The Management Of The Trichinopoly... vs The National Cotton Textile Mill...

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

Court: supreme-court

Case Number: Not extracted

Decision Date: 13 January, 1960

Coram: P.B. Gajendragadkar, K. Subba Rao, K.C. Das Gupta

The Management of the Trichinopoly Mills Limited, the appellant, filed a special leave appeal before the Supreme Court of India against a decision of the Labour Appellate Tribunal. The dispute concerned a claim for bonus made by the workmen, the respondents, for the year 1951. The respondents sought a bonus equal to six months’ wages, including dearness allowance, while the appellant denied any liability to grant such a bonus. The matter was initially referred to the Industrial Tribunal at Madurai, which directed the appellant to pay the respondents a bonus of four months’ basic wages for the relevant year. Dissatisfied with that award, the respondents appealed to the Labour Appellate Tribunal, contending that the circumstances warranted a substantially larger bonus. The appellate tribunal accepted the respondents’ argument in large part and increased the bonus from four months’ basic wages to eight months’ basic wages. The appellant now challenges that increased award, having obtained special leave to appeal the decision of the Labour Appellate Tribunal.

The appellant, represented by counsel, raised two principal contentions. First, it argued that the Labour Appellate Tribunal erred in awarding only Rs 66,948 as rehabilitation and replacement charges, insisting that the correct amount should have been fixed at Rs 1,61,780. Second, the appellant submitted that even if the tribunal’s findings on the bonus were accepted, the increase to eight months’ basic wages was unreasonable. Regarding the rehabilitation claim, the appellant offered no direct evidence to support its figure, instead relying on a previous award concerning a bonus claim for the year 1948. The respondents, on the other hand, referred to an earlier award relating to a bonus claim for the year 1950. The Industrial Tribunal had held that the 1948 decision was binding and should guide the present claim, whereas the Labour Appellate Tribunal chose to base its calculation on the 1950 decision. Established jurisprudence requires the employer to prove the amount claimed under rehabilitation and replacement charges by satisfactory evidence. In the present proceedings, the appellant failed to produce such evidence, relying instead on statements made by its secretary, which the Court found insufficient to determine the merits of the rehabilitation claim.

In the matter of the appellant’s claim for rehabilitation and replacement charges, the Court observed that the evidence presented in the present proceedings was wholly inadequate. Although the appellant’s Secretary, Mr H Srinivasa Rao, gave oral testimony in his evidence‑in‑chief, the Court found that his statements did not satisfy the evidential requirements needed to assess the claim. Mr Rao alleged that the current cost of replacing the mill machinery, if it were to be replaced, would be Rs 16,65,000 c.i.f. He further stated that the value of the existing general‑purpose machinery might be Rs 22,00,000 and that the value of the existing electrical machinery might be about Rs 6,00,000. In support of these figures he produced Exhibit M‑11, which contained quotations that the appellant had received in 1950. The Court noted, however, that the witness failed to give any evidence concerning the probable useful life of the machinery or its condition during the relevant year. Without such information, the Court held that it was impossible to determine the appropriate rehabilitation charges on the basis of the material offered. Consequently, the Court rejected the contention that the witness’s evidence provided a legal and reliable foundation for deciding the disputed issue.

The discussion then turned to the problem of which of the two earlier decisions should be regarded as providing the more satisfactory guidance for the present dispute. The tribunal and the Labour Appellate Tribunal had reached opposite conclusions on this point. The Court expressed a general reluctance to interfere with the findings of the Labour Appellate Tribunal, and even if it were inclined to favour the tribunal’s view, it could not identify any merit‑based reason to overturn the appellate tribunal’s approach. The Court acknowledged that the doctrine of res judicata could not be applied rigidly to such issues, yet it also recognised that industrial tribunals should not alter rehabilitation amounts from year to year without a sufficient justification. The Labour Appellate Tribunal had observed that, when the dispute concerning the 1950 bonus was pending, the appellant itself had suggested that that dispute be decided only after the earlier 1948 dispute, then before the Labour Appellate Tribunal, was finally resolved. The appellant conceded that a definitive decision on the 1948 matter would aid in resolving the later dispute. Moreover, the appellate tribunal had, for the first time, accepted a statement presented during the 1948 proceedings indicating the appellant’s rehabilitation claim of Rs 1,75,000, without giving the respondents a clear opportunity to challenge the accuracy of that figure. In view of these considerations, the Court found that the Labour Appellate Tribunal’s reliance on the 1950 decision could not be successfully challenged, and therefore there was no justification for overturning its direction on the rehabilitation and replacement charges.

The Court observed that no justification could be found for the grievance raised by the appellant in an appeal under Article 136, and therefore it was not inclined to disturb the direction of the Labour Appellate Tribunal which held that, with respect to rehabilitation and replacement charges, the appellant was entitled to claim Rs 66,948 rather than Rs 1,61,780. The Court noted that there was no dispute between the parties concerning replacement and rehabilitation charges for buildings. The next issue for consideration was whether, on the basis of the findings recorded, the Labour Appellate Tribunal was justified in allowing a bonus equal to eight months’ basic wages to the respondents. According to the Tribunal’s findings, the initial surplus available amounted to Rs 6,65,963. After deducting four prior charges, the amount left for distribution was Rs 2,22,473. From this sum the Tribunal directed that Rs 1,28,000 be distributed to the respondents as bonus, leaving a balance of Rs 94,473 with the appellant. To this balance the appellant was to add a rebate of income tax of Rs 59,714, which the grant of bonus entitled it to claim, resulting in a total of Rs 1,54,187 remaining with the appellant. Counsel for the appellant, Mr Sastri, contended that the award of an eight‑month bonus was unreasonably high and should be reduced. He pointed out that the respondents had claimed a six‑month bonus on the assumption that the calculation would be based on basic wages plus dearness allowance, and therefore the Tribunal had not granted the respondents more than they had claimed. Mr Sastri further argued that the Tribunal had provided no reasons for its direction on the payment of bonus, making it difficult to determine whether the surplus distribution had properly taken into account the three competing claims of the employer, the shareholders and the labour. He also emphasized that granting a bonus of eight months’ basic wages when the available surplus was less than Rs 3,00,000 was unusual. In support of his position, Mr Sastri relied heavily on the decision of the Labour Appellate Tribunal in Mettur Industries Ltd. v. Their Workmen, 1957‑2 Lab LJ 490, noting that one of the members of the Tribunal that decided the present dispute had, in substance, explained the present decision on the ground that certain relevant considerations had not been pressed before the Tribunal when it decided the case. The Court recognized that there were observations in the Mettur Industries judgment on which Mr Sastri was entitled to rely, and it was therefore conceded that the award of an eight‑month bonus might have been made without taking into account all relevant factors.

The Court observed that the award of eight months’ bonus may perhaps have been made without taking into account all relevant factors, but the question remained as to what order could be made on the present appeal. It noted that, as recently pointed out in the case of Associated Cement Companies Limited, Dwarka v. Its Workmen, the distribution of any available surplus must be determined in the light of several relevant facts. The Court further observed that the record of the present appeal contained no material that could assist it in applying the tests laid down in that precedent. Consequently, the Court found it difficult to decide what proper amount of bonus the respondents were entitled to in the present dispute.

The Court considered the contention of Mr. Sastri that the decision of the Labour Appellate Tribunal did not disclose the reasons on which the distribution was ordered. It asked how the Court could substitute that order of distribution by any other order without assistance of relevant material. In view of these limitations, the Court directed that the present award should not be treated as a precedent for deciding similar disputes between the parties in the future. The Court emphasized that the quantum of bonus to be paid to workmen in any such dispute must inevitably depend on the facts of each case, and that proper and adequate evidence had not been led in the present proceedings.

The Court acknowledged that when the Labour Appellate Tribunal reduced the amount of rehabilitation and replacement from Rs. 1,61,780 as ordered by the tribunal to Rs. 66,948, a case was obviously made for increasing the award of bonus to an amount higher than the four months’ basic wages granted under the award. However, the Court found it difficult to pronounce a judgment on whether the increase should have been to six months, seven months, or eight months of basic wages because of the paucity of relevant material available on the record. Accordingly, the Court concluded that the appellant was not entitled to ask for alteration of the award in question. The appeal therefore failed and was dismissed, and no order as to costs was made in the circumstances of the case.