MYSOHE KIRLOSKAR LIMITED versus WORKERS OF THE MYSORE KIRLOSKAR LIMITED

J.-Thisis an appeal by special leave in an industrial matter. There was a. dispute between the appellant and its workmen as to bonus for the year 11154-55. This dispute waa referred by the Govornmeµt of My11ore under the Industrial Disputes Act No. XIV of 1947) to a tribunal for adjudioation. A number of objections were raised by the appellant before the tribunal; but we are not concerned with them, as the law with respect to profit bonus has been settled by this Court in the Asaociated Cement Companies Ltd. v. Its workmen( The only point.II urged on behalf of the appellant by the learned Attorney-General are with respect to the amount of inoome-tax, return on working capital and provision for rehabilitation in connection with tho calculations made by the tribunal. We shall therefore confine ourselves to the three points which have been raised before us on behalf of the appellant.

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The tribunal allowed Rs. 1.67 laos for iucometax. The contention of the appellant is that this is incorrect in view of the decision of this Court in the .daaociated Cement Compniea Ltd.(') It appears that the gross profits of the appellant wore Rs.9.46 lacs, while the full statutory depreciation allowed to the appellant for the year in dispute was Re. 4.30 lacs. Thus income-tax should have been deduoted on the sum of Rs. 5.16 lacs at seven annas in the rupee, which was the rate prevalent in the relevant year. This amount comes to Its. 2.25 lacks. The contention of the appellant in this behalf is in our opinion correct and the calculation made by the tribunal will hiive to be modified accordingly.

pp. 376–377

The next question is about return on working capital. The dispute is both as to the rate of return and the amount on which it should be allo· wed. The tribunal has allowed three per cent on working capital. The appellant contends that the tribunal should have allowed four per cent. As was pointed out in the Associated Cement Companies' oose( the rate allowed by tribunals on working capital is between two to four per cent. In the present case the tribuna.1 has allowed three per cent. We do not think that there is any reason for us to inter. fore with the discretion of the tribunal in this matter though it is true that the recent trend of tribunals. is to allow four per cent return on. working capital.

p. 377

Turning now to the amount of working capital on which return should have been allowed, the appellant originally claimed that the amout used as working capital was Rs. 43.85 lacs. Latter however, a revised statement was put in and the amount was reduced to Rs. 36. 70 lac11.· The tribunal has however calculated the working capital used in the business as Rs. 7 .85 lacs. The main reason why the tribunal arrived at this figure was that it held that the amount in the depreciation reserve could not be treated as reserve used as working capital on which a return was admis· sible. It therefore excluded out of consideration the entire a.mount in the depreciation reserve which was Rs. 36.24 lacs in considering what sum had been used as working capital. This view of the tribunal is clearly incorrect in view of this Court's decision in The Tam Oil Milla Go. Ltd. v. Its Work· men. ("} In that case it wa.s pointed out that-

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"a return is allowed on the reserves used as working capital on the ground that if these reserves arc not used for this purpose, the concern would have to borrow mouoy and pay intor!'st on that. This being the basis on which a return on reserves used as working capital is allowed, there is no reason why, if there is in fact money a vilable in the depreciation reserve and if that money is artually used during the year as working capital a return should

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not be ~llowed on such money also." The same view was taken by tllis Court in l'etlad Turkey Red /Jye Works Ltd. v. Dyes and ()hernical Workers' Unum('), where it was emphasised that the balanoo-sheet did not by itself prove the fact of utilisation of reserve as working capital and the law required that sucha.n important fact as the utilisation of a portion of the reserve as working capital had to be proved by the employer by evidence given on affidavit or otherwise and after giving an opportunity to the workmen to contest the correctness of such evidence by cross-examination. Therefore the tribunal in this case was not right in excluding the amount in the depreciation reserve altogether from consideration on the ground that it was a re11erve for depreciation.

p. 378

Thie brings us to the question as- to what amount was actually used as working capital out of the reserve in tho relevant year. On that point there was the evidence of Shri i\I. S. Vartak who was the Secretary of the Appellant company. That evidence as to utilisation of the reserve a.a working ca.pit.al was accepted by the tribunal. The statement of Shri Vartak shows that the amount shown in the revised calculations as to the working capital was actually used as working capital during the year. Thus, according to this statement, Rs. 36. 70 lacs were used as working capital and the appellant claims return on that amount. It may be accepted that the sum of Rs. 36. 70 lacs was used as working capital by the appellant during the year; but we are of opinion that the appellant is not entitled to a return on this entire amount, for the reason that this amount includes a sum of Hs. 14.56 lacs which was either borrowed by the appellant or was in deposit with it, on which the ftppellant was paying interest. The appellant therefore cannot claim further interest on this borrowed amount which has been used as working capital, for it has already paid interest on it to those from whom it was borrowed and this has been taken into account as expsnse in arriving at the groBB profits. As was pointed out in The Tata Oil Mills Oo.s' case ('), the basis for giving a return on reserves used as working capital is that otherwise money would have to be borrowed for that purpose. Where borrowed money is used as working capital there is no question of giving any further rnturn on this borrowed money. The return on reserves used at working capital can only be given on moneys .belonging to the company whioh are used as working capital. Therefore, though Rs. 36.70 lacs might have actually been used as working capital in the relevant year, Rs. 14.56 lacs were borrowed money on which interest was paid. There is no question therefore of any further return on this amount as prior charge. Thus the amount on which the appellant is entitled to the return on working capital as a prior charge is Rs. 36.70 lacs minus Rs. 14.56 lacs, i.e. Rs. 22. 14 lacs. The return on this amount at three per cent comes to .66 lacs and the calculations made by the tribunal would have to be corrected accordingly.

pp. 378–379

Turning now to the claim for rehabilitation it is enough to say that n0 evidence as to rehabilitation waa led in this case. It may be that this was because the appellant expected that the claim it was making on other items of prior charges would be suffi. oient to resist the claim for further bonus besides one month's bonus already paid. Tho learned Attorney· General therefore submitted that the case might be remanded to enable the appellant to lead ovidance on tho question of rehabilitation. Tho dispute relates to the year 1954-55 and we think it is too la.to now to make a remand in order to determine this question. We should however like to make it clear that the fa.ct that no evidence as to rehabilitation wa.s led in this ye~r will not preclude the appellant from leading evidence as to the amount which should be allowed to it as prior charge on account of reh9.bilitation, in any subsequent dispute as to -bonus relating to subsequent years. In the present case, however, it is not possible to allow any amount for rehabilitation as a prior charge.

pp. 379–380

The final calculations therefore after the corrections made by us a.re as below :

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In Lacs Gross Profits

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Rs. 9.46 Deduct-National norrual depreciation...... 3.32

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Balanoe 6.14 Deduct-income- tax 2.25

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Balance 3.89 Deduct-return on paid up capital 1.33

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Balance 2.56 Deduct-return on working capital at 3% .66

p. 380

Available l!lll'plus 1.90 The ave.ile.ble surplus therefore for this year must bi: held to be Rs. 1.90 lacs roughly. One month's wages come to roughly Rs. ·64 lacs. It seems to therefore that it will be _fair ~o a.ll?W ll months' wages as bonus for this year, which would come to about Rs .. 96 lacs. The a.ppella.nt will get some rebate on that from the inoome·tax department. We are therefore of opinion that the workmen are entitled to an additional bonus for half a month for this year.

pp. 380–381

We therefore partly allow the appeal and reduce the additional bonus from one month to half a month. In the circumstances we order the parties to bear their own cost~.

p. 381

Appeal allowed. BIDI, BIDI LEAVES' AND TOBACCO MERCHANTS ASSOCIATION

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v.

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THE STATE OF BOMBAY (P. B. A. K.

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K. N. K. C. and N. JJ.)

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Wages-Bidi of

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and

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The June of and of

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bad and The that of

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of p~wers

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