- (1.) The appellant, Messrs. Alloy Steel Project, is an undertaking owned, controlled and managed by a government Company, viz. , Messrs. Hindustan Steel Ltd. Alloy Steel Project was started in the year 1961 and it went into production in the year 1964-65. No profit was earned at least right up to the year 1967-68. The workmen, however, claimed bonus at the minimum rate prescribed under the Payment of Bonus Act No. 21 of 1965 (hereinafter referred to as "the Act") in respect of theyear 1965-66 on the plea that this Alloy Steel Project was a part of the Hindustan Steel Ltd. and could not be treated as a new establishment for purposes of S. 16 of the Act. Hindustan Steel Ltd. was itself an establishment which had been in existence for a long period and had been even earning profits, so that exemption could not be granted to this Company in respect of payment of bonus under S. 16 of the Act. This claim of the workmen was resisted by the Company on the plea that Alloy Steel Project was a separate establishment in respect of which separate balance sheets and profit and loss accounts were maintained, so that no bonus was payable until either this Project itself earned profits, or from the sixth accounting year following the year 1964-65 when this Project went into production. The dispute between the workmen and the Company could not be resolved amicably and, consequently, a reference was made under the Industrial Disputes Act, 1947 which came up before the Ninth Industrial tribunal, West Bengal. The tribunal held that Alloy Steel Project could not be treated as a separate establishment because, under the Act, a Company is itself an establishment, so that all units of a Company like Hindustan Steel Ltd. will constitute one establishment. Since this project had not been earning any profits, the tribunal directed payment of bonus at the minimum rate of 4 per cent. of wages prescribed by the Act. Aggrieved by this award of the tribunal, the Company has come up in this appeal to this court by special leave, though the name of the appellant is shown as Alloy Steel Project, because it was under this name that the reference was dealt with by the tribunal.
(2.) The main basis of the decision of the tribunal is that "the word 'establishment' has been used in this Act to indicate a 'company' as called in common parlance". It was on this view that the tribunal further proceeded to consider whether this Alloy Steel Project could be held to be an establishment separate from Hindustan Steel Ltd. , or it had to be treated as a part of the parent establishment, viz. , Hindustan Steel Ltd. In this approach, it is clear that the tribunal committed an obvious error, as it ignored the indications which are manifest from the language used in the Act. In S. 2, Ss. (15) and (16) , establishments have been divided into two classes and their meaning has been defined. In clause (16) , "establishment in public sector" is defined as meaning an establishment owned, controlled or managed by- (A) a government company as defined in S. 617 of the Companies Act, 1956; (B) a corporation in which not less than forty per cent. of its capital is held (whether singly or taken together) by- (I) the government; or (Ii) the Reserve Bank of India; or (Iii) a corporation owned by the government or the Reserve Bank of India. In clause (15) of S. 2, "establishment in private sector" is defined to mean any establishment other than an establishment in public sector. Thus, between these two clauses, all establishments are covered. If an establishment is in public sector, it is covered by the definition in clause (16). If the establishment is not in public sector, it will be covered by the definition of "establishment in private sector' 'in clause (15). The significant words are those contained in clause (16) which show that an establishment in a public sector has to be owned, controlled or managed by a government company,or by a corporation of the nature described in that clause. Obviously, therefore, an establishment in a private sector would be one which is owned, controlled or managed by a person or body other than a government company or a corporation of the nature described in clause (16). In this view, an establishment cannot be identified with a company. It would be absurd to say that a company is owned, controlled or managed by a government company or a corporation. Obviously, the word "establishment" is intended to indicate something different from a company as defined in the Companies Act. This is further clarified by the provisions of sub- S. (3) of S. 1 which lays down the applicability of the Act. The Act has been made applicable to every factory and every other establishment in which twenty or more persons are employed on any day during an accounting year. Supposing a company has a factory in one premises and has another workshop entirely distinct and separate from that factory, in which the number of persons employed is less than 20. The Act itself will apply to the factory, but will not apply to the other establishment in which the number of employees is less than 20. This applicability of the Act will be independent of the other provisions of the Act. Learned counsel for the respondent-workmen relied on S. 3 of the Act to urge that even the establishment employing less than 20 persons will be a part of the parent establishment consisting of the factory. S. 3 is as follows : "3.Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act: Provided that where for any accounting year a separate balance-sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under this Act for that year) unless such department or undertaking or branch was, immediately before the commencement of that accounting year treated as part of the establishment for the purpose of computation of bonus. "it is to be noted that the principal part of S. 3 lays down that different departments or undertakings or branches of an establishment are to be treated as part of the same establishment only for the purpose of computation of bonus under the Act. They cannot be treated as part of one establishment for purposes of Ss. (3) of S. 1 of the Act. In fact. S. 3 cannot be resorted to at all when the Act itself is inapplicable in view of the provision contained in S. 1, Ss. (3). It is, thus, quite clear that the tribunal went entirely wrong in holding that simply because Alloy Steel Project is owned, controlled and managed by Hindustan Steel Ltd. , it has to be treated as a part of Hindustan Steel Ltd. , which is itself an establishment. Hindustan Steel Ltd. cannot be described as an establishment. The facts appearing on the record show that Hindustan Steel Ltd. has a number of establishments. These include Alloy Steel Project besides the head office, Rourkela Steel Plant, Bhilai Steel Plant, Durgapur Steel Plant, Coal Washeries Project and Bokaro Steel Project. The Company, Hindustan Steel Ltd. , cannot be equated with any one of these units. They are all separate undertakings, departments or branches owned, controlled and managed by one single Company and, consequently, the point raised has to be decided on the basis whether, under the provisoto S. 3, the Alloy Steel Project is to be treated as a separate establishment, or is to be treated as part of the main establishment owned by Hindustan Steel Ltd.
(3.) Learned counsel for the respondent-workmen, however, advanced a new argument which was not put forward before the tribunal. His submission was that, if an establishment of a Company consists of a number of departments) undertakings or branches, the principal part of S. 3 will apply and all such departments, undertakings or branches must be treated as parts of one single establishment for purposes of computation of bonus under the Act, out the proviso to S. 2 will not apply in such a case. According to him, the proviso to S. 3 will apply to establishments consisting of different departments, undertakings or branches which are owned, controlled or managed by persons other than companies. This argument was based on the reasoning that, in order to calculate available surplus for distribution of bonus in the case of a company) the Act lays down in S. 6 (d) , read with the Third Schedule that the deductions to be made from net profits will also include dividends payable on preference share capital, and 8.5 per cent. of its paid up equity share capital as at the commencement of the accounting year. This provision cannot be given effect to in respect of separate units of a Company, because the paid up capital or the preference share capital is not allocated between different units. In the case of the present Company, viz. Hindustan Steel Ltd. , the entire paid up capital is shown in the accounts of the head office. The money needed for working of the various units, including the Alloy Steel Project, is shown as remittance received from the head office and not as paid up capital of the Alloy Steel Project, etc. The result is that, if Alloy Steel Project or other units of the Hindustan Steel Ltd. are treated as separate establishments and available surplus is calculated separately for each unit, there will be no deduction at 8.5 per cent. of the paid up equity share capital as envisaged by S. 6 (d) and the Third Schedule of the Act.;