Bharat Barrel and Drum Mfg Co. vs Govind Gopal Waghmare and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 93 of 1959

Decision Date: 24 March 1960

Coram: K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta

In the matter titled Bharat Barrel And Drum Mfg. Co. Private Ltd. versus Govind Gopal Waghmare and Another, the Supreme Court of India delivered its judgment on 24 March 1960. The judgment was authored by Justice K.N. Wanchoo, who sat on the bench together with Justices P.B. Gajendragadkar and K.C. Das Gupta. The case was recorded as Civil Appeal No. 93 of 1959 and was heard by special leave from the award dated 13 May 1957 rendered by the Industrial Tribunal, Bombay, in Reference (I.T.) No. 166 of 1955. The appellant was represented by counsel consisting of R. J. Kolah, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, while the respondents, numbered one and two, were represented by counsel K. B. Chaudhury and Janardan Sharma.

The headnote of the judgment summarized the dispute as follows: the workmen of the appellant company claimed four months’ wages, including dearness allowance as a bonus for the year 1952, and they sought the retrospective operation of an increased wage scale that the Industrial Tribunal was to fix from 1 March 1952. The appellant accepted the wage scale recommended by the Tribunal but insisted that it be linked to a guaranteed level of production and contested its retrospective effect on the ground that the workmen had deliberately slowed production in earlier years. The Tribunal observed that there was some justification for the appellant’s contention that a considerable go‑slow had impaired production. Accordingly, the Tribunal ordered that the retrospective effect of the wage increase should commence from 1 June 1956, rather than from 1 March 1952 as the workmen claimed, and that the increased wages would not be tied to any guaranteed production, though the workers agreed to maintain reasonable production levels. The Tribunal also awarded five months’ basic wages as a bonus, applying the Full Bench formula that is generally employed in such matters. On appeal, the Supreme Court held that there was no reason to interfere with the Tribunal’s decision to fix 1 June 1956 as the date from which the increased wages would become effective, and it affirmed that the Tribunal possessed the jurisdiction to award five months’ basic wages as a bonus. Regarding the Full Bench formula, the Court explained that the amount of income‑tax payable must be deducted based on the figures calculated under the formula, and that the actual income‑tax paid, whether in excess or deficiency, is immaterial for this purpose.

In this dispute, the appellant was a company that manufactured barrels and drums in Bombay. A disagreement arose between the appellant and its workmen concerning several matters, and the Government of Bombay referred the dispute to the Industrial Tribunal on 17 November 1955. The workmen raised two specific claims before the tribunal: first, they sought four months’ wages, including dearness allowance, to be paid as a bonus for the year 1952; second, they asked that the wage scale to be fixed by the tribunal be applied retrospectively from 1 March 1952. Regarding the increase in wages, the appellant accepted the wage scale suggested by the tribunal but objected to any retrospective application of that increased scale. The appellant also insisted that any increase in wages should be tied to a guaranteed level of production because it believed that the workmen had deliberately reduced output in earlier years. The tribunal accepted that there was some justification for the appellant’s claim that a considerable go‑slow had affected production. Taking this view, the tribunal ordered that the retrospective effect of its award, which was pronounced on 13 May 1957, be deemed to commence from 1 June 1956. Although the tribunal found it difficult to prescribe a specific norm for linking the increased wages to a guaranteed production figure, it clarified that the increase was granted on the premise that the workers would achieve a reasonable level of production and noted that the workers appeared willing to do so. The tribunal further recommended that, immediately after the award, an expert be appointed by mutual agreement, if possible, to examine the production‑linkage issue; if agreement could not be reached, the tribunal said the appellant could appoint an expert. The appellant now contended before this Court that, because the tribunal had recognized the existence of a go‑slow, the tribunal should not have granted any retrospective effect to the order concerning the wage increase. The tribunal, however, had examined the matter fully and concluded that the increase should take effect from 1 June 1956. The Court noted that this date could hardly be described as retrospective, considering that the reference to the tribunal had been made in November 1955, and the tribunal had expressly rejected the workmen’s request for retrospective operation for the period from March 1952 to May 1956, a period during which considerable go‑slow had been practiced. Consequently, the Court found no reason to interfere with the tribunal’s determination that the increased wages should become effective from 1 June 1956. This brings us to the next question relating to bonus. The tribunal has awarded five months’ basic wages by way of bonus. The first contention in this connection is that the workmen had

In the matter before the Court, the workmen had originally claimed a bonus that corresponded to four months’ basic wages together with dearness allowance. The tribunal, however, awarded a bonus equal to five months’ basic wages. This award was not limited by the workmen’s claim because the five‑month amount was, in fact, lower than the workmen’s total demand when the dearness allowance was taken into account. Consequently, the tribunal possessed proper jurisdiction to grant the amount it did. The Court then examined whether the tribunal was justified in applying the Full Bench formula, which is the usual method for determining bonus awards. The tribunal’s findings on profit and other deductions were not contested. It recorded a gross profit of Rs 5.05 lacs, allowed depreciation of Rs 1.36 lacs, leaving a balance of Rs 3.69 lacs. After deducting income‑tax calculated at seven annas in a rupee, i.e., Rs 1.61 lacs, the remaining sum was Rs 2.08 lacs. Interest on paid‑up capital at six per cent per annum together with four per cent interest on working capital amounted to Rs 16,000, reducing the surplus to Rs 1.92 lacs. From this surplus the tribunal assigned Rs 91,000 as five months’ basic wages to constitute the bonus, leaving a residual Rs 1.01 lacs. A rebate of Rs 40,000 was then permitted on this balance, resulting in a total of Rs 1.41 lacs remaining with the appellant. On the basis of these calculations, the Court found no error in the tribunal’s award of bonus and held that the award could not be interfered with.

The appellant raised two additional points. First, it asserted that the tribunal had failed to consider any amount for rehabilitation. The Court noted that the appellant had not produced evidence of a specific rehabilitation sum. The only figure presented by the appellant was an appropriation of Rs 3.16 lacs to depreciation, which did not represent the proper notional normal depreciation allowed under the formula. The workmen’s submission, recorded in Exhibit U‑4, included a rehabilitation allowance of Rs 40,000. Even if that concession is accepted and deducted from the surplus figures previously discussed, the appellant would still retain Rs 1.01 lacs after the payment of the five‑month bonus. Thus, the Court found no basis to alter the bonus award on the rehabilitation ground. Second, the appellant contended that an income‑tax assessment made after the tribunal’s order showed an actual tax liability of Rs 2.35 lacs, and that this actual amount should replace the notional tax figure of Rs 1.61 lacs used by the tribunal. The Court explained that, for the purpose of the Full Bench formula, the tax deduction must be derived from the notional calculations prescribed by the formula, not from the actual tax assessed by the revenue authorities. The actual assessment may differ because of items that the workmen challenged but the tribunal allowed as legitimate expenses. Since the tribunal’s role is to apply the formula based on its own calculations, the Court concluded that the appellant’s argument concerning the actual tax assessment does not warrant interference. Accordingly, the Court dismissed the appeal, ordered no costs, and affirmed the tribunal’s award of bonus.

The Court observed that it was irrelevant whether the actual income‑tax paid by the appellant was higher or lower than the notional amount used in the calculations. In the present case, the Court noted that the income‑tax figure appeared to be larger because certain expenditures that the workmen had contested were accepted by the tribunal as legitimate expenses, yet those same expenditures had not been treated as proper expenses by the income‑tax department. The Court emphasized that the industrial tribunal was not required to examine the assessment made by the income‑tax authorities for any specific financial year. Instead, the tribunal’s duty was to apply the Full Bench formula using the notional figures it had computed, and the tribunal had performed that exercise correctly in this matter. Accordingly, the Court found that there was no valid basis on which to interfere with the award of bonus on the ground of the income‑tax assessment. As a result, the appeal was dismissed. The Court further stated that, given the circumstances, no order as to costs would be made. The appellate relief was therefore denied and the matter concluded without any further monetary order.