The Management of Praga Industries Ltd., Coimbatore v. The Workers

##### S.C.R. SUPREME COURT REPORTS 161 view of the company's willingness to take them back. The appeal of the workmen on the question of rein statment fails and is hereby dismissed. We may, however, make it clear that payment made pursuant. to the order of this Court will not in any event be refundable or adjustable towards the future wages of those workmen who will be reinstated by the company. BGth the company and the workmen have raised otqer points in their respective grounds of appeal; but as they have not been pressed before us we· need ##### not say anything \vith respect to them. In these circumstances we are of opinion that both the parties will bear their own costs of this Court. _Appeal No. 317 allowed._ _Appeal No. 318 dismissed._ _r959_ _Shalimar W oYks_ _Limited._ v. _Their Workmen_ _Wanchoo_ _],_ _I9J9_ _2'day 8_ ##### THE MANAGEMENT OF PRAGA INDUSTRIES LTD., COIMBATORE _v._ ##### THE WORKERS (B. P. SINHA, P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.) _Industrial_ _Dispute-Award_ _by_ _consent-Interim increment of_ _wages_ _in lieu of fixation of_ _wage_ _structure-Such award, if open_ _to_ _challenge-Wage structure of piece-rate worlmien-JVhether entitled_ _to_ _annual increment-Machinery, land, building on lease-Rehabilita-_ _tion_ _charges,_ _if allowable-Bonus-Calculation of available siirplus._ The appellant was the lessee under Praga Industries and took on lease buildings and machinery for five years with option of renewal. The subject matter of dispute for arljudication was with regard to the questions about (1) the quantum of bonus payable to the workmen for the year 1954, and (2) fixation of scale of wages with graded annual increments for different categories of workmen., In view of the .fact that the· lease in its favour was due to expire shortly, the appellant had suggested to the Tribunal that the question of classifying the workmen into skilled and unskilled workmen and providing for systematic grades of pay with increments may conveniently be deferred to a future date; the 21 ##### 162 SUPREME COURT REPORTS [1960(1)) _z959_ respondents agreed to this proposal and so both the parties represented to the Tribunal that they wouid be satisfied if an _Tiu_ _.l\Ja1iagc111ent_ interiln order was n1adc providint;" for the increment in the wages _of Praga Industries_ of the \vork111en. Accordingly, tl1e 'fribunal refrained from fixing _Li11litcd._ any wage structure, and as an interim measure, ordered increment v. of wages at 4 per cent. and directed the appellant to grant such _The lVor!1ers_ an increment every year until the workmen \vere classified and their pay scales \Vere introduced to reach a particular maximum. _Gajendragadkar ]._ The above increment applied to the monthly, time and piece #### rated workmen. • The appellant challenged the propriety of the course adopted by the Tribunal and contended that the Tribunal was asked to fix a wage structure, but instead it had passed merely·an interim order \Vhich \Vas irregular. The appellant also contended that the claim for the additional bonus for the year 1954 by the workmen was not justified as the financial position of the appellant was not satisfactory, and it was in debts and had not even paid rent due to the lessor, and in fact, had ploughed back the amount of rent due into the business as working capital. The appellant also resisted the direction for pay1ncnt of bonus on the ground that the award involved an unfair distribution of the available surplus and claimed rehabilitation charges for the leased property an<l machinery and interest on the amount of unpaid rent. _Held,_ that \vherc the parties the1nsclvcs represented to the Tribunal that the question of classifying respondents into skilled and unskilled \vorkrncn and providing for systematic grades of pa:y \Vith incrcn1cnts may be conveniently deferred to a future date and they \vould be satisfied 'vith a reasonable interim order providing for increment in the \\'ages of the \vorkn1en, it \\·as not open to the parties to challenge the a\Yard based on such representation at a later stage. 'l'hat although generally a \\'age structure \vith annual incrc1ncnts '"·as not provided for piece rate \\·orkcrs, \vho are paid for the \VOrk they do, the rate of \vages fixed for such \Yorkers couhl ll'gitimatcly he revised on a proper case hcing 1nade out in that behalf. _Held_ _further,_ that \vhere an amount earmarked as due for payn1cnt for so1nc other purpose was utilised as \\·orking capita], it should carry interc:-t, even though sho,vn as liability in the profit and loss ar:count and the san1c should be taken into consideration for arriving at the surplus available for the purposes of bonus. 'fhat no prior charges for rehabilitation could be allo\ved \vherc land, machinery and building for business \vere taken on lease. \Vhere ne\v rnachinery \vas purchased tbe amount of rehahilitation was covered by the depreciation allowerl. C1v1L APPELLATE JuRISIHCTION: Civil Appeal .No. 226 of 1958, ##### S.C.R. SUPREME COURT REPORTS 163 Appeal by special leave· from the award dated May 30, 1957, of the Labour Court, Coimbatore, in Industrial Dispute No. 89 of 1955. _r959_ Industrial Dispute No. 89 of 1955. _The_ _Management_ _of Praga_ _Industries_ _A._ _V._ _V·iswanatha_ _8a8tri_ and _T._ _V._ _R. Tataclwri,_ for _Limittd._ the appellants. v, _M. S._ _K._ _Sastn'.,_ for the respondents. 1959. Mav 8. The Judgment of the Court was delivered by· v, _The_ II' _orkers_ ##### GAJENI>RAGADKAR J.-'l'his appeal by special leave Gaimdragadkat ]. arises out of an industrial dispute between the l\Ianagc- ment of Praga Industries (P) Ltd., (hereafter called the appellant) and its workmen (hereafter called the rPs· pondents). The dispute which was referred hy the Government of Madras for adjudication to tlw fodnstrial Tribunal at Coimbatore covered four items. Two of them were settled by compromise between the parties and the remaining two were the subject-mat1t~r of adjudication. They are the qtwstion about the quantum of bonus payable to the respondents for the year 1954 and the question of fixing scales of wages with graded annual increments for different categories of respondents. The tribunal has ordPred thP appellant to pay to the respondents _by_ way of bonus three months' wages. The appellant had alrnady paid one month's bonus and so it had heen directed to pay bonus for two months mor('. In regard to the fixation of the wage structure the tribunal lrns r~frained from fixing any wage strnctnre at present and as an interim measure it has ordered the appellant to gmnt all its workmen an increnwnt at the rate of 4'\, and to continue to gmnt such an iucrernent ever~· year until they are classified and their pay scale is introduced to rPach ##### a particular maximum. It is these two directions in the award which are challenged by the itppellant in the present appeal. The appellant is a. private limited company carrying on the business of manufacturing nut and plastic buttons in Coimbatore as a lessee under Praga Industries, Coimbatore, which is a partnership firm. The appeallant took on lease from the said firm land, buildings 164 SUPREME COURT REPORTS [1960(1)] _'959_ and machinery belonging to it under an indenture of lease executed on January 15, 1954. Under this deed _The_ Managemc~t a monthly rental of Rs. 5,000 has to be paid by the _of Pmga Indn.,fnes_ ]j,, fi h 1 - j j j b _Limited._ appe ant iOr 1ve years; t e ease me uc es a c a use y v. which a right of renewal is given to the appellant for _The W or km_ a period of three years. The appellant's case was that its financial position _Gajendragadkar_ _f._ was not satisfactory ; that it had to borrow an over draft from the Indian Bank Limited, Coimbatore, under an overdraft acr.ount which left the appellant a debtor to the said Bank to the extent of Rs. 48,414 in 1954. The appellant had also not paid the rent due to the lessor for the said year and had in fact ploughed back the said amount of rent of Rs. 60,000 into the business of the appellant as working capital. According to the appellant, under the ·Full Bench formula t.he respondents' claim fur additional bonus was not justified. On the other hand the respondents urged that the appellant was making large profits and their claim for bonus was folly justified. The respondents also alleged that it was high time that a proper wage structure was fixed by the tribunal guarnntoeing to the respondents the payment of fair wages wjth fair annual increments with a view to reach specified maximums. On behalf of the appellant Mr. Viswanatha Sastri has challenged the propriety of the course adopted by the tribunal in making an interim order about the increment.'; in wr1ges of the appellant's employees. The tribunal \Y:cs asked to fix a warre structure unrler issue No. a. lustoad it has come o~t with an interim order ##### \Yhieh is very· irregular, sap Mr. Sastri. ln our opinion this argument is wholly untenable. It is clear from the award tlrnt the appellant itself suggested to the tribunal that the lease in its favour was due to expire within a year and a half and that the question of classifying the respondents into skilled and unskilled workmen and providing for systematic grades of pay with increments may be conveniently deferred to a future date. The respondents agreed to this suggestion, and both parties represented to the tribunal that they would be satisfied if a reasonable interim order # S.C.R. SUPRE~IE COURT REPORTS 165 was made providing for increment in the wages of the r959 respondents. That being so, it is not open to the appellant now to contend that the tribunal should _fnPie_ _Managdem_ - . _o_ _**raga**_ _1n_ _us 1ent_ _**ries**_ have fixed a wage structure and not passed an mterun _Limited._ order. v. On the merits of the interim order the only objection _The tt'orkers_ which has been raised by the appellant before us is in . respect of the application of the said order.to piece-rate _Ga;endragadkar_ _f._ ##### workers. It appears that on bctober 25, 1955, an agreement had been reached between the appell11nt and the respondents and by els. 5 and 6 of this agreement it was settled that an annual increment of 4% of the basic pay for all the monthly-rated and time-rated employees should be given, and that the revised wages should come into force from November 1, 1955. That being so, Mr. Sastri has not challenged the interim order passed by the tribunal in respect of the monthlyrated and the daily-rated workmen. His grievance is that the tribunal was in error in making a similar order in regard to the piece-rated workmen. ##### It is true that generally annual increments in the wages of piece-rated workers are not provided. These workers are paid by the work which they do though the rates fixed for such payment may he legitimately increased in proper cases; usually a wage structure with annual increments is not provided for such piece#### rated workers. It is on thi'l aspect of the matter that l\Ir. Sastri has laid considerable emphasis. On the other hand, Mr. Joseph Nejedly who gave evidence for the appellant frankly admitted that piece-rate wages had been fixed in 1947 and though there were some changes in them they were insignificant. He also cor.ceded that since 1947 the cost of living had gone up in Coimbatore. These statements make it clear that a case for revising the rates of wages payable to piece rated workers has been made out asmuch as in the case of monthly-rated or daily.rated workmen. Therefore we think that the appellant cannot successfully challenge the direction issued by the tribunal in regard to the increment of 4% in the case of rates of wages fixed for piece-rated workers. We would, however, like to modify the interim order in regard to piece-rated 166 SUPREME COURT REPORTS [1960(1)] _'959_ workers by directing that though their rates of wages should be increased at the rate of 4% they should not _;Phe_ _Management_ have the benefit of the annual increment at the said rate _**o**_ _**1**_ _**raga lnduslrzes**_ . k l . . _Limited._ until all the wor ers are are c ass1fie<l and their pay ##### v. scales are introduced. In other words, we confirm this _The_ _Workm_ part of the award with the only modification that ## .. - . future annual increment at the rate of4% should not _Ga;endrngad•ar_ _J._ be granted to the piece-rated workers. The mixt contention [1] raised by Mr. Sastri is in regard to the order made by the award directing the appellant to pay two months' additional bonus to the respondents. #### It is now well settled that the claim for bonus must be decided by the application of the :Full Bench formula. ##### In the application of the formula there are only two items which have given rise to a controversy in the present proceedings. The appellant claimed that he should be allowed 4% interest on Rs. 60,000 either on the basis that this interest would be payable to the lessor since default had been commited in the payment of rent due to him; or on the basis that the said amount had been utilised as working capital and ##### so should carry 4% interest. In our opinion the latter claim is well founded and must be upheld. There is no doubt that the monthly rent of Rs. 5,000 payable to the lessor, though shown as a liability in the profit and loss account, has in fact not been paid to the lessor ; and it is. also clear that the whole of this amount has in fact been used as working capital by the appellant. ##### Therefore its claim to have interest at 4% on this amount cannot be resisted by the respondents. IT'he tribunal was inclined to dissect this claim month by month and to consider the question of return on the amount month by month. \Ve do not think that it is necessary to adopt such a course in the present case. The other claim made by the appellant is in respect of improvement and modernisation of its machinery. The appellant claimed Rs. 20,000 under this head. This claim has been rejected by the tribunil, and we think rightly,. As we have already observed, the appellant has taken the land, machinery and buildings for its business as a lessee from the Praga Industries, Coimbatore, and so the appellant cannot claim to .___ ##### S.C.R. SUPREME COURT REPORTS 167 ### rehabilitate any of the said machinery and plant. If z959 the appellant has purchased new machinery in ·1954 the amount of rehabilitation which the appellant can _Tphe_ _Managdemenl_ . f h 'd h' - ., _1_ _raga n 1_ _us_ _1_ _ries_ c I aim [. ] m respect o t e sa1 mac mery ior 1954 IS [. ] _[o ]_ _Limited._ covered by the depreciation allowed to the appellant. v. This position is not disputed by Mr. Sastri. Therefore - _The Worliers_ we are satisfied that the appellant is not entitled to . claim Rs. 20,000 as a prior charge for rehabilitation. _Ga;endragadkar_ _f._ ### If the Full Bench formula is worked out in the light of these findings there can be no doubt that the tribunal was justified in directing the appellant to pay additional #### bonus for two months. It is common ground that, taking the net profit at Rs. 42,726, if the depreciation and the bonus paid for 1953 are added back, the figure of gross profit would be Rs. 69,546. From _this figure if the notional normal depreciation, income-tax, return ##### at 6% on paid-up capital and return at 4% on working capital of Rs. 60,000 are deducted, it still leaves a balance of over Rs. 26,000. The three months' bonus, including one month's bonus already paid by the appellant, awarded by the tribunal is in the neighbourhood of Rs. 22,000 but in respect of this bonus the appellant would be entitled to a rebate of income-tax to the extent of Rs. 12,300. That being so, it cannot be said that the order passed by the tribunal involves an unfair distribution of the available surplus. ##### In the result the appeal substantially fails and the award passed by the tribunal is confirmed with the modification as to the foture annual increments in regard to piece-rated workers. In the circumstances ##### of this case we direct that the parties should bear their own costs. _Appeal substantially dismissed_ ; _award partially modified._