- (1.) This is an appeal by special leave from a decision of the Labour Appellate Tribunal at Bombay, dated 23-11-1955. The Baroda Borough Municipality is the appellant, and the respondents are the workman employed in the electricity department of the said p73 Municipality represented mostly by the Baroda State Electric Workers Union (hereinafter called the respondent union). The substantial question for determination in this appeal is if the respondents, workers in a municipal department engaged in the generation supply and sale p73 of electric energy are entitled to the bonus claimed out of the surplus earnings of the said department (called 'profits' by the respondents) after allowing for all outgoings including necessary expenditure of the department and deductions for all prior charges. The question is short one, but has an importance and consequences reaching beyond the limits of the particular case in which it has arisen.
(2.) We may first state the relevant facts. Before 1-5-1949, on which date the former State of Baroda was merged in and integrated with the Province of Bombay (now the Bombay State), the Baroda Electric Supply Concern was owned and managed by the State of Baroda. On 19-4- 1949, the State Government of Baroda decided to hand over the said Concern as a gift to the Baroda Municipality and communicated an order to that effect in which it was stated inter alia: - "It is likely that the various types of assistance, financial or otherwise which the Baroda Municipality has been receiving up to now from the Baroda Government may not be continued to a similar extent after integration. It is therefore very necessary to find out new sources of revenue for the Municipality so that it may continue to maintain a high Standard of efficiency as far as possible ......" With this object in view the Baroda Government are pleased to hand over to the Municipality as a gift the Baroda Electric Supply Concern which at present is a Government concern including both the generation and distribution of electric power. With the transfer of the electric concern to the Municipality the various fund of the electric department like the Reserve Fund, the Depreciation Fund, Etc. are also to be transferred to the Municipality with this specific understanding that these funds should not be used for purposes other than those for which they are intended ...... The Baroda City Municipality will have to be issued licence for the generation and distribution of electricity as per Baroda Electricity Act and the Municipality should immediately apply for such a licence for the supply of electric power not only within the municipal limits but within the twenty miles radious round Baroda. The Municipality should continue the policy of the department to give electric energy at concessional rates for irrigation purposes in the villages, although this may not be profitable in the beginning ....... The entire staff of the Baroda Electric Supply Concern will be taken up by the Municipality without any reservation and the Municipality is directed to bring into operation terms and conditions of services as are prevalent under the Bombay Government and the officers and staff should be given emoluments which they would have got had they joined Bombay Government." On 29-4-1949, a formal order of handing over was made, subject to certain directions reserving the rights of the employees in the matter of pension, gratuity, provident fund, continuity of service, etc. In 1951 there was an industrial dispute between the Baroda Borough Municipality and the workman employed in the electric department with reference to a number of demands made by the latter, and by consent of the appellant Municipality and the respondent Union, the dispute was referred to the Industrial Tribunal Bombay, for adjudication by an order of the Government of Bombay dated 22-10-1951. The dispute related to a large number of items one of which was "payment of bonus equivalent to three months" wages (including dearness allowance) for the year 1949- 50 to all employees of the electric department including daily wage workers and temporary workers". The dispute was settled by agreement with regard to all other item except the items of bonus; on that item the Industrial Tribunal heard that parties and came to the conclusion that the respondents were not entitled to the bonus claimed because- (1) the Municipality was not a profit making concern (2) the balance of earnings over the outgoings of the electric department of the Municipality was not 'profit' as that word is understood in the ordinary trading or business sense; (3) the Municipality consisted both earning and spending departments and it was not permissible to create an indivious distinction between the different employees of the Municipality by granting bonus to the workman in one department only; and (4) the respondents having been compensated by higher scales of salary on the municipalisation of the undertaking and having got other benefits and amenities appertaining to municipal service were not entitled to claim such bonus as was granted to them during the regime of the former State-owned company.
(3.) Against this decision of the Tribunal, there was an appeal to the Labour Appellate Tribunal of India at Bombay. The Appellate Tribunal came to the conclusion that the respondents were entitled to claim bonus; it expressed the view that on the decision of this Court in D. N. Banerji v. P. R. Mukherjee, 1953 S C R 302: (AIR 1953 S C 58) (A), the expression 'industrial dispute' in the Industrial Dispute Act, 1947 includes disputes between municipalities and their employees in branches of work that can be regarded as analogous to the carrying on of a trade or business and if, the undertaking resulted in profit during the relevant trading period, the workmen were entitled to claim bonus as of right. On the question whether the excess of earnings over outlay of a municipal undertaking like the one under consideration here was profit or not, the Appellate Tribunal relied on the circumstances stated below for its finding that the excess was really profit: (a) the very nature of the gift to the Baroda Municipality by the State Government of Baroda showed that the concern (or undertaking) made over to the former was a profit making concern; (b) the concern was run separately and as it was a trading concern by its nature, the balance of earnings derived from it after allowing for all out goings was pecuniary gain and it made no material difference to the actual nature of the gain, whether it was called surplus or profit; and (c) no distinction could be made in principle between a municipal undertaking and an undertaking by a private or public concern, if the conditions laid down for the grant of bonus in Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur 1955-1 S C R 995: , ((S) A. I. R 1955 S.C. 170) (B) were fulfilled. As to the payment of bonus to the employees of one department only, the Appellate Tribunal said that if the profits were not sufficiently large to admit of bonus to all employees, it was permissible to treat the profit-making department as a separate unit for the purpose of granting bonus, unless there was some essential nexus or connection between the profit-making department and other departments or some unity or purposes of parallel or co-ordinate activity towards a common goal in all the departments without which the undertaking could not be carried on to proper advantage. The Appellate Tribunal pointed out that the accounts of the electricity department of the Baroda Municipality were separately kept and the undertaking carried on by the electricity department of the Municipality differed from other normal activities of the Municipality, there being no common nexus between them, it was open to the workmen of the electricity department to claim bonus out of the profit made by that department after making deductions for all prior charges. The Appellate Tribunal accordingly allowed the appeal, set aside the decision of the Industrial Tribunal and remanded the case for decision on merits according to law. p73;