Workmen Of Joint Steamercompanies vs Joint Steamer Companies

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 811 and 812 of 1962

Decision Date: 29 April 1963

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

The case was titled Workmen of Joint Steamer Companies versus Joint Steamer Companies and was decided by the Supreme Court of India on the 29th of April, 1963. The judgment was authored by Justice K. C. Das Gupta and the bench comprised Justices K. C. Das Gupta, P. B. Gajendragadkar and K. N. Wanchoo. The petitioner was the workmen of the Joint Steamer Companies and the respondent was the Joint Steamer Companies themselves. The decision is reported in 1963 AIR 1710 and 1964 SCR (3) 456. The matters involved pertained to an industrial dispute concerning the payment of bonus under the Industrial Disputes Act, 1947, particularly Section 21, and required application of the Full Bench Formula to assess the integrated industrial activity of a company operating in both India and Pakistan.

The respondent companies were engaged in a transport business that operated in the eastern part of the country in cooperation with one another, a relationship that continued after the partition of India. During the years 1949 to 1952 the principal traffic of the companies remained as before and comprised three categories: (a) traffic wholly within India; (b) traffic wholly with Pakistan; and (c) traffic between India and Pakistan. The large fleet of vessels employed by the companies was used commonly for voyages originating in Pakistan as well as for voyages originating in the Indian regions of West Bengal and Assam. Consequently, no substantial portion of the fleet could be identified as being devoted exclusively to operations in one country or the other.

The workmen claimed that they were entitled to a bonus for each of the four years in question. Their dispute was initially referred to an Industrial Tribunal, which rejected the claim. The Labour Appellate Tribunal subsequently affirmed the Tribunal’s order. The workmen then obtained special leave to appeal before this Court. The principal issue on appeal was whether the Full Bench Formula should be applied on the basis of the combined results of the companies’ operations in both India and Pakistan, or solely on the results of the operations conducted within India. The appellants contended that, even if the operations in the two countries formed one integrated industrial activity, a method should still be found to separate the two sets of operations for the purpose of applying the Full Bench Formula.

The Court held that, after applying the tests previously laid down by this Court, the transport activities carried out by a single company between two distinct places could not be characterised as separate and distinct industrial activities at those places. In reaching this conclusion, the Court referred to several earlier decisions, namely Associated Cement Companies v. Their Workmen [1959] S.C.R. 925; 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 Studios v. Their Workmen (1961) 3 F.L.R. 369; Fine Knitting Co. Ltd. v. I.C. & Ors. (1962) 1 L.L.J. 275; and D. O. M. Chemical Works v. Its Work‑men (1962) 1 L.L.J. 388.

Further, the Court observed that, based on the materials placed on record in the present case,

In this case the Court stated that it could not apply the Full Bench Formula to only a portion of the total operations carried out by the companies in India and Pakistan, and therefore affirmed the Labour Appellate Tribunal’s decision to reject the workmen’s claim for bonus for the years 1949 to 1952. The Court observed that, subject to the protection afforded by section twenty‑one of the Industrial Disputes Act and in the absence of any special circumstances, a Tribunal exercising its judicial discretion would normally be justified in directing the employer to give the workmen reasonable access to all relevant documents. However, the Court noted that even if the accounting books had been produced to the workmen, the material on record would not have enabled a proper calculation of the various figures required by the Full Bench Formula. Consequently, the appeals were ordered to be dismissed.

The judgment was delivered in the Civil Appellate jurisdiction in Civil Appeals numbered 811 and 812 of 1962, which were filed by special leave against the judgment and order dated 31 May 1956 of the Lahore Appellate Tribunal of India at Calcutta in Appeals numbered Cal. 225 and 224 of 1955. Counsel for the appellants appeared on behalf of the workmen, while counsel for the respondents represented the two steamer companies. The opinion of the Court was authored by Justice Das Gupta.

The two appeals raised a difficult question concerning the grant of bonus to workmen employed in an industry that operated both within India and beyond its borders. The appellants were the workmen of two steamer companies, the Indian General Navigation and Railway Company Limited and the Rivers Steam Navigation Company Limited, which for many years had operated jointly and were therefore described as the “Joint Steamer Companies”. Disputes arose between the companies and their workmen regarding the entitlement to bonus for the years 1949, 1950, 1951 and 1952. The Government of West Bengal referred the disputes to the Industrial Tribunal by two separate orders of reference—one covering the years 1949 and 1950 and the other covering the years 1951 and 1952. The Tribunal dealt with both references in a single judgment and rejected the workmen’s claim for bonus for all four years. The Labour Appellate Tribunal affirmed that rejection, albeit on different grounds. The present appeals were filed against that decision after the Court granted special leave.

The respondent companies had been established more than a century ago and, for more than fifty years before the partition of India, they had conducted transport business in the eastern part of the country in cooperation with each other. Their business involved transporting goods and passengers in six hundred to seven hundred vessels that operated on the Ganges and the Brahmaputra rivers and their tributaries. This business continued after the partition of India, leading to the situation that gave rise to the present dispute.

A portion of the State of Pakistan lay between the region of Assam and the rest of India, thereby separating the two territories. During the period that is the subject of these proceedings, namely the years 1949 to 1952, the company’s traffic continued in the same pattern as before the separation. The traffic was categorised into three distinct streams: first, traffic that was wholly within the boundaries of India; second, traffic that was wholly within the boundaries of Pakistan; and third, traffic that crossed the frontier between India and Pakistan. Throughout this period the principal offices of the companies remained at Calcutta, as they had always been. The large fleet of vessels employed by the companies was largely shared for both the traffic that originated in Pakistan and the traffic that originated in East Bengal and Assam. Consequently, no substantial segment of the fleet could be described as being exclusively employed in either country.

The workmen’s claim for a bonus was fundamentally premised on the argument that the companies had earned considerable profits from their operations in India. The workmen asserted that, because they had contributed to those profitable operations, they were entitled to share in the surplus in the form of a bonus. In response, the companies contended that the transport business undertaken in India and in Pakistan constituted a single, integrated industrial undertaking. According to the companies, the total result of the entire business, taken as a whole, must be considered when determining the entitlement to a bonus. The companies further argued that, if the principles for ascertaining profit bonus embodied in the Full Bench Formula—principles that this Court had ultimately crystallised in the Associated Cement Companies case—were applied to the overall result, the calculation would reveal that no surplus remained available for distribution as a bonus. To substantiate this position, the companies produced charts that illustrated their method of calculating the available surplus in accordance with the Full Bench Formula.

The counsel representing the workmen, before the Appellate Tribunal, admitted that the workmen could not sustain a claim for a bonus if the Full Bench Formula were applied to the surplus derived from the total profits of the companies’ operations in both India and Pakistan. The workmen’s position was that the Full Bench Formula should be applied solely to the profits generated in West Bengal, or at the very least, to the profits generated within India, thereby excluding the portion of the business that took place in Pakistan, which the workmen characterised as a foreign country. The Appellate Tribunal accepted the companies’ argument and consequently rejected the workmen’s claim for a bonus.

The principal dispute that has persisted before both the Appellate Tribunal and this Court centres on whether the Full Bench Formula must be applied to the combined results of the companies’ operations in India and Pakistan, or whether it should be applied only to the results of the operations carried out within India. If all of the operations are indeed parts of a single integrated industrial activity, there would ordinarily be no justification for limiting the bonus calculation to the Indian operations alone. The issue of whether distinct operations conducted by the same employer constitute one integrated industrial activity has been examined repeatedly in industrial adjudication, and this Court has also been called upon to consider that question on numerous occasions.

The Court observed that it had addressed the question of whether different operations of the same employer constitute a single integrated industrial activity on several occasions. In those earlier decisions the Court had set out a number of analytical tests that could assist in making that determination. Among the tests mentioned were the integrality of functions, the inter‑dependence of finance, the commonality of control and management, the commonality of manpower as well as the methods of recruitment and discipline applied to that labour, and whether the employer himself had treated the various parts as forming one unit. The Court emphasized that it was normally inappropriate to apply a single test in preference to the others; instead the weight to be given to each factor must be decided according to the particular facts of each case and the nature of the industrial activity involved. The Court cited several authorities that had articulated these principles, namely A.C.C. Ltd. v. Their Workmen (1), Pratap Press v. Their Workmen (2), The Management of Pakshiraja Studio v. Their Workmen (8), Fine Knitting Co., Ltd. v. I.C. (4) and D. C. M. Chemical Works v. Its Workmen (5). The Court noted that it is common for an employer to carry on the same industrial activity at different locations, and that a factual enquiry is required to decide whether the units at those locations constitute a single operation or are distinct and separate. For example, when a cement manufacturer starts two factories at places A and B, the two plants may be regarded as separate entities, so that the bonus claim of the workers at factory A would be assessed on the results of factory A alone and not on the combined performance of factories A and B. The Court added that the geographical character of the locations—whether one is in India and the other in a foreign country—does not, by itself, alter the analysis; the same method of distinguishing the units can still be applied. The Court found it difficult to conceive how a transport business that moves goods between two places could be treated as two different industrial activities at those places. The Court therefore deemed it unnecessary to discuss in detail the application of the foregoing tests to the present facts concerning the companies’ operations in Pakistan and in India, because the counsel appearing for the appellants, Mr Chatterjee, had not seriously argued that the operations formed two separate units. Nevertheless, Mr Chatterjee strongly contended that even if the Indian and Pakistani operations were part of one integrated activity, a method should still be found to separate the two sets of operations for the purpose of applying the Full Bench Formula. He further argued that the bulk of the companies’ operations were carried out in India, as the companies themselves admitted that sixty‑one point four percent of total receipts originated in India, and that most of the traffic involved movement from one point in India to another point in India. The Court therefore noted the arguments raised regarding the possibility of distinguishing the Indian operations for bonus calculations.

In this case, the Court noted that a witness admitted that sixty‑one point four percent of the total receipts of the companies were earned in India. The Court found it reasonable to conclude that the larger portion of the traffic also moved between points located within India. The workmen argued that a careful examination of the companies’ accounts would demonstrate that the traffic whose origin and destination were both in India generated substantial profits for the companies, and that it would be unfair to deny the workmen 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. The workmen further suggested that the economic conditions in Pakistan differed markedly from those in India, and that it would constitute a denial of justice to bind the Indian workmen to the results of the Pakistani operations. The Court observed that these submissions possessed considerable force and therefore it might have been prepared to explore whether any principles could be fashioned for applying the Full Bench Formula to such unusual circumstances, provided the record supplied sufficient assistance. However, the Court stated that the evidence placed before it offered little help in that regard, a fact that became starkly evident when the Full Bench Formula was attempted to be applied to the facts of the case.

At the outset of that task, the Court encountered the difficulty of determining the profits attributable to the companies’ so‑called “Indian operations.” The Court assumed that whenever traffic originated in India, the freight and fare receipts from that traffic should be treated as the receipts of the Indian operations, yet even this approximation could not be extended to the allocation of the related expenditures. The Court explained that a single vessel might, for example, carry cargo from Calcutta to Dibrugarh in Assam—both Indian locations—and in the same voyage also transport cargo from Calcutta to ports in Pakistan or from Pakistani ports to destinations in Assam. The record contained no indication of how, under such circumstances, the total expenditure incurred by the vessel should be apportioned between purely Indian traffic and the remaining traffic.

Mr. Chatterjee, appearing for the appellants, directed the Court’s attention to a notification issued by the Government of India on December ten, nineteen forty‑seven, which implemented an agreement between the Government of the Dominion of India and the Government of the Dominion of Pakistan for the avoidance of double taxation of income. He suggested that the principles set out in that agreement for determining what proportion of total income each Dominion could tax with respect to enterprises operating in both countries might be conveniently employed to ascertain the profits of the Indian operations for the purpose of applying the Full Bench Formula. The Court found it difficult to see how an agreement designed specifically for tax purposes under the Income‑Tax Act could provide a just or appropriate basis for calculating profit shares required by the Full Bench Formula.

The Court observed that the agreement between the Governments of India and Pakistan, which was intended solely for matters under the Income‑tax Act, could not readily provide a fair or appropriate foundation for calculating profits for the purpose of the Full Bench Formula used to determine bonus. Even if the agreement offered some guidance concerning the method of computing profits attributable to the companies’ Indian operations, the Court noted that a number of further obstacles continued to hinder the application of the Full Bench Formula. The first difficulty concerned the calculation of the paid‑up capital on which interest could be permitted. The Court pointed out that the record made no distinction between vessels employed entirely for Indian voyages and vessels used for traffic wholly within Pakistan or for traffic that crossed the border between the two countries. It was also noted that, as previously mentioned, a single vessel often carried cargo for Indian destinations as well as for Pakistani destinations, sometimes on the same trip.

From the evidence before the Court, it was evident that there was no simple method for determining what share of the total paid‑up capital of the companies could be said to have been employed for Indian operations. The Court further explained that it was equally challenging to ascertain the amount of working capital that was actually utilized for the Indian segment of the business. Because these uncertainties could not be resolved, the Court held that it was impossible to compute any figure for the prior charges that should be deducted for interest on paid‑up capital and for interest on working capital.

The Court also found the assessment of the amount required for rehabilitation to be highly problematic. It explained that the principal component of the capital needing rehabilitation consisted of the vessels that carried goods and passengers. Had it been known that a specific portion of the total fleet of six hundred or seven hundred vessels was earmarked exclusively for Indian operations, the Court might have been able to estimate the rehabilitation costs for those vessels. However, the Court observed that no such earmarking existed. Moreover, the Court emphasized that the same vessel could be used in a single journey to transport goods destined for purely Indian traffic, for traffic within Pakistan, and for traffic between the two countries. In addition, vessels that were occasionally restricted to purely Pakistani traffic could, from time to time, be transferred to Indian traffic. Given these facts, the Court concluded that, with the material available, it could not determine the amount required for rehabilitating capital employed solely in Indian operations.

Counsel for the appellant was fully aware of these difficulties. Nevertheless, he requested that the Court seek a method for applying the Full Bench Formula to the companies’ Indian operations. The counsel was unable to propose a specific solution, but he suggested that a possible approach might involve apportioning the total income, total expenditure, paid‑up capital and working capital of the combined Indian and Pakistani operations between the two jurisdictions. The Court noted that the counsel’s suggestion raised further complications, which had already been identified in the discussion above, and that a satisfactory resolution remained elusive.

In this case, the Court reiterated the difficulties in apportioning the financial data that had been pointed out earlier. It clarified that, despite any effort, the task of separating the Indian portion of the companies’ total operations from the combined India‑Pakistan business was wholly impossible to achieve on the record before it. The Court observed that in a different proceeding the workmen might be able to produce evidence through expert witnesses such as actuaries or accountants, enabling a tribunal to compute reasonably accurate figures for the various components of the Full Bench Formula with respect to the Indian business. However, based on the material presently before the Court, it stated that it could not apply the Full Bench Formula to only a part of the overall operations of the companies in India and Pakistan. Consequently, the Court concluded that the Labour Appellate Tribunal had correctly rejected the workmen’s claim for bonus for the years 1949, 1950, 1951 and 1952. Before disposing of the appeals, the Court addressed a vigorous complaint raised by Mr. Chatterjee, who asserted that the workmen and their representatives had been denied a fair hearing because they were not allowed to inspect certain account books they wished to consult. The Court examined the merit of that complaint and held that, even if the account books had been made available, the existing record still would not have permitted the calculation of accurate figures required by the Full Bench Formula. Nevertheless, the Court emphasized the importance of both employers and workmen furnishing all relevant documents, including account books, to any industrial adjudicating authority, as such papers may assist in reaching a proper decision. It noted that section 21 of the Industrial Disputes Act provides sufficient protection for confidential information, but where workmen or their representatives request inspection of relevant papers, employers should ordinarily comply, subject to the safeguards of that provision. Upon such a request, the Tribunal must exercise its judicial discretion and, absent special circumstances, may justifiably order reasonable access to the pertinent documents. Having reached these conclusions, the Court affirmed that the Appellate Tribunal was correct in rejecting the bonus claim and accordingly dismissed the appeals without ordering costs.