Workmen Of Joint Steamer Companies vs Joint Steamer Companies

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 29 April 1963

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

The Court noted that the two appeals presented a complex question concerning the entitlement to a bonus for workmen employed in an industry that operated both within India and in foreign territory. The appellants were identified as the workmen employed by two steamer enterprises, namely the Indian General Navigation and Railway Company Limited and the Rivers Steam Navigation Company Limited, which had, for many years, functioned jointly and were therefore collectively referred to as the “Joint Steamer Companies.” Disputes emerged between these companies and their employees regarding the award of a bonus for the fiscal years 1949, 1950, 1951 and 1952. In response, the Government of West Bengal issued two separate orders referring the matters to the Industrial Tribunal—one order addressing the bonus dispute for 1949‑1950 and another order concerning the dispute for 1951‑1952. The Tribunal dealt with both references in a single judgment and rejected the workmen’s claim for a bonus for all four years. The Labour Appellate Tribunal affirmed that rejection, albeit on different grounds, and the present appeals were filed against that decision pursuant to special leave granted by this Court. The Court further observed that the respondent companies had been established more than a hundred years earlier and, for more than fifty years prior to the partition of India, had conducted a transport business in the eastern region of the country in cooperation with one another. Their operations involved the carriage of goods and passengers on six hundred to seven hundred vessels navigating the Ganges, the Brahmaputra and their tributaries. After the partition, the business continued despite the emergence of a portion of the State of Pakistan lying between Assam and the rest of India. During the period under consideration, namely 1949 to 1952, the companies’ principal traffic remained as before and comprised three categories: traffic wholly within India, traffic wholly within Pakistan, and traffic crossing the border between India and Pakistan. The headquarters of the companies remained at Calcutta throughout this period, and the large fleet of vessels was employed in common for voyages originating in Pakistan as well as for voyages originating in East Bengal and Assam, so that no substantial segment of the fleet could be described as being used exclusively in one country or the other. The workmen based their claim for a bonus largely on the argument that the companies had earned considerable profits from their operations in India, and that the workmen had contributed to those profits and therefore deserved a share in the form of a bonus. In opposition to this claim, the companies contended that the transport activities they conducted constituted a single, integrated industrial undertaking spanning both India and Pakistan, and that the overall result of the entire business had to be considered when determining the entitlement to a bonus.

The companies contended that the transport activities carried out in India and Pakistan constituted one single, integrated industrial undertaking and that the overall result of the entire business must be taken into account when deciding the question of bonus. They argued that if the principles for ascertaining a profit‑bonus embodied in the Full Bench Formula, as finally crystallised by this Court in the Associated Cement Companies’ Case ([1959] S.C.R. 925.), were applied to the combined operations, the calculation would show that no surplus remained available for distribution as bonus. To demonstrate this position, the companies produced charts that illustrated their version of the surplus calculation performed in accordance with the Full Bench Formula.

The counsel for the workmen admitted before the Appellate Tribunal that, if the Full Bench Formula were to be applied to the surplus based on the profits of the companies derived from the whole business in India and Pakistan, they would have no claim for bonus. Their submission was that the Full Bench Formula should be applied only to profits earned in West Bengal, or at the very least to profits earned in India, excluding Pakistan, which was a foreign country. The Appellate Tribunal accepted the companies’ argument and, consequently, rejected the workmen’s claim for a bonus. Before this Court, the principal dispute remained whether the Full Bench Formula must be applied to the aggregate results of the companies’ operations in both India and Pakistan, or only to the results of the operations carried out in India. The Court observed that when all the operations form parts of one integrated industrial activity, there is ordinarily no justification for limiting the bonus calculation to the Indian operations alone. The Court noted that the question of whether different operations undertaken by the same employer constitute a single integrated industrial activity has frequently been examined in industrial adjudication. In a series of decisions, the Court has outlined several tests that assist in making this determination, including the integrality of functions, inter‑dependence of finance, common control and management, common manpower and the manner of recruitment and discipline, and whether the employer himself has treated the various parts as a single unit. The Court further emphasized that reliance on a single test should be avoided; the relative weight to be given to each test depends on the facts of the particular case and the nature of the industrial activity. The Court cited several authorities supporting this approach, namely A.C.C. Ltd. v. Their Workmen (1960 (1) L.L.J. 1), Pratap Press v. Their Workmen (1960 (1) L.L.J. 497), The Management of Pakshiraja Studio v. Their Workmen (1916 (3) F.L.R. 369), Fine Knitting Co., Ltd. v. I.C. (1962 (1) L.L.J. 275), and D.C.M. Chemical Works v. Its Workmen (1962 (1) L.L.J. 388).

In this case the Court observed that it is common for a single employer to carry out the same industrial activity at more than one location, and that a question then arises as to whether the operations at the different locations constitute one unit or separate units. The Court gave the example of a cement‑manufacturing company that establishes two factories, one at location A and another at location B. The Court explained that the two factories could be regarded as distinct and separate units, so that a claim for bonus by the workmen of factory A would be decided on the basis of the results of factory A alone and not on the combined results of factories A and B. The Court further stated that it would make no difference if one of the factories were situated in India and the other in a foreign country, because the separate items of profit and loss could still be identified for the purpose of applying the Full Bench Formula.

The Court then turned to the situation of a company engaged in a transport business that operates between two places. It found it difficult to regard the operations at the two places as different and distinct industrial activities. The Court noted that it was unnecessary to examine in detail the various tests previously laid down for determining whether the company’s operations in Pakistan and in India formed two separate units or a single unit, because counsel for the appellants, Mr Chatterjee, did not seriously argue that they were separate units. Nevertheless, Mr Chatterjee argued vigorously that, even if the Indian and Pakistani operations were part of one integrated industrial activity, a method should still be found to separate the two sets of operations for the application of the Full Bench Formula.

Mr Chatterjee contended that the bulk of the company’s operations were carried out in India. He relied on the company’s own witness, who admitted that sixty‑one point four percent of the total receipts were earned in India. The Court agreed that it was reasonable to infer that most of the traffic also moved from one point in India to another point in India. The workmen argued that a careful examination of the company’s accounts would show that the Indian traffic generated considerable profits, and that it would be unfair to deny them a share of those profits in the form of a bonus merely because other operations—whether carried out within Pakistan or between India and Pakistan—had incurred losses. It was further suggested that the conditions in Pakistan were markedly different from those in India, and that it would be a denial of justice to bind the Indian workmen to the results of the Pakistani operations. The Court found that these submissions possessed considerable force, and indicated that it might be prepared to consider whether principles could be developed for applying the Full Bench Formula to such peculiar circumstances.

In this case, the Court observed that the record did not provide sufficient assistance to formulate a rule for the unusual conditions presented. The evidence placed before the Court offered only limited help, a fact that became especially apparent when the Court attempted to apply the Full Bench Formula to the factual circumstances of the dispute. At the outset of the enquiry, the Court faced the problem of determining the profits attributable to the companies’ “Indian operations.” The Court noted that even if it were assumed that all freight and fare receipts arising from traffic that originated in India could be treated as receipts of the Indian operations, such an approximation could not be extended to the allocation of the related expenditure. The same vessel might, for example, transport cargo from Calcutta to Dibrugarh in Assam, both points within India, while also carrying traffic from Calcutta to destinations in Pakistan and from points in Pakistan to Assam. The evidence on the record did not indicate how the total expenditure incurred by such vessels should be divided between purely Indian traffic and the remainder of the traffic.

The Court then turned to the argument raised by counsel who referred to a Government of India notification dated 10 December 1947. That notification implemented an agreement between the Governments of the Dominion of India and the Dominion of Pakistan for the avoidance of double taxation of income. Counsel suggested that the principles emerging from that agreement, which prescribe how to calculate the share of total income attributable to each Dominion for enterprises operating in both countries, might be conveniently applied to determine the profits of the Indian operations for the purposes of the Full Bench Formula. The Court found it difficult to accept that an agreement designed specifically for the administration of the Income‑Tax Act could provide a just and appropriate basis for computing profits in the context of the Full Bench Formula for bonus entitlement.

Even assuming that the agreement offered some guidance on the calculation of profits for the companies’ Indian activities, the Court identified further obstacles to applying the Full Bench Formula. One such obstacle concerned the calculation of the paid‑up capital on which interest could be allowed. The Court observed that the record made no distinction between vessels employed exclusively for Indian operations and those used for traffic within Pakistan or between India and Pakistan. As previously noted, a single vessel often carried cargo for both Indian and Pakistani destinations. Consequently, from the evidence available, the Court could not ascertain what portion of the companies’ total paid‑up capital, nor the extent of working capital, could be reasonably said to have been employed for the Indian operations.

The Court observed that it was impossible to determine how much of the companies’ paid‑up capital had actually been employed in the Indian operations because no distinction was drawn in the evidence between vessels used solely for Indian traffic and those that also served Pakistani routes. The same vessel often carried cargo for both Indian and Pakistani destinations in a single voyage, and there was no record indicating which portion of the total paid‑up capital could be allocated to Indian activities. Similarly, the Court found that the extent of working capital devoted to Indian operations could not be ascertained. Because of these uncertainties, the Court held that it could not calculate any specific figure for the prior charges that should be deducted for interest on paid‑up capital and interest on working capital. The assessment of the amount required for rehabilitation presented an equally formidable problem. The bulk of the capital needing rehabilitation consisted of the vessels that transported goods and passengers. Even if the total fleet, estimated at six hundred to seven hundred vessels, had been clearly earmarked for exclusively Indian service, the Court could have attempted to determine the rehabilitation requirement. However, no such earmarking existed. Moreover, the evidence showed that a single vessel might be used for purely Indian traffic on one trip and for Pakistani traffic on another, and that vessels occasionally shifted from Pakistani to Indian service. In the absence of reliable data, the Court concluded that it could not isolate the amount of rehabilitation needed for the capital employed solely in Indian operations.

Learning of these difficulties, counsel for the appellant requested that the Court devise a method for applying the Full Bench Formula to the Indian portion of the companies’ business. Counsel admitted that he could not propose a concrete solution, other than suggesting that income, expenditure, paid‑up capital and working capital be apportioned between Indian and Pakistani operations. The Court noted the obstacles to such apportionment that had already been discussed. Nonetheless, the Court did not declare the task absolutely impossible; it suggested that in a different case, parties might present expert testimony from actuaries, accountants or other specialists, enabling a tribunal to compute reasonably accurate figures for the Indian business under the Full Bench Formula. Based on the material presently before it, however, the Court was unable to apply the formula to only a part of the total operations. Consequently, the Court affirmed the Labour Appellate Tribunal’s decision to reject the workmen’s claims for bonus for the years 1949, 1950, 1951 and 1952. Before concluding the appeals, the Court addressed a vigorous complaint lodged by Mr Chatterjee, who alleged that the workmen had not received a fair hearing because they were denied access to certain account books they wished to review. The Court indicated that even if those books had been made available, the existing record would still have been insufficient to derive proper figures for the components of the Full Bench Formula, while also emphasizing the importance of both employers and workmen providing all relevant documents to industrial adjudication processes.

The Court observed that the workmen and their representatives had not been allowed to inspect certain account books that they had sought to consult. It considered it necessary to assess whether this grievance was justified. The Court held that, even if those account books had been made available, the material on record would still be insufficient to calculate accurate figures for the various components required by the Full Bench Formula. Nevertheless, the Court stressed that both employers and workmen should make all pertinent documents, including such account books, available to the industrial adjudicating authority so that a proper decision on the issues could be reached. The Court noted that section 21 of the Industrial Disputes Act provides substantial protection for information that a party wishes to keep confidential. When workmen or their representatives request inspection of such papers, the employer is ordinarily expected to comply with the request, subject to the confidentiality safeguards contemplated in section 21. Upon any such request, the Tribunal must exercise its judicial discretion, and, in the absence of special circumstances, it would normally be appropriate for the Tribunal to direct the employer to grant the workmen reasonable access to all relevant documents.

The Court further stated that, having examined the record, it concluded that the Appellate Tribunal had correctly rejected the workmen’s claim for bonus. Consequently, the appeals were dismissed. The Court ordered that no costs would be awarded to either side.