI to
raise before us in the present appeal. On the ba~is
'"'
He n-"'"1
becrdaty, Soulh
lt1dit1 M UllWfllfs'
A1.roeiafion
v.
The Secrett:ry,
Coimbator1 Distrit;t
1'extilt Wtffklrs'
u.w.
Gt1jenir'1Mk•r J.
1962
~H..,,....,
S«retttrJ, S.U.
/"""' Jli/1...-,'
il•10ri4Ji011
...
'l'A1 S«:r•""'·
~'"" Dislri&t 7 ,.,;i, IF"'"'' um.
lllfl
Fdnoar;J I,
948 SUPREME COURT REPORTS (1962) SUPP. '
that the normal lifo of the printing machinery is
20 years, a divisor will have to be adopted and by
the adoption of the proper divisor it would follow
that there is no available surplus for the relavant
year. That is why the award passed by tho Tribu
nal directing the appellant to distribute Ra. 1.25
lakhs byway of bonus amongst its employees for the
year I !156-57 has to be set aside. The appeal is
accordingly allowed; but there would be no order as
to costs.
BIPAT GOPE
v.
STATE 0.1!' BIHAR
(.M. Hm..i.YA.TULLAH and J.C. S.ILUI, JJ.)
Criminal Prowlure-CommiUmml proettding-Ortlu of
di4cltatr;e l>y M agi4trate, First Ola&, after trying tlae wlwk caae
-Procedure under s. 207A(6), Criminal Procedure Code
Jol/Dwt4-l/ in ezcuo of jurisdktio-Code of CrimiMl P..-.
dure, 1898 (Act V of 1898), s, 207..4(6).
In procccdinl!.' under s. 207A(6) of the Code of Criminal
Proccdwe the Magistrate discharged the accused after record
ing the evidenc~ in the case. The High Court on rev.illon set
aside the order and directed the Magfatrate to commit the
accused to stand trial before the court of scssbn. The Magia
trate examined witnesses, held spot inspection. He did not
stop to find out if there was evidence which, if believed, would
establish, at least, a prima facie case, but went on further to
disbelieve that evidence, by an elaborate and paimtaldng
process of examination, in aid of which he brought to bear his
own appraisal of inconsistencies, improbabilities etc. In •hort,
he tried the whole case from one and to the other and esta
blished his point in a fairly elaborate order.
Held, that the jumdiction conferred by sub-s. (6) of
s. 207 A, does not entitle the Magistrate to try the case on his
own, and forestall the drcision of the court of session. The
order of discharge passed by him in the present case, therefore,
wu in cxccas of jurladic:tion, and muat he set aside.
,
I
)