Decided on November 13,1968



- (1.) A dispute between the management and the union of workmen of J. and P. Coats (India) (Private), Ltd. , Koratti, was referred for adjudication to the industrial tribunal, Calicut. The issue referred was: Additional bonus for the years ending 31 December 1960 and 1961.
(2.) THE management-company had already paid bonus to the workmen for the years in question at 5 per cent of the basic wages and dearness allowance earned for the years in question. The union claimed 10 per cent bonus for the year 1960 and 25 per cent for the year 1961. At the hearing before the tribunal, the claim for additional bonus for the year 1960 was not pressed, In respect of the claim for the year 1961, the management and the union were at issue about the items of reckoning to enter into the computation both of the gross profits as well as the permissible deductions. These were reflected in their respective worksheets filed before the tribunal, Ex. M. 4 by the management, and Ex. W. 2 by the union. Broadly stated, the points in controversy were these. The management claimed an amount of Rs. 3,05,064 derived as net income by the company from the export incentive scheme on foreign cotton, as extraneous income, not liable to be included in the gross profits. While contesting this claim, the union wanted to add back two items of profits shown in the profit and less account, namely (1) 10 per cent of the expenses on stores and spares as being expenses of a capital nature, and (2) an amount of Ra. 2,30,096 representing 6 per cent of the value of the closing stock on the ground that the same had been undervalued with a view to depress profits for the year in question. Regarding the permissible deductions, the following were the items in controversy: (1) the management claimed a return on paid-up capital at 8. 57 per cent whereas the union contended that it could in no event exceed 6 per cent; (2) the management claimed a return of 5. 7 per cent on reserves used as working capital whereas the union limited to claim to 4 per cent; (3) the management claimed certain charges for rehabilitation for plant and machinery which was objected to by the union; and (4) the management claimed a deduction of Rs. 1,17, 576 being the return at 5. 7 per cent on the current account balance of the parent company at Glasgow and associated companies on Rs. 20,62,744 made available interest-free by those companies during the year 1961. The tribunal by Ex. P. 1 award held that the deduction of Rs. 3,05,084 claimed by the management as extraneous income was unjustified; that 10 per cent of the expenses on stores and spares cannot be added back as claimed by the union; that Rs. 2,30,095 being 5 per cent of the value of the closing stock had to be added back to the profits as claimed by the union; that the return on the current account balance of the parent company and associated companies at 5. 7 per cent could not be deducted; that the management was entitled to a return of 8. 57 per cent on the paid-up capital and only 4 per cent on the reserves used as working capital. The tribunal rejected the management's claim for rehabilitation charges. In the result, on a memorandum of calculation shown in Para. 20 of its award (Es. P. 1) it found that a sum of Rs. 2,30, 420 was the available surplus for the year 1961. Basing itself on note 2 in Ex. M. 2 (worksheet for the year 1960) that 5 per cent bonus is equivalent to Rs. 1,11,037 and taking into account the 5 per cent bonus already paid by the management, it directed the payment of as additional bonus of 5 per cent for the year 1961. The management and the onion have filed these writ petitions against the portions of the award by which they have been respectively aggrieved.
(3.) PRACTICALLY the entire controversy in regard to the reckoning of the gross profits, and the range of permissible deductions has again, bees agitated before me. It would have been necessary to go the whole hog over again, in this judgment, as was done at the stage of argument; but at the conclusion of the hearing, it was fairly and properly realized that in view of one patent mistake made by the tribunal the decision on one of the points in controversy must turn the scale. The tribunal, as noticed, disallowed the contention of the management that the sum of Rs 3, 05,064 being net income from the export, incentive scheme on foreign cotton should be treated as extraneous income and deducted from the gross profits. But while arriving at the gross profits after addition of this head of income, it retained the provision for taxation at the same figure shown in the management's worksheet Ex. M. 4 forgetting that the same was arrived at after excluding the amount of Rs. 3,05,064 as extraneous income. Counsel for the union very frankly and properly conceded that this was a patent mistake. If the sum of Rs. 3, 05,064 were not to be treated as extraneous income, the provisions for taxation should be, not Rs. 17, 48, 416 as shown in Ex. M. and accepted in Para. 20 of Ex. P. 1. but Rs. 18,21,624 as shown by the management in a statement supplied at the hearing with copy to the opposite party. This mistake of the tribunal, if rectified, as it should be. would wipe off a substantial margin of the available surplus found by it. Counsel for the union submitted that it would then be impossible to disclose any available surplus to sustain the award of additional bonus unless the claim of the union in its writ petition. Original Petition No. 4278 of 1966-that the return on working capital should be allowed only at 6 per cent and not at 8. 57 per cent as found by this tribunal is sustained. It was therefore common ground at the end of the hearing that the writ petitions can be disposed of on the one and only question whether the award of 8. 57 per cent as return on the paid-up capital, was justified and proper. In that view, a consideration of the other questions debated before me is unnecessary.;

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