BHARGAVA - (1.) THESE three appeals by special leave arise out of two Awards by the Industrial Tribunal, Bombay, in two References relating to bonus made by the State Government under Section 10 (1) (d) of the Industrial Disputes Act, 1947. The employer is Messrs. Gannon Dunkerlay and Company Ltd. (hereinafter referred to as "the Company"). The workmen of the Company were represented in these industrial disputes by the Gannon Dunkerlay Employees' Union (hereinafter referred to as"the Union"). One reference related to the bonus claimed by the workmen at 50 Per Cent of their annual wages for the years 1958-59 and 1959-60, while the second reference related to the bonus claimed at the same rate for the year 1960-61. The Tribunal awarded the bonus after calculating surplus available for distribution of bonus in accordance with the Full Bench Formula laid down by the Labour Appellate Tribunal and approved by this Court in the case of Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka v. Its Workmen, 1959 SCR 925 = (AIR 1959 SC 967). Both parties to the appeals are agreed that the Tribunal acted rightly in applying that formula for calculation of bonus payable to the workmen; but both the parties were dissatisfied with the manner in which the calculations were made and with the details of the calculations. When arguments were heard by us in these appeals, we asked learned counsel for parties and the representative of the Union in the appeal of the Union to give us fresh calculations based on Full Bench Formula as explained by this Court in the cases of National Engineering Industries Ltd. v. Its Workmen, (1968) 1 SCR 779 = (AIR 1968 SC 538) and Workmen of Hindustan Motors Ltd. v. Hindustan Motors Ltd., (1968) 2 SCR 311 = (AIR 1968 SC 963), as the Tribunal had not followed all those principles. Counsel for parties gave us calculations, but it was again found that there was difference of opinion on a number of points arising in connection with these calculations. The points of difference were 10 in number. As a result, we heard detailed arguments on all those 10 points of difference, and we proceed to give our decision on these 10 points of difference. We may add that, on conclusion of the arguments on all these contested points, we indicated to counsel our decision on 9 of them when reserving the judgment, so that counsel could work out agreed figures of surplus available for distribution of bonus in each of the three years in accordance with those principles and the other agreed principles. The figures of available surplus having been supplied by counsel for parties, we shall proceed in this judgment to allocate the surplus and to declare what is the appropriate amount of bonus payable in respect of each of the three years. We now take up the ten contested points, one at a time.
(2.) THE first dispute related to the question whether the amount shown in the balance-sheet as advances recoverable in cash or in kind or for value to be received, on the assets side is to be treated as part of fixed and capital assets, or is to be treated as part of working capital, in order to determine on what amount of reserves, utilised as working capital, return should be allowed to the Company in calculation of surplus. THE claim of the Company was that these advances should be treated as part of the working capital when working out the figure of working capital in accordance with the principle adopted by this Court in Hindustan Motors case, (1968) 2 SCR 311 = (AIR 1968 SC 963) (supra), because these advances were made in accordance with the business transactions of the Company to various constituents etc. THE argument is not supported by any material. THEre is no evidence on the record that these advances were made in the course of business of the Company to parties from whom the Company was making purchases. In fact, the nature of two of the advances during the year 1958-59 appears to be that these advances were given to officers of the Company, or to a private limited Company wherein two Directors were interested. Such advances recoverable in cash or in kind or for value to be received were treated in the Hindustan Motors case, (1968) 2 SCR 311 = (AIR 1968 SC 963) as not forming part of the working capital, but as part of the capital assets. In the absence of any evidence that these advances were made in the course of business transactions of such a nature that they would form part of the working capital these advances have to be treated as part of capital assets following the decision in Hindustan Motors case, (1968) 2 SCR 311 - (AIR 1968 SC 963), (supra). The Second point raised was whether dividends received from trade investments in each of the three years should be deducted from the gross profits for calculation of surplus available for bonus. This is a question that has to be decided against the Company on the ground that no claim was put forward before the Tribunal to treat the income accruing through these dividends as extraneous income earned from activities in which the workmen made no contribution. These trade investments have to be treated as capital assets of the Company forming part of their trading activities. The income accruing from these dividends must, therefore, be related to the business of the Company as a whole and, hence, the income from these dividends has to be included in income for purposes of calculation a surplus available for bonus. The amount invested in earning these dividends will, however, have to be treated not as part of working capital but as part of capital assets of the Company. The third point requiring decision relates to the entry in the balance-sheet in respect of loans advanced by the Company on personal security. Interest was earned on these loans. It was urged that this interest on loan investments should be treated as extraneous income which the workmen cannot claim to have been earned with their contribution. This is correct. Income from such loans must be deducted from the gross income when calculating surplus available for bonus. However, on the principle laid down in Hindustan Motors case, (1968) 2 SCR 311 = (AIR 1968 SC 963) against this income must first be set off the interest paid on loans by the Company on the principle that the Company has no justification for earning extraneous income by utilising part of its funds for that purpose while adding to the expenditure in the business by paying interest in respect of loans taken by the Company. It is only if any surplus income is left after deducting the interest paid on loans that, that amount will be excluded from the calculations. The loans themselves will have to be treated as capital assets for purposes of calculation of the working capital.
(3.) THE next three points all relate to calculation of rehabilitation grant which, in the Formula, is usually the most contentious point. THE rehabilitation is claimed in respect of buildings of the Company utilised for its business purposes plant and machinery belonging to the cylinder factory of the Company, and other plant and machinery of the Company which is primarily used for its business of civil engineering. So far as buildings are concerned, the Company claimed rehabilitation in respect of three sets of buildings, the first set valued at Rupees 82,000/-, was constructed in the year 1947-48, the second set of buildings worth Rupees 50,000/- was constructed in 1952-53, and the third set claimed to be of the value of Rupees 4,95,648/- was constructed in the year 1958-59 which is the first of the years in respect of which bonus has been claimed in the first reference by the workmen. THE argument on behalf of the Union was that the Company has not proved the original cost of these buildings, nor has it proved the multiplier or the divisor, so that no rehabilitation grant should be allowed at all in respect of these buildings. In order to prove the original cost of the buildings, the Company examined two witnesses, S. K. Guha Thakurta, Engineer, and Har Kishan Lal Gupta, Accountant. THE argument was that the evidence of these witnesses as to original cost has not been accepted by the Tribunal and this Court should not interfere with this finding of fact recorded by the Tribunal. It. however, appears that, in recording this finding the Tribunal committed a very serious error in completely ignoring the registers Exhibits C-1 and C-5 which were produced to show the original cost of the buildings. Exhibit C-1 contains the entry relating to the buildings constructed in 1958-59, while Ext. C-5 contains entries of the buildings constructed in the years 1947-48 and1952-53. THE Engineer Guha Thakurta, in preparing the statement for rehabilitation grant for the buildings, took the figures from the Accounts Department. Harkishan Lal Gupta, on behalf of the Accounts Department, proved that the figures were given to Guha Thakurta. Gupta states that he had seen these registers Exts. C-1 and C-5 and that, though the figures were supplied by other members of the accounts staff, he had a check made of all the figures. THE authenticity of the registers C-1 and C-5 was not challenged before the Tribunal. Some attempt was made by learned counsel in this Court to show that the register Ext. C-1 was not kept in the regular course of business and could not be relied upon. Register Ext. C-1 not only contains entries about the buildings of the cylinder factory of the Company, but also contains entries relating to the machinery and plant of the factory. In challenging the authenticity of this register, counsel pointed out that the entries were not made in it in respect of plant and machinery in the chronological order of purchase. Secondly entries up to page 28 and even on page 29 were made in respect of plant and machinery acquired during the years 1958-59 to 1960-61, and then, on page 29 entry is made in respect of buildings. From this it was sought to be inferrred that this register was specially prepared for these industrial disputes and was not kept in the regular course of business. It was further pointed out that pages 13 and 15 had been stuck together, so that no page14 existed in the register. THE main objection on which reliance was placed related to the fact that entries were made in respect of plant and machinery unto page 28 and thereafter entries in respect of buildings were made on page 29, even though the entry about buildings related to the year 1958-59, while some of the entries about plant and machinery related to the later years even up to the year 1960-61. An examination of the register, however, explains the manner in which the register had been kept. It appears that the Company envisaged that, during the period that the register will be in use, 28 pages will be needed to make entries in respect of plant and machinery. In the very beginning, therefore, these pages were kept for that purpose, while 29th page was allotted to buildings. THE 30th page was allotted to motor vehicles, and the 31st page to typewriters. However, when entries came to be made from time to time, all the entries relating to plant and machinery could not be made within 28 pages, so that some of the entries were made on page 29 after separating part of that page from the page allotted to buildings by drawing a line across the page. Similarly, entries relating to motor vehicles could not be completed on page 30, so that they were carried, over to page 31 where only part of the page was needed for typewriters. On page 31, the heading "Typewriters" was put at the initial stage, but the expression "Motor Vehicles" was added to the heading after the word "Typewriters" when entries in respect of them were required to be made on page 31. THEse entries, instead of showing that the register was not maintained in the regular course of business, are indicative of the contrary. So far as the order of entries in respect of plant and machinery of the factory is concerned, it is true that they are not in the order of date of purchase. THE reason why they are not in that order could have been explained if this register had been challenged by asking specific questions from the Accountant, Harkishan Lal Gupta; but the register was admitted in evidence by the Tribunal without any objection from the Union. It was for the Union to challenge its authenticity by cross examining Gupta on the points which could throw doubt on its authenticity. It is quite possible that the entries may have been made not in the order in which the machineries were purchased, but in the order in which they may have been received in the factory. Some plant and machinery purchased earlier may have been received later. While such possibilities exist, there is no reason to doubt that the register is maintained in the regular course of business. THE same argument applies to the circumstance that pages 13 and 15 have been stuck together and no page 14 now exists. THEre is nothing to show that this sticking together was not necessitated by some error which took place in making entries on that page 14 at the time when occasion arose to make entries on that page. In fact, if the register had been prepared at one sitting for purposes of these cases, the Company would have taken care that no suspicious circumstance comes into existence and, if; by chance, any error was committed, it could have prepared another register in lieu of Ext. C-1. THE fact that this was not done shows that this register is the register kept in the course of business and, hence, there is no reason to doubt the entries made in it. This register proves that the buildings for the cylinder factory constructed in the year 1958-59 cost Rs. 4,54,789.00. Then, there is the register Ext. C-5 which contains entries of lots of other buildings owned by the Company, including buildings which are not used for business purposes and are let out for earning extraneous income and in respect of which no rehabilitation grant has been claimed by the Company. This register is the register maintained for the purpose of calculating depreciation in respect of each building. This register was started in the year 1955-56, and the progressive depreciation in respect of each building from that year onwards is entered in this register. The register shows original cost of buildings of the year 1947-48 at Rupees 82,000/- and of the year 1952-53 at Rs. 50,000.00. Thus, there was a proof available in these registers of the original cost of these three blocks of buildings. The claim of the Company for rehabilitation grant for the year 1958-59 was in respect of buildings of the value of Rs. 4,95,648.00. As we have just indicated, the entries in register C-1 bear out the construction of buildings for the cylinder factory in 1958-59 of the value of Rs. 4,54,789.00. For buildings claimed to have been constructed in that year of the value of the difference between these two amounts no documentary evidence has been produced. Reliance was placed on behalf of the Company on a certificate issued by the Chartered Accountant on 18/04/1963 in which the total original cost of the buildings used by the Company for its business purposes, after excluding those that were let out, was certified to be Rupess 6,27,648/-. It was urged that, if, from this amount, the three amounts proved as value of buildings entered in the two registers Exs. C-1 and C-5 is deducted, the balance represents the additional buildings that were constructed in 1958-59 and which are used for business purposes by the Company. This certificate cannot be accepted as the basis for proving that buildings of that value were really constructed in the year 1958-59 and form part of the business premises of the Company. The certificate cannot be held to prove the original cost of those buildings. Even the Chartered Accountant, who gave the certificate, did not explain in the affidavit how he had arrived at this figure of Rupess 6,27,648/-. Consequently, rehabilitation grant can be allowed only in respect of the three sets of buildings, mentioned above, the original cost of which has bean proved by production of registers Exts. C-1 and C-5.;