S.C.R. THE STATE OF MYSORE v. THE WORKERS OF GOLD MINES (GAJENDRAGADKAR, A. K. SARKAR, SUBBA RAO and VIVIAN BosE JJ.) Industrial Dispute-Gold mining industry–Claim of bonus by employees-Available surplus, Calculation of-Applicability of Full Bench Formula-Duty of Industrial Tribunal.
This was an appeal against.an award of bonus to the work- men of the Mysore gold mining industries, then under company management. A covenant in the lease executed in favour of the companies permitted them to create a reserve fund to meet
depreciation and development expenditure by contributing 15% of the revenue expenditure to it and deduct the same in calcu- lating the net surplus. The covenant imposed no obligation on
the lessees to create such a fund and was obviously intended to provide a basis for the lessor's claim to royalties. It was con- tended on behalf of the employer companies that the formula for determination of available surplus as evolved by the Full Bench of the Labour Appellate Tribunal in Mill Owners Associa- tion, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay, (1950) L.L.J. 1247, was inapplicable to gold mining industries which had special and distinguishing features of their own and that the employers were entitled under the said covenant to deduct 15% of the revenue expenditure as a prior charge in calculating the available surplus. It was their case that, th us calculated, there was no available surplus out of which bonus could be awarded. The Tribunal was not impressed by this argument,
disallowed the claim made on the basis of the covenant, applied the formula, upheld the claim for depreciation but as there was no evidence to show that any sums had actually been spent for rehabilitation for the years in question, refused to make any allowance on that head. It was further urged in appeal that since the cmppanies were misled by previous awards passed
in their favour in not preferring any specific claim for rehabili- tation, apart from the general claim under the covenant, they should, in case their general claim was disallowed, be permitted to do so :
Held, that the formula evolved by the Labour Appellate Tribunal and generally approved by this Court and the categories · of prior charges prescribed by it were comprehensive enough to cover each individual case and there was no reason why it should not apply to the gold mining industries as well.
Mill Owners Association, Bombay v. The Rashtriya Mill Maz-' door Sangh, Bombay, (1950) L.L.J. 1247, discuss~d. II4 May 22. SUPR:mM:m COURT R:mPORTS [1959] z958 Muir Mills Co. Ltd., Kanpur v. Suti Mills Mazdoor Union,
The State of Mysore v. The Workers of Gold Mines Kanpur, [r955] r S.C.R. 99r, referred to. The covenant in the lease, apart from the question whether it could bind the workmen, imposed no obligation on the
employees and could not preclude an investigation by the Tribu- nal as to the merits of each particular claim of expenditure in order to ascertain the existence of any available surplus, and the Tribunal was right in disallowing the claim made solely on the basis of the covenant which could otherwise have been made under the formula itself.
Held, further, that the concept of social and economic justice on which the claim of bonus is founded apply equally to gold mining industries as to any others and the formula, which had for its purpose the ascertainment of the available surplus to make an a\vard possible, O\.ved its origin to the san1e principles of social and economic justice enshrined in the Directive
Principles of State Policy enunciated by Arts. 38 and 43 of the Constitution. It is for the Industrial Tribunal to determine in each parti- cular case, on the evidence adduced by the employers and
having regard to the special requirements of the industry, which items of expenditure should be admitted under each of the four categories prescribed by the formula and in doing so they
should apply the principles laid down and discussed in decided cases in a flexible manner suited to the requirements of each case. Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills
Staff Union, (r952) L.A.C. r72, Trichinopol)' Mills Ltd., Ramjee- nagar v. National Cotton Mills Workers Union, Ramjeenagar, (1953) L.A.C. 672, The Mee-nakshi Mills Ltd., Madurai and Manap- parai v. Their Workmen, (r954) L.A.C. r3r, The Rohtas Sugar Ltd. v. Their Workmen, (r954) L.A.C. r68 and The Metiltr Indits- tries Ltd., Metti<r Dam v. The Workers, (1957) L.A.C. 288, referred to.
As in the present case, the employers were misled by the previous awards, it was only proper that they shou.ld be allowed an opportunity to prove their claim for rehabilitation apart from the general claim under the covenant.
CIVIL APP~LLATE JURISDICTION : Civil Appeal No. 648of1957. Appeal by special leave from the judgment and order dated November 24, 1956, of the Central Govt. Industrial Tribunal, Madras, in Industrial Dispute
·No. 1 of 1956 . JI. N. Sa'!"yal, Additional Solicitor-General of India, S.C~R. R. Ganapathy Iyer, T. Rangaswami Iyengar and T. M. Sen, for the appellant. Janardan Sharma, for respondents Nos. 1, 2 and 6.
L. K. Jha, B. R. L. Iyengar and· C. V. Ramachar, for respondents Nos. 3 and 5 . 1958. May 22. The Judgment of the Court was delivered by The State of Mysore . v. The Workers of Gold Mines
GAJENDRAGADKAR J.-This is an appeal withGajendragadkar J . special leave by the State of Mysore against the award passed by the Central Government Industrial Tribunal, Madras, on November 24, 1956, in Industrial
Dispute No. 1 of 1956 between the employers in relation to the Gold Mines of the Kolar Gold Fields, Myso1·e, and their workmen. The employers were the Champion Reef Gold Mines of India (KGF) Ltd.,
Mysore State, the Mysore Gold Mining Company (KG]') Ltd., Mysore State and the Nundydroog Mines (KGF) Ltd., and their allied establishments the Central Administration, the Kolar Gold ]'ields Electricity
Department, the Kolar Gold ]'ield Hospital and the Kolar Gold Field Watch and vVard establishment. The dispute between these employers and their workmen arose from the claim made by the workmen
for bonus for the calendar years 1953 and 1954. The Unions representing the workmen alleged that the employers had sufficient available surplus in their hands from which they could and should be awarded
bonus for the two years in question. The Union repre- senting the workmen in Mysore Gold Mining Co. Ltd., demanded four months wages and five months wages as bonus for the years 1953 and 1954 respectively.
The Union on behalf of the Nundydroog Mines demanded four months total wages • as bonus for 1953 and 1954 whereas the workmen in Champion Reef Gold Mines demanded four months wages
as bonus for the said two years. Th.e management opposed these demands on the ground that there was no available surplus for both the years in all the mines and so no bonus can be awarded. In'substance
the tribunal has rejected the case made out by the • [1959) I958 management and has passed an award in favour of the workmen .. Taking into consideration all relevant Tire Stale of
l h M)''°" factors the tribuna as awarded as bonus wages at v. the rate of I! months in i953 and three months in 1954 The Wo•·kers of to the workers of Champion Reef Mines Ltd; Gold Min.s
2t months in 1953 and 3t months in 1954 to the . — workers of the Nundydroog Mines Ltd; and one Ga1endragadtwr J. month's in 1953 and three months in 1954 to the workers of the Mysore Gold ·Mines Co. Ltd. In
regard to the workmen employed in the allied establishments, the tribunal has awarded as bonus one month's wages in the year 1953 and two months basic wages in the year 1954. It was urged before the tribunal by the manage-
ment that it would be inappropriate to apply the Full Bench formula evolved by the Labour Appellate Tribunal in the Mill Owners Association, Bombay v. The llashtriya ~Mill Mazdoor Sangh, Bombay (1)
without suitable modifications to the case of the mines. The argument was that, unlike the textile industry, gold mining is a wasting industry, and the adjustment of the rival claims of the employer and the employee,
even on the basis of social justice, cannot be properly made by the rigid application of the said formula. In the case of gold mines it is of considerable importance that the industry should invest a large
amount in search of new ore and higher expenditure has to be incurred even for renewal and replacement of machinery. The tribunal accepted the argument that the special requirements of the gold mining
industry would have to be considered in dealing with the workmen's claim for bonus, but nevertheless it was inclined to take the view that the principles laid down by the Labour Appellate Tribunal in arriving at
the Fnll Bench formula should be adhered to. The next argument which was raised before the tribunal was based on sub-para. (5) in the lease deed executed in favour of the management on :February 20,
1949. The case for the management was that the managem.ent was entitled to deduct 15% of the • revenue expenditure as a prior charge in calculating (1) (1950) L •• L. J. h47. S.C.R.
the available surplus. It was urged that the relevant I958 clause in the lease deed required the management to The State of create a reserve fund to meet depreciation and Mysore development expenditure of a capital nature and to pro-
v. vide for the search of new ore and it was urgedthat The Workers of the amount debited by the management in pursuance Gold Mines of this clause should be treated as a prior charge.<. . d-dk 'b
d b h" l ,a;en raga ar The tn una was not impresse y t is argument. t held that a. separate fund for finding out new ore and keeping the longevity of the industry was absolutely necessary but it was not satisfied that the
covenant in the lease on which reliance was placed by the management could bind the workmen and that the amount in question could be treated as a prior charge. The tribunal also found that no evidence
had 1'een adduced before it that any part of the amount thus debited had been in fact used for any of the purposes mentioned in the covenant. According to the tribunal there was also no evidence that, in
addition to the statutory depreciation any further allowance should be made for rehabilitation reserve and it held that it was not shown that any amount had in fact been spent for rehabilitation in the two
relevant years. On these findings the amount of Rs. 20·26 lakhs on which the management relied was not allowed by the tribunal because, in its opinion, the said amount was a mixture of very many items
depending upon the options exercised by the manage- ment under the terms of the joint operation schemes. Another point of dispute between the parties was in respect of the contribution made by the management
to the Pension Fund scheme. The management claim- ed credit both for the initial and the annual contribu- tion made by it in the relevant years. .The tribunal held that, having regard to the circumstances under
which the pension fund was introduced by the com- panies and having regard to the fact that it was intended only for the benefit of the covenanted staff of the companies, it would be inequitable to allow
either the initial or the annual contributionS' to take· precedence over the workmen's claim for bonus. Therefore, the claim by the management for deduction [1959] ;958 of both 1.he initial and annual contributions was
The State of rejected. It was also urged by the management that Myso•c the amount representing the bonus paid to the work- v. men for the year 1950 should be deducted in 1953 The W01·km of since it was actually debited to the workmen in that Gold Min"
year. The tribunal held that this claim was in- c . d -dh 1 admissible. Lastly, the tribunal disallowed the claim aJen raga ar , made by the management for interest at a higher rate
than 2% on reserve employed as working capital during the relevant years. Having thus rejected , most of the contentions raised by the management, the tribunal applied the Full Bench formula and came
to the conclusion that there was enough available surplus in the hands of the management for the years 1953 and 1954 and so it made an award in favour of the workmen for payment of bonus as alread:Y' indi-
cated. It is this award which has given rise to the present a.ppeal. Before dealing with the merits Of tho appeal, it would be relevant to state the material facts in regard to the working of the Gold Mines which has ultimately
brought the State of Mysore as the appellant in the present appeal before us. :E'our Public Joint Stock Com- panies incorporated in the United Kingdom were opera- ting the Gold Mines of the Kolar Gold Fields by virtue
of leases of mining rights obtained by them from the Government of Mysore. These companies were the Mysore Gold Mining Co. Ltd., the Champion Reef Gold .Mines of India Ltd., the Oorgaum Gold Mining Co.
Ltd., and the Nundydroog Mines Ltd. The terms and conditions of the leases obtained by these companies were the same. After the second world war broke out, the value of gold increased and so the Mysore
legidature pJtssed an act called the Mysore Duty on Gold Act, 1940 (Mys. XIX of 1940) imposing duty on gQld produced in the mines. This duty was in addi- tion to the royalty, rent, cesses and taxes payable
under the lease deeds executed on Ma.rch 25, 1935. It appears that the gold mining companies represented ·that the· imposition of gold duties meant hardship for them and that it did not leave sufficient funds from
which provision could be made for depreciation and · S.C.R. development so necessary for the longevity of the r95B mines. As a result of the negotiations, the Act · The State of of 1940 ·was repealed in 1946 and a fresh agree-
Mysore ment made under which contribution was levied v. by the State of Mysore against the companies. The Workers of Under this agreement rupee companies had to Gold Mines be formed in India to take over the undertakings G . d -dk a;en raga
at ]. and assets m Mysore of the Sterlmg or U. . com- panies and the seat of management had to be trans- ferred from the United Kingdom to India. In pursuance of this agreement four rupee companies
corresponding to the four Sterling or U. K. companies were formed in India. Their names were the Mysore Gold Mining Co. (KGF) Ltd., the Champion Reef Gold Mines of India (KGF) Ltd., the Oorgaum Gold Mines
(KGF) Ltd., and the Nundydroog. Mines (KGF) Ltd. All the shares in the rupee companies were held by the corresponding Sterling or U. K. companies. The assets in Mysore of the Sterling companies were
transferred to the corresponding K. G. ]'. companies and the mining operations were carried on by these companies from April 1, 1951, by conforming to the terms and conditions embodied in the agreements
(copies of which are Exs. 1 and 2). The four gold mining companies had for the pur- poses of convenience and economy common establish- ments called Central Administration, Medical Esta-
blishment and the Electricity Department. There was also a private limited company named Kolar Mines Power Station (K. G. F.) Private Ltd., all the shares of which were held by the said gold mining
companies. This was only an ancillary company and its object was to maintain a stand-by emergency plant for generating electricity in case of emergency and to distribute electric power to the gold minilig companies.
The gold mining companies were managed by the same managing agents by name John Taylor & Sons (Private) Ltd. The Oorgaum mine soon · became an uneconomic unit because it had reached such depths that.owing to.
technical difficulties ore could no longer be taken out • of them. This company, therefore,· cea~ed mining [1959] operations in 1953 and transferred its leases with the The state of
· concurrence of the Mysore Government to the Cham- Mysore pion Reef Gold Mines of India (K. G. F.) Ltd. Since v. then Oorgaum company has gone into liquidation. The Workm of That is how in the year 1954 there \YGl'C only three Gold Milles
operating mining companies and their allied esta- Gajendragadkar ]. blishments. In 1956 the Mysore State nationalised the gold mining industry by an act called the Kolar Gold Mine Undertakings (Acquisition) Act, 1956 (Mys.
XXII of 1956). According to the provisions of this Act and the notification issued thereunder, the under- takings of the gold mining companies vested in the State from November 29, 1956. In consequence, the
Government became liable to pay the bonus awarded by the Central Government Industrial Tribunal, Madras. That is how the State of Mysore felt aggriev- ed by the said award and has preferred the present
appeal by special leave tu this Court. The first point which calls for our decision is whether the tribunal was justified in applying the principles underlying the Fnll Bench formula in
determining the existence or otherwise of the avail- able suplus in the hands of the appellant during the relevant years. In The Mill Owners Association, Bombay v. The Rashtriya }Ifill .Jvlazdoor Sangh, Bom-
bay('), the Labour Appellate Tribunal was called upon to consider the workmen's claim for bonus .. The appellate tribunal held that bonus was not an ex- gratia payment even where wages had been standard-
ised nor was it a matter of deferred wages. The recognition of the workmen's claim for bonus rests on the view, which is now well established, that both labour and capital contribute to the earnings of the
industrial concern and that social justice requires that workmen should be allowed a reasonable share in the profits made by the industry. In determining the qnantum of the profit to which workmen as a whole
can be held to be entitled, the Labom Appellate :rribunal·evolved a formula under which the amount • of the available surplus in the hands of the employer (1) (i950) L.L.J.° 1247.
S.C.R. .903 can be determined. This formula takes the figure of r95B the gross profits made by the industry for the The State of relevant year and makes provisions for deprecia- Mysore
tion, for reserves, for rehabilitation, for return at 6% v. on the paid-up capital, for a return on the working The Workers of capital at a lesser1rate than the return on the paid-up
Gold Mine.s capital and for the payment of income-tax. TheseG . a -dk aJen ra.ga ar items are treated as pr10r charges and the amount determined after deducting the aggregate tota.l of
these items from the gross profits is deemed to be the available surplus for the relevant year. It is in this available surplus thus deduced that labour is entitled to claim a reasonable share by way of bonus. It would
thus be clear that under this formula the existence of an available surplus is a condition precedent for the award"of bonus to workmen. The formula also postu- lates that the claim for bonus is made by workmen
who are not paid what may properly be regarded as living ·wages. The payment of bonus is thus intended to attempt to fill up the gap, to the extent that is reasonably possible, qetween the wages actually paid
to the WOl'kmen and the living wages which they legitimately hope in due course to secure. This for- mula has received the general approval. of this Court in Muir Mills Co. Ltd., Kanpur v. Suti Mills Mazdoor
Union, Kanpur (1). It is conceded before us that since 1950 the basis supplied by this formula has been adopted by industrial adjudication all over the country in dealing with the workmen's claim for bonus in
different kinds of industries. It is, however, urged by Mr. Sanyal, for the appel- lant, that the appellant's industry is a wasting in- dustry and it needs special consideration. Search
for new ore which is essential for th~ prosperity and longevity of this industry is its special feature and the interests of the industry itself .require that proper and adequate provision for prospect-
ing new ore must be made before the workmen's claim for bonus can be awarded. Similairly a larger provision may have to be made for depreciation or· (1) [1955) Is. c. R. 991. rr5 [1959]
r~58 rehabilitation because of the special needs of this in- dustry. It may he conceded that this industry has The Stale of Mysore some special needs of its own ; but it cannot he denied
v. that the principles of social justice on which a cl:tim The Workers of for bonus is founded apply as much to this industry Gold Mines as to others. Social and economic justice have been
given a place of pride in our Constitution and one of Gajendragadhar ]. th d" t• · 1 f St t l" h · d · e irec ive prmmp es o a e po wy ens rme m Art. 38 requires that the State shall strive to promote
the welfare of the people by securing and protecting as effectively as it may a social order in which justice social, economic and political shall inform all the institutions of national life.
Besides, Art. 43 enun- ciates another directive principle by providing that the State shall endeavour to secure, by suitable legisla- tion or economic organization or in any other way, to
all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities.
The concept of social and economic justice is a living concept of revolutionary import ; it gives sustenance to the rule of law and meaning and significance to the ideal of a welfare state. It is on this concept of social justice
that the formula in question has been founded and experience in the matter of industrial adjudication shows that, on the whole, the formula has attained a fair amount of success. It is true that in industrial ad-
judication purely technical and legalistic considerations which are apt to lead to rigidity or inflexibility would not always he appropriate; nor is it desirable to allow purely theoretical or academie considerations unrelated
to facts to influence industrial adjudication. In its attempt to qo social justice, industrial adjudication has to adjust rival claims of the employer and his workmen in a fair and just manner and this object
can best he achieved by dealing with each problem as it arises on its own facts and circumstances. Experi- ence has shown that the formula in question is, in its · application, elastic enough to meet the requirements
of individual cases, and so we do not think that the appellant ii.as inade out a case for any addition to the S.C.R. existing categories of prior charges. It is clear that the amounts which can be admitted under the said
existing categories would have to be determined in the The State of Mysore light of the evidence adduced by the employer and v. having regard to the special requirements of the em-
The Workers of ployer's industry. In the present case the special Gold Mines features of the appellant's industry on which Mr. Sanyal relies would have to be taken into account Ga;endragadkar J. in determining the amounts which could be included
either under depreciation or under rehabilitation. That is the approach adopted by the tribunal in the present case and we do not think that any complaint can be validly made against it.
The next point which has been urged by Mr. Sanyal relates to the claim made by the appellant for the deduc- tion of°l5% of the revenue expenditure under a special covenant of the lease. Let us first refer to the relevant
terms of the lease on which this argument is founded. The original lease which was executed in 1935 had, under para. 3, imposed upon the lessees an obligation that they shall, during the term of the lease, in the
best and the most effectual manner and without inter- mission, except when prevented by unavoidable accident, search for all gold metals, metallic ores, pre- cious stones, coal and other substances of a saleable or
mercantilable nature within or upon the mining block. The second schedule to the lease purported to define the expression 'adjusted annual profits of the lessee' on which the lessor's claim for royalty was based.
The adjusted annual profits of the lessee had to be ascertained under this schedule by reference to the published annual accounts of the lessees and meant the difference in any year between the gross income
of the lessees from all sources and the gro&is amount of the sums mentioned in paras. 1 to 6 of the schedule. Para. 5 to the schedule referred to a sum equal to 15% of the aggregate amount of the expenses mentioned in
para. 4 of this part of the schedule. Thus it appears that amongst the items which the lessee was entitled to deduct from the gross revenue for the pllrpose of· determining his adjusted annual profits was included
the amount mentioned in para. 5. Subsequ~ntly by an [1959] r958 agreement and deed of variation executed in 1949 the deductions '"hich the lessee was entitled to make from The. Stale of
Myso" the gross profits for the purpose of determining his v. adjusted surplus were stated in a modified form. Tho The Wo•km of adjusted profit was now called the net surplus and the Gold Mines
procedure to be adopted to determine this net surplus has been mentioned in para. 5 of this document. Gajendrngad!U<r ]. Cl ( ) f 5 , th t , l J 'th h' I ause v o para. 1s e ma cna cause w1
w 1c i we are concerned. Under this clause a sum up to 15% of the aggregate amount of the expenses of the lessees shown as debit items in their published revenue account or Income and Expenditure account shall be
reserved for depreciation and development expenditure of a capital nature such as search for new ore, purchase of machinery, etc., and for renewals and replac,ements and shall be credited to a separate fund, provided,
however, that the accumulated balance in the said fund less commitments does not exceed 25% of the expenses of the lessee shown as debit items in their published revenue account or Income and Expenditure
account as the case may be for the first year on which the 15% was calculated or of the last preceding year whichever shall be greater. It is on this clause that the appellant claims to treat the amount of 15% as a
prior charge in the present proceedings. The argument is that this is a valid contract, between the lessor and the lessee and the lessee is entitled to claim the benefit of the contract and to treat the amount as a prior
charge. In dealing with this point we do not think it is necessary to decide the larger academic question as to whether such a contract would bind the workmen. The tribunal has held that since the rele-
vant covenant has the effect of withdrawing from the gross profits a substantial amount, workmen are entitl- ed to contend that the contract does not bind them and the amount should not be treated as a prior
charge. In our opinion it would be possible to deal with this question in a different way. The appellant's , · argume1it assumes that the lessee is under an obliga- tion to create a, reserve fund and to contribute to it an
amount equal to 15% as mentioned in the clause. This S.C.R. assumption is not justified by the clause itself. It is significant that the clause does not impose on the l The State of
appellant an obligation to create a reserve fund at al . Mysore The only obligation which the lease has imposed on v. the appellant is that the appellant shall make a search The Workers of for all gold and metallic ores during the continuance of
Gala Mines the lease. If, for carrying out this search the appellant . d dk d h b . l d Go;e11 raga ar ]. actually spen s any amount e may e entit e to claim credit for that amount ; but neither the lease
nor its annexures impose any obligation on the appel- lant to spend a particular amount in that behalf or to create a special fund earmarked for that purpose. The lessor has merely allowed the appellant to create a
specific fund as indicated in the relevant clause and the l~ssor has agreed to allow 'the appellant to deduct the amount thus put in the sai& reserve fund from year to year from the gross receipts for the purpose of deter-
mining the appellant's net surplus. In other words, for deciding the amount of net surplus on which the lessor's claims such as that for royalties or cont.ribntions may be based, the appellant is allowed to make
certain specified deductions; amongst these is the 15% mentioned in para. 5, cl. (v). Besides, the 15% of the aggregate amonnt mentioned in the clause is the maxi- mum limit which the contribution to the special fund
in any year is allowed to reach under this clause. Prima facie it appears to be doubtful if the appellant's failure to create a reserve fund or to make a contribu. tion to the said fund from year to year would neces-
sarily incur forfeiture of his lease .. However, apart from this consideration there is no obligation imposed on the appellant under this clause and any argument based on the alleged obligation cannot, therefore, be
accepted. There is also another consideration which must be borne in mind. The fund contemplated by the relevant clause is intended to meet depreciation and develop- ment expenditure and it is clear that the depreciation
and rehabilitation are included in the ]'ull Bench formula amongst the items of prior charge 1n dealing • with workmen's claim for bonus. If the appellant wants to make a claim for depreciation and rehabilitation
[1959] '958 it would be open to him to make such a claim even under the Full Bench formula. Indeed its claim The State of Mysm for depreciation has been upheld by the present award.
v. The fact that items of depreciation and rehabilitation The Workers of are included in this clause shows that even if the Gold Mines amounts claimed by the appellant solely on the
Gajendragadkar J. strength of this clause are not allowed, it would nevertheless be open to the appellant to make a claim in respect of admissible items independently of the clause and if he succeeds in proving this claim
there could be no injustice to the appellant. In our opinion it would not be reasonable or fair to allow the appellant's specific claim for 15% by way of rehabilitation solely on the ground that the
clause allows it to debit up to 15% in a special.fund without examining the question as to whether a claim for depreciation and rehabilitation is justified, and if yes, what should be the amount which should be
treated as a prior charge in the present proceeding. Inclusion of these items in a separate fund allowed under the relevant clause cannot preclude an investi- gation by the industrial tribunal into the merits of the
said items and that is what the appellant Reeks to do by placing his claim in that behalf solely on the relevant clause. We are, therefore, satisfied that the tribunal was not in error in disallowing the claim made
by the appellant solely on the strength of this parti- cular clause. As we have already pointed out the tribunal has in fact conceded that the appellant would be justified in making a claim for prospecting new ore and thereby
helping the longevity of its industry ; but since no material was placed before the tribunal on which the tribunal could.determine the amount which the appel- lant can legitimately claim in that behalf, the tribunal
was unable to give the appellant any relief in this matter. In this connection Mr. Sanyal referred us to the entries in the extracts from the balance-sheets which referred to the captial expenditure during the
• relevant years on buildings, machinery and plant and sundries as well (IS on shaft sinking, etc. In regard to the Mysore 0old Mining Co., for instance, the capital S.C.R. expenditure in question during the year ending Decem-
z95B her 31, 1953, was shown as Rs. 3,30,729 (Ex. VIII-A). The State of ·But the difficulty in accepting this figure as a prior Mysore charge either under depreciation or under rehabilitation
v. arises from the fact that Mr. Rajagopal Srinivasan The Workers of who was examined on behalf of the appellant was un- Gold Mines able to explain how this total amount was made up. G . d-dk . . The witness expressly admitted that the companies aJen raga dr f.
had no record to show separately the amounts under different heads. Mr. Sanyal fairly conceded that the companies might have led better evidence in support of their case. As the evidence stands, however, it is
difficult to challenge the correctness of the view taken by the tribunal that the amounts shown in the differ- ent extracts from the balance-sheets are a mixture of very i:nany items depending upon the options exercised
by the management and that it would be impossible to say which part of the said amounts can be legiti- mately treated as prior charge under the heading of rehabilitation. That is why we do not think that
Mr. Sanyal can succeed in his argument that, on the evidence as it stands, the appellant is entitled to any particular amount under the heading of rehabilitation. That takes us to the appellant's case in regard to
the annual contribution towards the pension fund which has been disallowed by the tribunal. It appears that the scheme of pension fund which was intended for the benefit of the covenanted servants -of the ster-
ling companies came into operation as from January 1, 1951, soon after the· rupee companies came into existence. Certain rules appear to have been framed in respect of this pension fund and a trust has ap-
parently been created for the administration of the fund. Under these rules the companies.made the con- tribution which is called the initial contribution to the fund as specified in para. l(c) of the rules. In addition
to this initial contribution, the companies had to pay to the fund by half-yearly instalments on June 30 and December 31 of each year an ordinary annual contri- bution at the rate specified in para. 6.
The'appellant • makes a claim for the deduction of this annual contri· bution as' a prior charge and his grie-iance is that this [1959] claim has been unreasonably disallowed by the tribu-
The state of nal. In regard to this fund the tribunal has made Mysor< certain findings of fact which cannot be challenged v. before us. The tribunal has relied on the circum- The Woekm of stances under which this fond came into existence. Gold~nes
Mr. Jha, for the respondents, has characterised this Gajendeagadhae J. fund as a parting gift of tho Sterling companies to their covenanted servants and it would appear as if the tribunal was inclined to take a similar view about the
genesis of this fund. The class of persons for whose benefit this fund has been created consists of a very small number of officers. It does not appear from the record that these persons claimed this benefit or that
granting this benefit was otherwise necessary for the successful operation of the affairs of the companies. The officers who got the benefit of this fund were en- titled to gratuity and during all the years of their
existence the Sterling companies had never thought before of creating such a fund. A claim for the initial contribution to this fund has not been made before us; but even in regard to the annual contribution the
tribunal was not satisfied that the amount was reason- · able and that the payment of this amount was otherwise justified on the merits. As against these facts the tribnnal referred to the cases of a larger number of
non-covenanted servants of the companies and other employees for whom no such fund exists. Having regard to all these circumstances the tribunal held that it would not be fair or just to allow the appellant
to claim that the annual contribution to the pension fund in question should be treated as a prior charge, a.nd thereby reduce the gross profits which would adversely affect the respondents' cla.im for bonus. In
our opinion, ivhether or not this particular a.mount i,;hould be allowed as claimed by the appellant does not raise any general question of law and the reason- ableness of the claim has, therefore, to be judged in
the light of all relevant facts and circumstances. As the tribunal has found against the appellant on this point we do not think we would be justified in interfer- • ing with the decision of the tribunal.
The neid; contention raised by Mr. Sanyal is iu, S.C.R. !HI respect of the finding made by the tribunal in regard r958 to the amount of bonus paid by the companies to their k h Th
The State of wor men or t e year 1950. e emp oyer's case was Mysore that though this bonus had accrued for the year 1950 v. it was actually paid in 1953 and so the amount of the The Workers of bonus should be deducted from the gross profits for
Gold Mines 1953. This contention has been rejected by the tribu- nal. The tribunal has observed that though the dis- Gajendragadkar J. bursement of bonus for the year was actually made in
the early part of 1953 the amount was provided and de- bited in 1952. This can be seen from the income-tax as- sessment order to which the tribunal has referred. The employer had claimed as an expenditure the amount
in respect of bonus relating to 1950 in the said income- tax proceeding and so it was held that the said amount eann(}t now be taken into consideration for the year 1953. We do not see any error of law .committed by
the tribunal in recording this finding. It is clear that the respondents were found entitled to bonus for the year 1950, because the companies held in their hands sufficient available surplus from the trading profits of
that year. In the absence of satisfactory evidence, normally the bonus paid to the respondents for the year 1950 cannot be brought into accounting for a subsequent year. We are, therefore, satisfied that the
appellant cannot successfully challenge the tribunal's finding on this question. It will now be material to refer to the two previous awards between the companies and their workmen
because Mr. Sanyal has based an argument on these awards and that argument yet remains to be ex- amined. On January 5, 1953, Mr. V. N. Dikshitulu, the sole member of the industrial tribunal made his
award in an industrial dispute between the Champion Reef Gold Mines of India Ltd., and its ~orkmen. By this award the tribunal held that the claim made by the employer on the strength of the clause permitting
the creation of a reserve fund and an annual contri- bution to it up to 15% " cannot but be allowed because niining operations can be performed only . subject to the condition of making the said item of •
u6 [1959] z95B reserve as per the agreement and hence it. stands to reason tha.t the reserve should be deducted from the The State of Mysore gross profits to ascertain the available surplus". It is
v. clear from the a ward that the tribunal did not con. The Work"' of sider the effect of the terms contained in the clause Gold Mines after construing the relevant clauses and we see no
G . d –d discussion about the merits of the rival contentions in •J•n raga kar J. respect of this claim. Apparently, the tribunal ac- cepted the employer's case at its face value and
granted the relief to the employer without considering all the relevant clauses of the lease and its annexures and without examining the merits of the workmen's case on the point. The next award was passed by
Mr. Dave on December 31, 1954, in Reference Nos. 6 and 7 of 1954. These two references arose from dis.- putes between the 06rgaum Gold Mines and the Champion Reef Gold Mines and their workmen. By
this award Mr. Dave rejected the employer's claim for deducting 15% from the gross profits under the rele- vant clause because he was not satisfied that the maximum limit of 25% mentioned in the clause had
not been exceeded during the year 1952. The em- ployer did not produce relevant books of account and Mr. Dave took the view that the non-production of the books showed that the employer was afraid that
the books would indicate that the maximum limit had already been exceeded. On that view Mr. Dave reached the conclusion that the employer was not entitled to make any contribution to the fund during
the relevant year. In regard to the pension fund Mr. Dave disallowed the claim for initial contribution but allowed the claim for annual contribution. He was inclined to hold that the annual contribution was
made for services rendered during that year and should certainly form part of the expenses of that year. This award was taken before the Labour Appellate Tribunal. The Labour Appellate Tribunal confirmed
Mr. Dave's decision both in regard to the initial and the annual contribution towards the pension fund. The App\lllate Tribunal, however, differed from Mr . • Dave in 'regard to the employer's claim for the deduc-
tion of 15%. under the relevant ·clause. It accepted \,,.. S.C.R. the finding of the tribunal that the employer had failed z958 to prove that in a particular year the maximum The State of
of 15% was in fact required to be contributed to the Mysore reserve fund. However, it held that the amount of v. Rs. 4·77 lakhs represented the actual expenditure in- The Workers of
curred by the employer during the year and so this Gold Mines amount was allowed to be treated as a prior charge. G It would no doubt appear as if the Appellate Tribunal ajendragadkar f. took the relevant figure from the balance-sheet as
showing the actual expenditure. It is unnecessary for us to consider whether this finding was justified or not. What is, however, relevant for the present purpose is the finding of the tribunal that the company was J.ot
entitled to claim the full provision of the rate of 15% of the total revenue expenditure allowed under the claus& in question. Mr. Sanyal has referred to these two awards in sup- port of his contention that the companies did not think
it necessary to make a specific claim for rehabilitation because it -was thought that following the previous awards the claim made for 15% would be allowed. His argument is that if the claim based on the covenant is
disallowed it would be unfair to his client not to allow any claim for rehabilitation at all. It is clear that the claim for rehabilitation which could have been sepa- rately made by the company was not so made because
it was included in the claim for the deduction of 15%. There is also some force in Mr. Sanyal's argument that, having regard to the previous awards the com- panies may have thought that the said claim would be
allowed. Since we have held against the appellant in respect of the major claim made on the said relevant clause of 15% it is necessary to consider whether the appellant should be allowed an opportunity to make
out a specific claim for rehabilitation and•lead evidence in support of the said claim. Mr. Jha, for the respondents, has resisted the appel- lant's request for a remand to enable it to put forward
this claim for rehabilitation. He argues that the com- panies deliberately did not make a specific ,claim for rehabilit1ttion and chose to rest their case on the • relevant terms of the contract because.theY. knew that
[1959] I958 a claim for rehabilitation would not be sustained. In this connection Mr. Jha referred us to the principles The State of d b d l Mysore adopte y in ustria courts in determining the
v. employer's claims for rehabilitation. We are not The Workm of impressed by this argument. It seems to us that, if the Gold Mines employer was partly misled by the previous awards
and did not in consequence put forward a specific Go;endragadkar J. 1 · c h b'l't t' 't uJd t b f ' c aim ior re a I I a 10n, I wo no e air or iust that he should be precluded from making such a claim
even after his general claim for the deduction of 15% is disallowed. After all, the Full Bench formula has recognised the existence of four items as constituting a prior charge on principles of social justice and if, in
the present case, the employer failed to make out a claim for deduction of one of the items substantially as a result of the previous awards passed in its favour, he cannot be penalised as suggested by Mr. Jha. We would
accordingly allow the appellant to put forward before the tribunal a specific claim under the heading of rehabilitation and lead evidence in support of the said claim. While we are sending this case back for the purpose
of determining the appellant's claim for rehabilitation and for deciding two other points which we would presently indicate, it would be useful, if we briefly refer to the principles which are usually adopted by
industrial courts in adjudicating upon the employer's claim for rehabilitation. It is not disputed before us that these principles would have to be borne in mind by the tribunal in determining the validity of the
appellant's claim for rehabilitation which we are now permitting it to make. It has been observed by the Labour Appellate Tribunal in Ganesh Flour .M~ills Go. Ltd., Kanpur v. Ganesh Flour Mills Staff Union (1)
that though .the employer is entitled to claim deduc- tions from the gross profits in respect of rehabilitation as a matter of right it is difficult to lay down any general rule applicable to each and every industry.
The Full Bench formula evolved in the case of The Mill Owners Association, Bombay('), was not intended to • 'lay dow'n any hard and fast rule in that behalf. For (1) (1952) L.A.G. 172 .
(2) (1950) L. L. J. 1247. S.C.R. the purpose of sustaining the claim for rehabilitation r958 there must be evidence to show the age of the machi- The State of nery, the period during which it requires the replace-
Mysore ment, the cost of replacement, the amount standing in v. the depreciation and reserve fund and to what extent The Workers of the funds at the disposal of the company would meet
Gold Mines the cost of replacement. In Trichinopoly Mills Ltd., k l C M'll W k , U • Ga;endragad ar ]. RamJeenagar v. ationa otton i s or er.s nion, Ramjeenagar (1) the appellate tribunal has observed
that for determining the total amount required for rehabilitation it is the original cost that has to be multiplied by an appropriate multiple, for instance 2·7, for the purpose of ascertaining the replacement value
of the machinery, buildings and plant. From the amount thus obtained 5% of the original value is to be deducted as breakdown value. The balance is treat- ed as sufficient to complete replacement of machinery
and buildings. Then the amounts in hand under the head of depreciation, general reserve and rehabilita- tion have to be totalled and this total has to be deduct- ed from the aforesaid balance which is required to
complete replacement of machinery and buildings. It is the balance thus drawn that has to be spread over a number of years, as for instance 15, for the purpose of rehabilitation ; in other words, the bailance has to be divided by 15 and the amount thus determined has to
be treated as prior charge under the heading of rehabilitation for the relevant year. (Vide The Meenakshi Mills Ltd., Madurai and Manapparai v. Their TY orkmen (2) ; The Rohtas Sugar Ltd. v. Their
W orkrnen (3) ; and The M ettur Industries Ltd., M ettur Dam v. The Workers( 4)). Thus the appellant's claim for rehabilitation would have to be tried by the tribu- nal in the light of these decisions. In the application
of the principles discussed in these decistons, industrial adjudication cannot adopt an inflexible or rigid approach; these principles will have to be applied with such modifications and adjustments as may be found
necessary, just and expedient having regard to the evidence led by the parties before the tribunal an<;l (1) (1953) L.A.C. 672. (3) (1954) L.A.C. 168, 184. · (2) (1954) L.A.C. 131.
(4) (1957) L.A.C. 288 • [1959]. '958 having regard to the special needs and requirements of the industry. This position appears to be fully The State of Mysore recognised by the Labour Appellate Tribunal in these
v. decisions themselves. The Workers of There is another point on which Mr. Sanyal has Gold Mines requested us to call for a finding from the tribunal. G . d -dk His case is that the award of the tribunal in one
a1en raga ar J. t . l . l ff f ma ena particu ar su ers ram an error apparent on the face of the record. In the award, the initial con- tribution to the pension fund and the annual contri-
bution to the pension fund have been added back for both the years in respect of all the companies. Mr. Sanyal contends that the amount added back under the heading " annual contribution to the pension
fund" really includes the initial contribution to the said fund also, and so it was erroneous to have added· back a separate amount under the heading " the initial con- tribution to the pension fund". In other words, the
grievance is that the amount of the initial contribution has been added back twice. Mr. Jha, for the respon- dents, does not ·accept Mr. Sanyal's contention that this is an error apparent on the face of the record. He
disputes the assumption made by Mr. Sanyal that the annual contribution to the pension fund in each case includes the hiitial contribution as well. \Ve do not propose to express any opinion on the merits of this
dispute. \Ve think it is desirable that the tribunal should be requested to make its finding on the ques- tion as to whether the amount of initial contribution has been added back twice over as suggested by the
appellant. This is the second point which we want to remit for the consideration of the tribunal. The third point which we propose to remit for the consideration of the tribunal has been raised by
Mr. Jha for tire respondents. He argues that the tribu- nal has committed an obvious error in allowing ·a deduction of statutory depreciation to each one of the companies for both the years in question and in sup-
port of his argument he relies on the statements con- ~ained in .the report of the directors in each case. As • an illustration we should refer to the report and accounts of phe Nundydroog Mines (KGF) Ltd., for the
S.C.R. year ended December 31, 1953. In this report, under x958 the item "capital expenditure", it is stated that the sum of Rs. 13,50,000 being depreciation for the period Th~I~s~:. of
April 1, 1951 to December 31, 1953 has now been writ- v. ten off. Mr. Jha contends that, since this amount has The Workers of been written off as depreciation, in calculating the Gold Mines
available surplus for the year no amount should be allowed by way of statutory depreciation. This argu- Gajendragadkar f. ment has been considered by the tribunal in para. 20 of its award but Mr. Jha wants to challenge the
correctness of the conclusion reached by the tribunal. We would normally not have allowed Mr. Jha's request for a reconsideration of this matter; but since on two points raised by the appellant we are remand-
ing the case to the tribunal and calling for its findings on thti said points we think it right to allow the respondents an opportunity to re-agitate this point. In fairness to Mr. Sanyal we may add that he did
not object to this matter being remitted to the tribu- nal for reconsideration. We would, however, like to make it clear that in dealing with this point it would not be open to the respondents to contend that the
appellant was not entitled to claim additional deprecia- tion under the head of statutory depreciation. This Court has held in Sree M eenakshi J.11 ills Ltd. v. Their Workmen (1) that additional depreciation which is
admissible under s. 10(2) (vi) of the Income-tax Act need not necessarily be allowed by industrial courts in determining the available surplus under the Full Bench formula. 1 We wish to make it clear that it would not
be open to the respondents to raise any contention. on the strength of this decision under the issue which is being remitted to the tribunal at their request. It is somewhat unfortunate that, though we have
held against the appellant on the main 1Joints urged by Mr. Sanyal before us, we cannot finally dispose of the appeal today. It is true that it is of the utmost importance that indu'.strialadjudication should be dealt
·with speedily' and 'without unnecessary delay ; but 'ill the present case we have come to the con:clu&ion th'at it would be fair and just to allow the appellant to.raise· • (r) [1958] S.C.R. 878.
!JlS [1959] r95S the two points mentioned in the judgment. That is why we think it necessary that this case should be The State of sent back to the tribunal with the direction that the
Mysore v. tribunal should make its fiudings on the issues remi1,- The Workers of ted to it by this judgment. The thr·ee issues on which Gold Mines we want a finding from the tribunal are :
(1) In addition to the statutory depreciation Gajendragadkar ]. allowed, is the appellant entitled to claim any dedun- tion under the head of rehabilitation, and if yes, to what amount?
(2) Does the award.in substance add back the initial contribution to the pension fund twice over in making calculations for ascertaining the available surplus? (3) In allowing statutory depreciation to the
appellant for the relevant years, has the award. virtu- ally allowed the said depreciation twice over having regard to the fact that a large amount has been written off by the appellant towards depreciation for
the said period ? Parties will be at liberty to lead additional relevant evidence. The tribunal should consider the evidence led by the parties, hear their learned advocates and make its findings on these issues. We would also direct
the tribunal to consider whether, as a result of it~ findings on ariy of the said issues, aily adjustment will have to be made in its final award. If, as a result of its findings, the amount of available surplus is likely
to be materially affected then the tribmial should indi- cate what the available surplus in that case would be in respect of each of the companies in regard to each of the two years in question. The tribunal should
also make a finding as to the amount of bonus to which the respondents would, in its opinion, be entitled on this altered finding as to available surplus. \Ve desire that this appeal should be finally disposed
of as soon as possible ; so we direct that the tribunal should submit its findings along with the evidence to be recorded hereafter to this Court within three months . from to.day. Both parties have stated to us that
this matter has to be and would be dealt with by the Central G<!vernment Industrial Tribunal functioning ; r S.C.R. at Bangalore. The proceedings will acqordingly be z958 remitted to the said tribunal.
The appellant will d f h The State of pay the cost of reman in any event. Costs o t e Mysore present hearing of the appeal will be costs in the v. appeal. The Workers of We would like to add that Mr. Sanyal has agreed
Gold Mines without prejudice that the appellant will -pay to the . -. d t fift d b . t d th . l . Ga;endragadkar J. respon en s een ays as10 wage owar s e1r c aim for bonus during the relevant years.
Gase remanded. AN ANT GOP AL SHEOREY v. THE STATE OF BOMBAY (B. P. SINHA, JAFER IMAM and J. L. KAPUR JJ.) Criminal trial-Amendment in procedure during pendency of trial-If retrospective-Code of Criminal Procedure (V of r898), s. 342 A-Criminal Procedure Code (Amendment) Act (26 of r955), S. II6.
A complaint was filed against the appellant on January 13, 1953, and the Special Magistrate trying him commenced the recording of evidence on July 4, 1955· During the trial the Criminal Procedure Code (Amendment) Act (26 of 1955) came
into force on January 2, 1956, which introduced s. 342 A in the Code of Criminal Procedure. The appellant made an appli- cation to the Magistrate claiming the right to appear as a wit- ness on his own behalf under s. 342 A in disproof of the charges made against him. The Magistrate rejected the application on the ground that s. 342 A 'could not be applied to pending proceed- . ings which would be according to the procedure laid down in the unamended Code :
Held, that on a plain construction of s. n6eof the amending Act which provided for procedure to be followed in pending cases s. 342 A was clearly applicable in such cases. Under the general law also a change in procedure operates retrospec- tivelJ::.
CRIMINAL APPELLATE . JURISDICTION: Criminal Appeal No. 178of1957. – II7 May 22,