Subject NOT available

shows that the workers were entitled to claim bonus as an implied term of employ- ment. I have already observed that the Central Government had taken over the Undertakings from the Mysore Government in the year 1962. They had agreed to pay some compensation which was to be determined on some agreed formula. The compensation was not paid at one time but there were adjustments and ia connection with the payment towards compensation Shri M. R. Yardl the then Joint Secretary to the Government of India wrote a letter dated 13th May 1965- to the Chief Secretary to the Government of Mysore and in item (iii) of annexure II of this letter it has been stated:—

Items of adjustments/credits etc.

Amount

Authority

Proportionate bonus for 1962-63 .

. Rs. 6^49,346,11

D.O. No. Ch. S. 703/63. d.tcd 21-13-1063 tiom Shri K. Balachandran,. Chief Secretary to. the Government of Mysore to Shri M.R. Yardi, Jt. Secy. 10* Government of India* Ministry of Finance.

From this letter it is clear that the amount of Rs. 6 lakhs odd paid to the workers- as bonus for the period of 8 months from April 1982 to November 1962 was paid by the Central Government at the instance and on the authorisation from the¹ Mysore Government and it appears that as the accounts were not for the full year the word "proportionate" was used and it will not show that the workers were entitled to bonus every year and accordingly they were entitled to bonus for that year as an Implied term of employment.

41. The Central Government had taken over the undertakings as a going con- cern and had there been a term of employment and condition of service about bonus there was no question of the workers claiming the bonus for the period of eight months. The agreement exhibit E-18 in respect of this bonus mentions, about the demand and it states that It was explained by the management that presently accounts were ready only for the period 1st April, 1962 to 30th. November, 1962 and that therefore the discussions were confined to that period alone. This agreement does not make any mention about payment of bonus as a condition of service and the words 'proportionate bonus for 1962-63' will not show that the payment of bonus was a condition of service.

42. I have already observed that the rate of payment of bonus was not uni- form nor was the payment made in connection with any festival. It has been observed in the ruling reported in 1969 II LLJ page 407 (Churkulam Tea Estate (Private) Ltd., and its workmen and another):—

"Following also further decision, Bombay Company Ltd., v. its workmen (1964—IILLJ 109) and Bombay Company (Private) Ltd., v. their employees (Civil Appeal No. 659 of 1966 dated 22nd September 1967) It Is held that when payment of bonus has not been uniform over the years, It is Impossible to Infer its payment as an implied condition.' of service unless such payment is connected with some festival. Hence the tribunal was wrong in holding that an inferenca could be drawn for payment of bonus as an Implied condition of service in the circumstances of the instant case when the payment admittedly was not uniform and was not connected with any festival. It Is impossible to Infer an Implied condition of service when payment has not been uniform in the past unless such payment can be connected with same festival. The claim cannot be sustained even as customary or tradi- tional bonus because apart from the fact that it is not connected with any festival one of the essential Ingredients, namely, that the payment should have been made at a uniform rate throughout is also admittedly lacking In the instant case."

The facts In the above ruling are to some extent similar to the present case and these observations will show that the Kolar Gold Mine workers are not entitled to claim bonus as an Implied term of servic* or In the alternative as a customary or traditional bonua.

Pro/it Sharing Bonus

43. The workers have by their written statements claimed profit bonus con- tending that there has been a growing demand for gold and hence the Under* takings have started developing the industry by exploration work to find out new ores. They have been also holding a virtual monopoly and dictating terms to •users and because of the prosperity the workers are entitled to share the profits as bonus. It has been contended that there were no proper incremental wage scales for workmen; they were poorly paid and they were entitled to claim bonus. The management has opposed this claim of profit sharing bonus contending that there is absolutely no profit and there is no available surplus. On the contrary there is a loss to the tune of Rs. 327 lakhs and the workmen are not entitled to claim any bonus. The learned Counsel Shrl T. Rangaswami Iyengar for the manage- ment has invited my attention to the ruling reported in 1958 II LLJ 479 in which it has been observed:—

"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 available surplus is a condition precedent for the award of bonus to workmen. The formula also postulates 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 between the wages actually paid to the workmen and the living wages which they ultimately hope In due course to secure."

It has been also observed in the famous case of the Muir Mills Ltd., and their -workmen (1955 II LLJ page 1):—

"There are however two conditions which have to be satisfied before pay- ment of bonus can be justified and they are when wages fall short of living standard when the industry makes a huge profit."

and it has been urged that the two conditions precedent necessary for the justi- fication of the grant of bonus are not fulfilled in this case and the reference should Tse thrown out

44. The learned Counsel has relied upon the balance sheet and profit and loss accounts statements for the period in question and it has been arcued that the •yrlrna facie evidence shows that as there is no available surplus the workmen are not entitled to get bonus. The unions have contended that the Labour Appel- late Tribunal's formula is not applicable to the facts of this case and the gold mine workers are entitled to claim bonus because of the prosperity of the other Undertakings. Leaving aside the question ahout the profits and available surplus lor a while I shall first discuss the evidence to find whether the second condition about the gap between actual wafte and the living wage is satisfied in this case.

Gap between the Actual Wage and the Living Wage

45. It is not in dispute that prior to the year 1954 the workmen had no proper "wage scale and the surface worker was getting 13 annas per day as basic wage •and dearness allowance of Rs. 22 per month. The workmen had raised a dispute and the waRe structure was determined bv the Central Government Industrial Tribunal by an award which is known as the Dave Award reported in 1955 1 LLJ page 47. By this award the minimum wage fixed for the surface worker was Tie. 1 and Rs. 1/4 for the underground worker. By the award dearness allowance was linked to the cost of living index and it was 3 annas per point over 100. This •award was passed in the yeflr 1955 and was given effect from 1st April, 1954. This award expired in the year 1958 and since then till after the period In question I.e. 1st December, 1962 to 31st March, 1964 there was nn revision of Ihe wage scalea. •On the contrary it aopears that in the year 1961 the management had by a settle- ment abolished the Unking of dearness allowance to the cost of living index fixing it at a flnt rate of Rs. GO and cut the workers to a loss as the cost of living was rising. Thus durinc; the period in question the workers were uettine a bssic wage as per the award i.e. Re, 1 for the surface worker and dearness allowance of lis. 60 which came to about Rs. 92.50.

^6. In support of their contention about the low wage and the firarj the workers "have examined Shri S. Rajagopal who is an office bearer of the K.G.M.U. union •who has given the historv about the wa^es paid to tjjef workers at the K.G.F. He has stated that before the year 1954 the basic wage for a surfaea worker was

13 annas and Rs. 1/1 for an underground worker and the workers were paid dearness allowance which came to about Rs. 22 per month. Regarding the award. he has stated:—

"As per the award the minimum wage fixed for a surface worker was Re. 1 per day and Rs. 1/4 per day for the underground worker. In the award D.A. was linked to the cost of living index which wafc 3dnt;as per point over 100 and as per award the total wages were Rs. 80 for surface worker and Rs. 85/- for underground worker. This award expired in 1958. From 1958 the workmen did not get any iegular increment in their remuneration. But as per settlement in the year 1961 a fixed dearness allowance of Rs. 60 was given by abolishing the linkage of dearness allowance to the cost of living index. There was no increase in the basic wage under the settlement."

and this evidence will show that during the period from 1st December, 1962 to 31st March, 1064 the workers were getting the basic wage fixed by the award of He. 1 per day and a fixed dearness allowance of Rs. 60 per month. Shrl Raja- gopal has also given the wages paid to the workers at Bangalore the textile and other industrial workers. His evidence shows that the cost of living index at Bangalore in the year 1963 was 473 points and in 1964 it was 902 points and the workers in the textile mills in the years 1962, 1963 and 1984 were getting a basic wage of Rs. 40 and a dearness allowance of Rs. 90. Thus the total remuneration was Rs. 130 per month. It is further clear from his evidence that the cost of living index for K.G.F. was higher than for Bangalore. In the year 1963 it was 830 and In 1964 it was 554 points and in spite of these higher indices and increases In the cost of living at Kolar the worker at K.G.F. was getting only Rs. 92.50 per month as against 130 and this clearly shows that the K.G.F. worker was getting" comparatively a very meagre amount.

47. The unions have made a grievance about the flat dearness allowance of Rs. (30 as cost of living was continuously rising and Shri Rajagopal has stated that according to the Tribunal's award dearness ai'owance in the year 19S3-B4 would have been Rs. 80 to Rs. 85 per worker but under the settlement of 1961 the worker was Retting only Rs. 60 and has thus lost dearness allowance to the extent of Rs. 20 to Rs. 25 per month. He has further stated;—

"The difference in the wages for the lowest paid worker at Bangalore and K.G.F. was Rs. 35/- in the period, The Bangalore worker was petting more. The Bangalore worker moreover is provided with the facility such as subsidised housing canteen food medical facilities, transport.'¹"

Thus if we compare the wages paid to the worker at K G.F. and to a similar worker at Bangalore it shall have to be held that the K.G.F, worker was very lowly- paid and was not being done justice to.

48. Shri K. P, SachJndranath, President, appearing for the union has contended that this remuneration of RE. 92.50 per month was scantv and very meagrp and the workers were not able to make both ends meet and they were ever indebted and there was a wide gap between the actual wage and the living wage. He bas also invited my attention to the observations made in the report of the Family Living Survey for Industrial Workers at K.G.F. The report has been published In the year 1959 and In Chapter XIV the Labour Bureau has given important findings. In paragraph it has been stated:—

"The avg-fitrp monthly expenditure for current living was Rs. 132. per family."

It Is not in dispute that the cost of living is increasing pvery year and during the period in question the monthly expenditure for a family must have further in- creased and it shall have to be held that there was a wide gap between the actual wage and living wage.

49. Shri Sachindranath has also cross-examined Shri R. Sreenivas the Chief Accounts Officer of the Undertakings who has also admitted the alleged wage structure. He has stated:—

"It 13 corrert to say that after slenlne the Rgreement of 1961 we continued Id fcay Upto 81st March, 1964 Rs. 92,50 as the wages to the minimum t>ald worker."

The dearness allowance paid to the workers was not sufficient to neutralize the Increase in the cost of living and Shri Sreenivas has stated:—

"The payments made by the Undertakings to the workers may not neutralize- the rise fully during the period."

and considering this evidence it shall have to be held that the mine workers at Kolar Gold fields were paid very low wages and there was a wide gap.

50. This inference will be further corroborated from the circumstance that even the learned Counsel for the management Shri T. Rangaswamy Iyengar while raising an objection to certain questions during evidence had submitted that the management had conceded the existence of a gap between the actual wages and the living wage. I have already observed that the workers have examined Shri S. Rajagopal office bearer of the K.G.M.U, Union for providing that the gold mine workers were getting very low wages. When Shri Sachindranath had put him questions in examination in chief about wages paid to the workers at Bangalore Shri Rangaswamy Iyengar had raised an objection to these questions contending that the management had already conceded a gap in the wages by their written statement and it was not necessary to ask questions on wages to the witness. However, it is clear from the reply statement of the management dated 19th August, 1967 that they had disputed the workers' contention and the questions were allowed. I have made a note about this objection while recording the evi- dence of Shri S, Rajagopal and this circumstance also shows the truthfulness of the workers contentions that they were paid very low wages and there was a wide gap in the actual wages and the living wages and the further question is whether the demand for bonus is Justified.

Contentions about availably surplus

51. As regards the second condition precedent about available surplus profits the learned Counsel Shri Rangaswamy Iyengar on behalf of the management has argued that the Central Government took over the Undertakings from 1st December 1962 and the present dispute relates to the bonus for the period of sixteen months from that date to 31st March, 1964; during this period the rates of gold had gone down; the cost of production was high and there could absolutely be no profit. It is further argued that the units of the Undertakings have maintained regular accounts and the management has produced the balance sheet and profit and loss statement for the business during the period; the gold produced was taken over by the Central Government at the I.M.F, rate and the ba^nce sheet and profit and loss statement exhibit E-7 would show that the Undertakings are at a loss of Rs. 327 lakhs. The management has a'so prepared the calculations of available surplus for 16 months which is at exhibit E-f). This statement is pre- pared according to the Full Bench formula and it will be Keen that instead cf an available surplus there is a deficit of Rs, 412 lakhs and the question of granting bonus cannot at all be considered.

D e d u ct R o y a l ty

Rs. tn lckh<: —17--6 3 2 - 3?

— 8 0 - 64 S t a t u t o ry D e p r e c i a t i on . . , . . . . .- 2 3 - 42

—113'06

—I5 4'96

Thus according to these calculations also there Is a deficit of Rs. 183.61 lakhs, Th" learned Counsel Shri Rangaswamy Iyengar has argued that when there Is no profit but huge losses further consideration about depreciation, rehabilitation etc. Is not necessary and it would be absolutely academic. As there la a loss the workers -are not entitled to claim bonus and the reference should be dismissed.

53. The unions have argued that the Kolar Gold Mining Undertakings which -are run departmentally by the Central Government are not in the real sense •commercial undertakings. They are not" run ori commercial lines. The gold .produced is not sold for profit tout it is taken over by the State and the Labour Appellate Tribunal's formula is not applicable to the facts of this case. In the alternative it is contended that the profit and loss account of the undertaking has taken credit for a number of items of expenditure which cannot be allowed as expenditure for the purpose 6? bonus calculations, the gold produced is not • also properly valued and even if the Labour Apellate Tribunal's formula is made applicable the workmen will be entitled to get bonus if the exaggerated claims by the management are eschewed, The accounts of the undertaking include -extraneous items and the profit and loss statement and the balance sheet should not be considered as a prirna facie evidence of the alleged loss.

54. It has been argued on behalf of the management that the balance sheets and the profit and loss account are certified by the competent authorities and the Tribunal is not ordinarily expected to go behind the various items mentioned .and it must toe held that there is loss to the "Undertakings. Shri Iyengar has invited my attention to the observations of their Lordships of the Supreme Court in the rulings reported in 1959 1 LLJ 644 at page 663 (Associated Cement Cos. -"Ltd., and their workmen) and 1965 II LLJ 144 (Brittanla Engineering Co. w. -their workmen). In the first ruling it is observed:—

"II would likewise be open to the parties to claim the exclusion of items either on the credit or on the debit side on the ground that the im- pugned items are wholly extraneous and entirely unrelated to the trading profits of the year. In considering such a plea¹ the tribunal must resist the temptation of dissecting the balance sheet too minutely or of attempting to reconstruct it in any manner

The working of the formula begins with the figure of gross profits tBken from the profit and loss accounts which are arrived at after payment of wages and dearness allowance to the employees and other items of expenditure. As a general rule the amount of gross profits thus ascertained is accepted without submitting the statement of the pro- fit and loss account to a close scrutiny. Thus it may be stated that as a rule the gross profit appearing art the face of the statement of the orofit and loss account should be taken as the basic figure while working out the formula."

"In the second ruling 1966 II LLJ 144 (Brittania Engineering Co. v. their work- men) it has been observed that certified profit and loss account and balance sheet must be presumed correct unless they are challenged and demonstrated to be wrong. Hence a portion of the expenses shown as "consumption of raw •materials, stores and spare parts", could not be added back on ground that it represented capital expenditure.

55. Learned Counsel has also read to me the recommendations of the Bonus Commission to show that I should not go behind the profit and loss statements. In chapter XXX para 19'7 of the Report the Commission has remarked:—

"But we consider that Tribunals and Arbitrators should not embark on investigations into questions such as whether stocks have been cor- rectly valued, whether a portion of the revenue expenditure which has been" passed bv the auditors as revenue expenditure should be considered as capital expenditure, the adequacy of remuneration to Directors and managing agents of companies whether expenditure on travelling allowance is excessive etc. The Companies Act and other Acts provide ample safeguards against maloractices. There are also provisions under the Companies Act for directing investi- gations into the affairs of Companies in certain circumstances," sti'l it has been argued that in the ordinary concerns the balance sheets ere pre- pared under the provisions of the Companies Act while in cases in which the undertakings are run departmentally there ts still a stricter control. The under- takings are on a higher level. The reoorts of departmentally run concerns are submitted to thp Parliament ond under the circumstances the profit and loss statement and balance sheet exhibit F.7 produced should be accepted as a primo jade evidence. The balance sheet shows a loss and as theire is no profit the workers are not entitled to claim any bonus.

56. The learned Counsel has also referred to the paragraphs In the Audit Report (Commercial) of the Central Government. In the prefatory remarks paragraphs 5 it has been stated that the receipts and expenditure and transac- tions relating to Departmental Undertakings form part of the Consolidated Fund of India and the Comptroller and Auditor General is responsible for their audit. The audit report of the Kolar Gold Mining Undertakings has been also published in this book under the signature of the Director of Cemmerclal Audit and con- sidering the certification of the accounts by such high and competent authorities the Tribunal must accept the correctness of the statements and hold that there are huge losses and the workers are not entitled to any bonus.

57. Shri Sachindranath on behalf of' the union has argued that the balance sheet and profit and loss statements produce^ !by the employers exhibit E-7 are not drawn in accordance with the provisions of the Companies Act. The em- ployer's witness Shri B. Sreeniyas, the Cheif Accounts Officer ha? admitted that the Companies Act is not applicable to the Undertakings. The Mysore Govern- ment took ever the gold mining industry from the companies from 28th Novem- ber 1950 and till that date the balance sheet and nroflt and loss statements were drawn in accordance with the provisions of the Companies Act. But thereafter on nationalization with the change in the management the system of accounting has also undergone a change and the balance sheet and profit and loss statements were drawn on different basis and are now required to be only proper and not, according to the"Vr"6vision of any law and consequently there is no question of the strict scrutiny and this document should not be accepted as It is.

58. It has been further argued that during the days of the management under the companies there was fixed and paid up capital. But after nationalisation the whole capital structure was also charged. Shri Srcenivasan has stated:—

"It is correct to say that there was paid up capital of the companies before they were nationalised. These companies had fixed capital in Rureeri before 1956.

Q. You have not got capital structure like any company registered under the Companies Act.

A, No, the Companies Act is not applicable to our Undertaking."

Bv referring to the records the witness says that the paid up capital of the thren iiiinin^ companies in the year 1056 was Rs. 162 lakhs odd. The paid up capital In the year 1962 when the Undertaking was with the Mysore Government was Rs. 29388449/-. The compensation paid by the Mysore Government was Rs, 164 lakhs odd. The balance sheet and statement of profit and loss account exhibit E-7 is for the period from 1st December, 1962; to 31st March. 1964. It is not in the form of balance sheet and profit and loss account as required under the Indian Companies Act. The figures shown in exhibit E-7 are as per tho state of affairs at the end of 31st March, 1964. He has stated:—

"It is correct to say that we have not shown in exhibit E-7 the reserves and capital at the commencement of the year."

Even in the replies given by the witness to the questions put by the management he has stated:—

"The capital of the undertaking is made up of the compensation pnid to the Mvsore Government plus the drawings from Government during the period less remittances made during the period. To this we have to add interest on capital and deduct losses during the period or add profit during the period in order to arrive at the nett capital em- ployed In the business. I say so because it is in the printed account."

In view of this evidence and circumstances it shall have to be held that the capi- tal structure of the undertakings is quite different from the capital structure In a company registered under the Companies Act. Consequently the balance sheet and profit and loss statement have not been drawn ui> after the accounts have been subjected to the same scrutiny and safeguards as those of the registered companies and there Is much force in the contention of the union that the balance sheet and profit and loss statements as they stand cannot be the basis for finding the profit obtained.

59 A close scrutiny of the balance sheet will also show that this document does not represent all the departments and activities of the undertakings nnd the management has thought it proper to omit them from the statement It I=" thf case of the management that the gold produced has not been sold but U is taken over and merely its value is shown at the I.M.F. rate. From this It is clear

that there was no realization of any amount by the sale of the fiold produced, which could have ibeen remitted. However, the balance sheet exhibit E-7 gives a different story. It showa remittance of Rs. 4 crores odd in the left hand column. Under Government capital it states:—

Rs.

Government Capital (^Compensation paid to Mysore Government) 301,49,346 Add withdrawals during the period from 1-12-1962 ^ 3 1 - 3 - 1 9 64 . . 826,13,621

11,27,64,967

Less remittances during the period

4,26,46,081

Balance . . .. 7,01,18,668 Interest on capital , . . . •• , . . . 16,24,941

Less loss during the period

7,17,43,827 3 ) 5 9 > 7 9 J ° I°

The profit and loss statement also shows the same nett loss of Bs. 359 lakhs odd. Thus it will be seen that the management has borrowed. Rs. 26 lakhs and had remitted Rs. 426 lakhs odd. However, the balance sheet does not throw any light from where the amounts remitted were realised. At the time of arguments it was submitted that the undertakings run also a dairy, petrol pumps and grain shops and the realizations were out of that business. In that case it shall have to be held that the balance sheet and the accounts are not only the balance sheet and accounts of the gold mining units of the Undertakings. The borrowings may also be for the purpose of other business. Under the circumstances it will not be fair to wholly rely on the balance sheet and the profit and loss statement for arriving at the available surplus.

60. It is true that the Kolar Gold Mining Undertakings are run departmen- tally. The audit reports are also submitted to Parliament. However, I do not think that these circumstances will invest the balance sheet and profit and loss statement with a greater sanctity. Accountability to the Legislature and parlia- mentary scrutiny I do not think will impose any additional responsibility on the executives charged with the duty to prepare these documents; nor will such sketchy documents throw sufficient light on the detailed working and activities of the concern. Although in theory parliamentary control over departmental^ run undertakings is extensive it is not so in practice. It is significant to remem- ber that the profit and loss statement for the period ending 31st March 1964 has been prepared and finally printed after about an year and three months on 12th August 1965. It is prepared by the Chief Accounts Officer of the Undertaking and is signed by the Managing Director. These documents have been audited and certified by the Assistant Audit Officer. However, the certificate itself will show that the document cannot be accepted in its entirety. The certificate reads:—

"I have examined the foregoing accounts and balance sheet of the K.O.M, Undertakings. I have obtained all the information and explanations that are required and subject to the observations in a separate audit report I certify the result of my audit "

This shows that there is an audit note made by the auditor. That note has not been produced and it is not known what items that note refers[ 0 and the mere production of the profit and loss account and balance sheet will not prove that whatever has been stated in the balance sheet is correct.

61 The unions have challenged the correctness of the entries in the balance sheet and profit and loss accounts statements. It has been alleged that the nmount of cost of Rs. 588 lakhs odd shown by the management in the profit and loss statement includes various amounts which are in fact either Items of capital expenditure or Items covered more than once and if these items are deducted from this amount the cost will be reduced to somewhere about 460 lakhs and mstead al loss there would be gross profit. The employers had in their written statement dated 12th May 1065 merely stated that there were losses and that there was no available surplus to pay bonus to the workmen The unions have In their written statement of claim dated 14th September 196ft requested that the under- taking should produce documents such as: m dulv e ^ t ed statement of accounts for the financial years 1961-82, 62-63 and 63-64 (2) statement showing basic wages

a nd dearness allowance drawn by each employee for each of the financial years 1961-62, 1062-83 and 1963-64 and (3} statement showing fhe statutory deprecia- tion etc., for each of the financial years, 1981-62, 1962-63 and 1963-64.

62. Subsequently the Mysore Mine "Workers' Union had filed a supplementary written statement and had made specific allegations about the inadmlssibility of items of expenditure in the sttHenienL of accounts. In para 6 they have stated:—

"Without prejudice to the contentions raised above it is submitted that the workmen would be entitled to bonus even in terms of the L.A.T. formula if exaggerated claims by the management are eschewed. The profit and loss account of the undertakings has taken credit for a number of items of expenditure which cannot be allowed as ex- penditure for purposes of bonus calculations,"

The cross-examination of the witness will also show that the unions have ques- tioned the correctness of the major items of expenditure and it was suggested *hat the monies spent on development, replacement, construction of roads, build- ings etc., have been wrongly Included in the revenue costs. It has been also contended that the amount of wages of Rs. 332 lakhs on salary, wages and other items etc., includes a portion of the capital expenditure and some Items were taken twice over. Leaving aside these contentions about wrong inclusion of the items In the cross examination by Shri B. Reddy the witness was specifically put questions about manipulation of accounts:—

"The last eight months of the Mysore Government were in loss and subse- quently after the Government of India took over it is continuously in loss.

Q. After the Government of India took over it is continuously a losing con- cern. Is this Joss In the balance sheet brought about by the way in which the accounts are manipulated?

ThJ.- question is objected to on the ground that the questioner presuppcues that the accounts are manipulated. The learned Counsel for the workman submits that it is a suggestion on behalf of the workmen and hence the question should be allowed- The question is allowed-

A. No."

63. Thus it is clear that the unions had challenged the correctness of the figures In the balance sheet. It was their contention that the amount of the tctal cost of Rs. 558 lakhs includes various items of capital expenditure, amounts •which should not have been charged to revenue and which should be deducted from total and in view of these allegations I do not think that the balance sheet and the profit and loss accounts statement entries can be accepted as true merely •on the production of the documents and the auditor's certificate.

G4. The profit and loss statement challenged by the union is as follows:—

Costs:

1 , 7 8 , 3 7 , 4 3 0 - co C o n s u m p t i on of Stores and S p a re P a i ls . . ..

P o w er

. . . . . . . ..

4 C , 4 3 , 9 3 2i°O

S a l a r i e s, W a g e s, G r a t u i ty a nd o t h er Benefits

3 , 3 2 , 6 5 , 5 7 7 - 00

I S J ? J J , 1 C 2 - CO C o n t r i b u t i on to P r o v i d e nt mid P e n s i on F u n ds

••

5J69J73JI3I-OO

Less: e x p e n d i t u re i n c u r r ed f o r:

Capital works including work in progress and s u n d ry credits Welfare work

3 , 3 9 , 7 72 1 2 , 4 8 , 3 34

R e p a i rs a nd M a i n t e n a n ce of B l d g s. . . ..

63S 66

G o ld r e a l i s a t i on c h a r g es . . . - ••

2 0 , 0 76

W a t ch & W a rd E s t a b l i s h m e nt

1,995521893-00

460,20,236-00

W e l f a re W o rk R e p a i rs a nd m a i n t e n a n ce of b u i l d i n gs G o ld r e a l i s a t i on c h a r g es . . . . .. I n s u r a n ce . . . . . . .. R e n ts a nd C e s s es . . . . . .. R a t es a nd T a x es . . . . . .. S t a t i o n e ry a nd P r i n t i ng . . . . .. P o s t a g e s, c a b l e s, t e l e p h o ne c h a r g e s, b a nk c h a r g es et W a t er c h a r g es . . . . . .. I n c i d e n t a ls . . . . . . .. E l e c t r i c i ty D e p a r t m e nt M e d i c al E s t a b l i s h m e nt . . . . .. C e n t r al A d m i n i s t r a t i on . . . . .. W a t ch & W a rd E s t a b l i s h m e nt C o n s u l t a n t s' F e es A u d it F e es

4,90,028-00 12,48,142'00 i;²4,373-°o 33,215-00 23,506-00 54,932-00 1,053769-00 I93i57-oo JJ93J94I"OO 3,89,440-00 24,06,194-00 14,06,834-00 12,04,482-00 !3JI73O35-OO- 5J34:3O9-OO 43,364-00

65. The management had valued gold at the I.M.P. rates and in the profit and loss statement the amount realized by sale of gold was shown to be at Rs, 247.36 lakhs. The unions have challenged the correctness of the rates at which the gold has been valued. However, I shall deal with the question about the price of the gold later on and I will first discuss the evidence to find whether the manage- ment have proved the correctness of the various entries on the debit side and whether in fact the total amount of cost Is Rs. 558 lakhs.

66. It has been held by tho Supreme Court in a number of cases that the correctness of the figures as shown in the balance sheet and profit and loss accounts statements must be established by proper evidence In Court by those who are responsible for preparing the document or by other competent witnesses. The unions have relied upon the ruling reported in 1960 1 LLJ page 548 (Petlad Turkey Red Dye Works Company Ltd., and Dyes Chemical Workers' Union and others) in which their Lordships have first discussed about the necessity of proof of a medical certificate and have observed:—

"There is no reason why an exception should be made in the case of balance sheets prepared by companies for Lhemselves. It has to be borne In mind that In many cases the directors of the companies may feel inclined to make incorrect statements in these balance sheets for ulterior purposes. While that is no reason to suspect every state- ment made In these balance sheets the position Is clear that we cannot presume the statements made therein to be always correct. The burden is on the party who asserts a statement to be correct to prove the same by a relevant and acceptable evidence. The mere statement of the balance sheet is of r.r> assistance to show therefore that any portion of the reserve was actually utilized as working capital An audited balance sheet would show that certain statements are made but the mere fact that the statements are made could never be taken as proving the statements aa correct."

67. In the ruling reported in the same volume at page 542 (Khandesh Spinning and Weaving Mills Company Ltd., and Rashtriya Girni Kamgar Sangh and others) their Lordships of the Supreme Court have specifically mentioned that the accounts of a company are prepared by the management. The balance sheet and profit and lot,s accounts are also prepared by the company's officers. The Labour have no concern in it. When so much depends on this items the principles of justice and equity demand that an industrial court should Insist upon a clear proof of the same and also pivo a real and adequate opportunity to the labour to canvass- the correctness of particulars furnished by the employer.

Revenue Earpendiiure

68. In support of their contentions the management have examined Shrl R. Sreenivasan thp Chief Accounts Officer of the Undertaking. He has prepared the- balanre sheet from the statements of expenditure submitted to him by the units. He had no personal knowledge about the items of expenditure. He has stated:—

"At the time of preparing the balance sheet I have not gone through the items of expenditure but the statement is prepared from returns submitted to me by all the mines."

and the mere production of the profit and loss account and balance sheet and the statements made by the witness, 1 do not think, will be sufficient to prove the various items challenged by the unions. It cannot be presumed that the statements made in the balance sheet or the statements in the profit and loss account are correct. The burden of proof is on the party who asserts the statements to be correct and must prove the same by relevant and acceptable evidence. The witness has been cross-examined at great length. The management have also produced some statements of details and I shall discuss the evidence about the debit items alleged to have been wrongly charged to revenue or Improperly included in the revenue expenditure or which have been twice covered and should be neither deducted from the total costs or added back to the profits while considering the question of surpuls for bonus.

69. (i) Retiring Benefits to the extent of Rs. 16:02 lakhs.—It will appear from the balance sheet exhibit E-7 that the management had shown a reserve of Rs. 20,39,234 as liability to employees on retirement. The unions have contended that the amounts paid towards service gratuity should have been paid out of this reserve. The management has wrongly charged this amount to revenue expendi- ture and that amount should be excluded from the costs. The witness has also •deposed to this fact and stated:—

"It is correct to say that I am debiting certain amounts besides the item of Rs. 26,39,234 towards the expenditure as retiring benefits during the period in question."

At the Instance of the union the management has produced a statement exhibit W-7 showing an amount of Rs. 14,38,567 paid towards service gratuity, termination gratuity silicosis and workmen's compensation. However, a statement showirg the split-up of the gratuities, compensation etc., produced on 18th August 1967 gives a different amount for the very items. There is a slight variation. The amounts are—•

RB. lakhs

T. Service Gratuity •2. Termination gratuity 3. Silicosis compensation 4, Workmen's compensation

'55 y ai 5'89 . . . 2-37

16-02

Shrl R. Sreenivasan has admitted that these amounts paid have been charged by him to the revenue account. He has stated,: —

"For all these years from 1951 uptodate the payment towards service gtatuity and silicosis compensation have been charged only to the revenue account and not to the reserve account and hence the total reserve figure is not reduced."

He further makes it clear:—

"It Is correct to say that this amount has been passed on to pay gratuity to the employees who would be discharged, retired or retrenched from time to time. I did not pay the amount of Rs. 14.38 lakhs as shown in the statement exhibit E-7 out of the service gratuity reserve because nothing was known as to whom and what amount had to be paid."

It Is clear that the amount paid towards the two gratuities and compensations which should have been charged to the reserve have been rmld out of the revenue of the year and the total cost shall have to be reduced by this amount of Rs. lfl:03 lakhs,.

70. (li) Donations: —

The unions have further alleged that the management has given donations to the King's College, London, research grant to King's College and K.G.F. first- grade college and since these amounts have been paid out of the revenue expenses of the year they should be deducted. It appears from exhibits W-4, W-10 and

W-ll that the management had given the following donations, grants to schools- etc

Grants to schools, teachers etc. . . , . Rs. 8838i2 (Ex-'W-4) Donation to K.G.F, Sanitary Board medical institutions

etc

Rs. 5,337 (Ex-W-4)

Donation to K.G.F. l'irst-gradc college . . . Rs. 1-33 lakhs (Ex-W-11)

It has come In evidence that there are frequent rock bursts in the mines and the- management had to suffer heavy losses on that account. It also hampers the- winning of gold. It appears that with a view to know the reasons and llnd a, reinudy tho management might have paid the amount for research to the King's College. The K. G. F. Schools are situated in the vicinity and the sanitary board is Rlsn doing Its work in the same area and these two donations which are less than a lakh of rupees cannot be said to be Improperly made by the management whi.'h is a big establishment employing more than 13000 workers.

71. However, I do not think that the donation of Rs. 1.33 lakhs to the first grafte college can be considered to be permissible. It is not possible for the boys of the workers' family to take advantage of the college institution. The workers pre leading a hand to mouth life. They cannot meet both the ends and In their eye college education will be a luxury. Being a public college ordinarily it will be useful only to the students who generally come from the rich and advanced people and considering the circumstances in my opinion this donation of Rs. 1.33. lakhs should be deducted from the revenuo expenses of the year.

72. (iii) and (iv) Charges for experts officers' bungalow servants: —

The unions have challenged the correctness of the entries of the amounts of Rs. 2,22,964 and Rs. 1,63,000 alleged to have been paid as wages to the servants allotted to the officers' bungalows, and it has been contended that the management has not proved that In fact such huge amounts have been paid and that it was not necessary for them to spend such huge amounts on servants of strangers. It appears from the profit and loss account exhibit E-7 that the management has- paid RE. 5.34,399 as consultants fees to the consulting engineers- It appears that the management took the help of some consultants in running the industry.

72-A. The profit and loss accounts statement shows that an amount of Rs. 332:

lakhs Rnd odd has been paid towards salaries, wages, gratuity and other benefits and while giving the break-up of this amount they have stated that on amount of Rs. 1.63 lakhs has been paid over bungalow servants. The Chief Accounts Officer in his cross-examination has admitted that this amount Is spent over the consul- tants' servants- He has stated:—

"The bungalow servants mentioned are the servants allotted to the consul- tants' bungalows and their wages are included in this item. The amount of Rs. 1,63,000 paid to bungalow servants in statement dateel 18th August, 1967 refers to officers as per the contract of service to them. This item of Rs. 1.63,000 and item of Rs. 2,22,964 In statement No. 2 are included in the agreement and I shall produce the agree- ment."

It is also clear from this statement that the amount of Ra. 2,22,964 which has- been mentioned against incidentals in W-ll the split up of which has been given In exhibit W-10 Is spent over these officers.

73. I do not think that such huge amounts spent over the consulting engineers and officers crn be said to bo properly utilised for the production of gold and the workers should be made to suffer on their account. The management have contended that these amounts were spent In accordance with the agreements made with the consultants and officers. The workers have challenged these items under the so called agreements. Ordinarily a Tribunal will not interfere with such agree- ments or the discretions exercised by the management- However, the undertakings are depsrtmpntally rim concerns I think the unions are lustifled in criticizing these Items of expenses. The witness had agreed to produce the agreements. It is not. known why these agreements have not been produced and It shall have to be held that the amounts of Rs. 1.63 lakhs and Rs- 2,22,964 have not been proved to have been properly utilized and these two items will be reduced from the costs.

74- (v) Items considered twice.—The unions have made a serious grievance- about the method of accounting adopted by the management and have by their

reply application dated 6th May, 1968 it has been contended that they have not followed the principles of accounting and that the various items of capital expen- diture have been Included in the revenue expenditure, some are included twice and if these items are deducted there will be a profit. The management has contended that the items of expenditure are allocated towards revenue and capital expenses as per the cost code of the undertakings and the accounts are made in accordance with the same and there is no question of challenging the method. The cost code has been produced as exhibit W-5. It is a very sketchy book and it will be very difficult for a layman to determine correctly whether a particular item is capital expenditure or revenue expenditure. The unions have read certain paragraphs from the book on practical auditing and it cannot be disputed that by capital expenditure Is meant all expenditure Incurred for the purpose of acquiring assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business. It is also clear that revenue expenditure is all expenditure incurred in carrying on the business and in maintaining the capital assets In a state ol efficiency. However, I do not think that I shall be justified In considering the question whether the cost code allocations are in accordance with the principles generally accepted or not. It it; clear that the management have their own rules to decide the capital and revenue allocations and I shall discuss the correctness if any particular item challenged to have been wrongly Included.

75. The management has contended that the cost of Rs. 558 lakhs arrived at In the profit and loss statement exhibit E-7 Is arrived at after deducting the capital expenditure. It does not include any Item of a capital nature nor does it include anj amount twice over. However, the profit and loss account statement drawn by the management on the i'ace of it supports the contention of the unions. I have already quoted the statement which will show that all the costs are first stated under the four headings with a total Rs. 569.73 lakhs and thereafter the Accounts Officer has given certain deductions under the column less expenditure Incurred for the first of which is capital works showing an amount of Rs. 9,38,045 ana the total of the five Items in the column less is Rs. 109.52 lakhs. After deducting these five items they have shown the amount of Rs. 460.20 lakhs- When the Chief Accounts Officer was asked about the reason why he had deducted and added he has given a very amusing explanation. He has stated:—

"I have not other specific reason except the one about proper presentation In better form to deduct and add the items under the same head in the revenue and profit and loss account exhibit E-7.

This cannot be accepted and the circumstance itself shows that the management does not treat these five Items as expenses properly chargeable to revenue. It may be that the amounts might have been either utilised towards capital expendi- ture or might have been included in the total of the four items of costs and there is much substance In the contention of the unions that the management has not properly followed the principles of accountancy in maintaining the accounts. Sur- prisingly they have added these items of welfare work, repairs and maintenance of buildings gold realisation charges, watch and ward establishment over again- The explanation given by the management that this method has been followed for purposes of proper presentation does not at all stand to reason and when those items have been deducted from the total amount of revenue cost either because of their character as capital expenditure or previous Inclusion In the four items I think it proper to accept the Union's contention that these very amounts which are Included In the same heads and added should not be added again-

70. It la significant to note that the management has supplied their details for the item of welfare work of Rs. 4,90,228/- which is at exhibit W-4. This men- tions an expenditure of an amount of Rs. 33,24,300/- under the head salaries allowances etc. The Chief Accounts Officer has In his deposition admitted.¹—

"The Item of Rs. 3,32,430/- first item from the last exhibit W-4 Is included under salaries, wages, gratuity and other benefits etc. and also in the column contribution to provident fund and pension found and trans- ferred to this account as shown under 'less-' "

This abo corroborated the union's contentions that some of the amounts from the other items and heads of the departments added subsequently are Included In the total amount of the cost under the first four heads, consumption of stores, wages, contribution to provident fund etc-, and the management thus had reduced the total cost by the Items (1) welfare work. .Rs. 3,39,772/- (2) repairs and main- tenance..Rs. 12,48,134/- (3) gold realisation charges Rs. 6,866/- (4) watch and

ward establishment. .Rs. 20.076/-. It will not be proper to allow the manage- ment to add these very amounts which are included In the amounts under the same heads welfare work, repairs and maintenance of buildings, gold realisation charges and watch and ward establishment, The total of the four items comes to—

Rs.

3>39,772 12,48,134 6,866 20,076 16,14,8^8

and the total cost will be reduced by this amount.

77. (vi) Replacement cost of Rs. 11,50,000.—The union have contended that the management have charged the capital expenditure to the revenue account and all these items have not been reduced from the total cost and one such item Is Ra. 11,50,000/- which is. in respect of replacement of plant and machinery. The management had denied these allegations and have stated that the amount Is Included in the total capital expenditure of Es. 93 lakhs odd. However, it is clear from the evidence of the witness that this is not covered in the amount of the head capital expenditure. It is not in dispute that this amount is capital ex- penditure. Shri Sreenivasan has also stated:—

"I consider the expenditure on works in progress as capital expenditure but the amount of Rs. 11-50 lakhs in exhibit E-7 is capital expendi- ture."

It is not in dispute that the management has charged this amount to the revenue account. The witness has further stated:—•

"It is correct to say that the amount of Rs. 93.38 lakhs and Rs. 11.50 lakhs

in exhibit E-7 are charged by me to revenue account."

This itaelf proves that the amount of Rs. 11.50 lakhs is separate and it has been charged by the management to revenue account and the total cost shall have to be reduced by this amount.

78. (vil) Shaft Sinking.—The unions have contended that the cost of Ks. 2424 lakhs required for shaft sinking is capital expenditure. The management had charged this amount to the revenue account and the same should be either de- ducted from the revenue costs or added to the profits while considering the avail- able surplus. The management have argued that the amount is included In the capital expenditure of Rs. 93 lakhs and the same has been deducted and the amount is not wrongly charged to revenue.

79. The management have produced the details of the shaft sinking and it appears that they have incurred an expenditure of Rs- 24-24 lakhs as cost towards shaft sinking. However, except the word of the witness there is nothing to show that this amount has been included in the capital expenditure. The unions had asked for the split-up of the amount of Rs. 93 lakhs odd but the s^une has not been supplied The witness himself has made inconsistent statements about the nature of this expenditure. According to him only the main shafts are charged to capital. He has stated:—

"It is correct to say that the main shafts are charged to capital while all other shafts are charged to revenue. The main shaft may be under- ground or on the surface also. I shall not be able to give the details-

He has further stated:—

"I agree with the statement to the extent that shaft sinking mainly for exploratory work will be capital but shaft sinking expenditure for winning the gold on reef will be revenue expenditure."

"It Is correct to say that in the cost code there is no such Indication as shaft sinking for exploration and shaft sinking for winning gold. But the whole expenditure for sinking shafts will be termed as exploratory expenditure. It Is correct to say that whether it Is main shaft or other shaft the expenditure is expenditure incurred on new excavation and on machinery installed. It will also include wages on labour employed for that purpose.

Profit and loss account will Include such items under the heading cost Such items means shaft sinking."

80. This evidence clearly shows that according to the witness shaft sinking other than the main shaft is to be charged to revenue and he must have charged It to the revenue account. In his further cross-examination he has made it clear but has added that he has subsequently transferred this amount to capital- He has stated:—

"I have stated in the cross-examination by Shri Sachindranath that I have charged these items to revenue because it is initially charged to reve- nue account and subsequently transferred to capital account." "I have charged this amount initially to revenue because the cost code does not say that the undertaking cannot charge it Initially to revenue. I shall not be able to say on what date I have transferred these items to capital account.

Q. I put it to you that during the period of 16 months in question you had not transferred these items to capital?

A. It is not correct.

Q. Can you say from, the record when the accounts were transferred? A. I shall furnish the record."

Thus it was subsequently alleged that the management has transferred this amount from revenue account to the capital account and it is an after thought. The explanation for initially charging the amount to revenue does not stand to reason. They have not alse produced the necessary entries in that respect and it is difficult to accept the contention that the amount was subsequently transfer- red. It is an item of capital expenditure and the total cost under revenue shall have to be reduced by this amount.

81. The unions have contended that the management have according to their profit and loss statement incurred a capital expenditure of Rs. 83 lakhs odd. How- ever, the salary and wages paid to the workers carrying on this work of a capital nature are included in the total amount of Rs. 332 lakhs under the head salaries.. The management has not deducted the amount of salaries and wages from this amount nor have they given the figure separately and so some percentage of this amount should be considered to be capital expenditure and the same should be deducted from the revenue costs or should be added to the profits. The unions have als.0 invited rny attention to the observations from the volume Practical Auditing by Walter W. Bigg, F.C.A., P.S.A.A. page 108 which says that sometimes capital is Included in the revenue expenditure and the auditors should be parti- cular. In this book it has been observed: —

"The allocation of expenditure as between capital and revenue calls for the auditor's careful .examination. Where the expenditure is directly incurred for capital purposes, it can be vouched by the auditor in the course of his examination of the cash book or the Bought Journal and his duties in this connection have already been dealt with. In many cases however the expenditure takes the form of wages of workmen either wholly or partially employed on capital improvements and extensions but whose wages are included in the general wages ac- count. Unless therefore a transfer la made from the wages account to the debit of the asset account concerned revenue will be charged with wages which may properly be capitalised. Before passing any such transfer the auditor should examine the basis upon which it has been calculated...,"

82- Considering the evidnece in my opinion in the present case also such capital expenditure particularly in respect of wages has been included in the revenue expenditure and the same has not been deducted. In this connection the Chief Accounts Officer has stated: —

"The figure of Rs. 332 lakhs odd third Item in costs will include wages of labour employed on capital works."

He has further stated: —

"I shall not be able to split the flflure of Bs, 332 lakhs odd under the head- ing salaries etc., and be able to state what portion of it forma capital expenses."

In view of this situation and the admissions on the part of the management about the inclusion of some capital expenditure in this amount the unions are justified in contending that some part of it should be deducted from the revenue costs.

83. However, there is no evidence to find exactly what amount has been in- curred as capital expenditure towards salary etc., but considering the huge amount of the figure of Rs. 93 lakhs as capital expenditure and the total amount of salary in my opinion 5 per cent of the costs towards salary wages etc., should be held to have been incurred for works of capital nature. The total amount of costs under the head salaries is Rs. 332 lakhs and 5 per cent of the same would be Rs. 16.6 lakhs and the revenue costs will have to be reduced by this amount.

84. In their profit and loss statement the management have taken the total cost of production at Rs, 558 lakhs and the same figure has been taken into considera- tion while preparing the available surplus statements exhibits E-9 and E-10. I have discussed the evidence about the various items alleged by the unions to- have been wrongly included in the revenues expenditure and considering these- items which were of a capital nature and which have been repeated and covered twice or which should not have been charged to revenue the total cost of Rs. 538.75 lakhs will be reduced by the following amounts: —

I t e ms

Amounts in lakhs of rupees

, . . . . , ..

R e t i r e m e nt b e n e f i ts e t c. D o n a t i o ns C h a r g es f or t he e x p e r ts a nd o f f i c e rs b u n g a l ow s e r v a n ts

I. 2. 3-

I t e ms t a k en t w i ce o v er , . . . ., R e h a b i l i t a t i on . . . . . . .. C a p i t al e x p e n d i t u re t o w a r ds s a l a r i es e t c. . . .. Shaft Sinking

i6-a i'33 1-63 2 '22 I6-I4 II'5O 16-6 24-24 4- 5. 6. 7-

89-86

and on deducting this amount from the total of Rs. 558.7S lakhs the revenue expenditure of Rs. 558.75—89.86=Rs. 468.89 lakhs will be taken for calculating the gross profit.

Calculation of Available Surplus

85. The learned Counsel for the management has argued that the workers had raised the dispute about the bonus for the year 1953-54 and after the award in the reference the matter was pending in appeal before the Supreme Court at the time when the Mysore Government nationalised the industry. In that appeal proceeding Civil Appeal No. 648 of 1937 the Supreme Court passed an award in terms of the compromise and after this compromise award the available surplus was calculated according to the terms agreed. The management has prepared the calculations of the available surplus for the period taking both the I.M.F. rate and the Hutti rate of gold. These calculations of the available surplus have been made in accordance with the L.A.T. formula aa per the terms of the compromise.

86. The two statements are produced as exhibits E-9 and E-10. Tn exhibit E-9 the price of gold and silver is calculated as per T.M.F. rate while in exhibit E-10 it has been calculated at the Hutti Mines rate. There is no other difference. The •prior charges In both are the. same. I have already quoted the statement of avail- able surplus in Exhibit E-10 and it will appear from this statement that the manage- ment has claimed the following amounts as prior charges: —

Rs. in lakhs

Statutory Depreciation 23-42 Additional provision for rehabilitation and normal development reserved . ⁴ I' ?° Interest on borrowings . . . . . . . .. 16*85 Return onfixedcapital Return on reserves used as working capital Royalty

9"O4 i'6i 3²<3° and it has been contended that this statement has been made as per the agreement between the union and the management. The amount of rehabilitation in binding on the workers and as per this statement also there is a huge loss and there is na question of payment of bonus.

87. The unions have contended that the agreement which was entered into by the unions with the Mysore Government is not binding upon them. It has also expired and the management ought to have proved the prior charges In the pro- ceedings if they wanted to claim the same for considering the question of bonus.

88, I have already stated that the dispute between the workers and the manage- ment in respect of bonus for the years 1953-1954 was pending before the Supreme Court in Civil Appeal No. G48 of 1957. Their Lordships of the Supreme Court re- manded the case by their judgment dated 22nd May 1958 and thereafter the parties had compromised the dispute. The compromise agreement is included In Exhibit E-13 and the relevant portion from this agreement is as follows: —

"It is therefore agreed between the parties that available surplus out of which bonus should bo paid to the workmen should be calculated as follows: —

fa) gross profits of each year will be arrived at after deducting from gross income revenue expenditure which includes royalty, additional royalty, contribution to Government, annual contribution to the pen- sion fund and also staff provident fund;

(b) Out of the gross profits will be deducted as prior charges—

(i) Income-tax and other taxes If any;

(ii) an amount equal to the total depreciation that would be allowable under the provisions of the Income-tax Law;

(iil) an amount equal to the difference between the actual capital expendi- ture and statutory depreciation as per (ii) above

or

7\ per cent of the total revenue expenditure whichever is less as- additional provision for rehabilitationj

(iv) an amount equal to 6 per cent of the capital invested in the Under- takings; and

(v) an amount equal to 2 per cent on reserves employed as working capital."

The Chief Accounts Officer has stated in his deposition that he has made the calculations of the available surplus according to the L.A.T. formula modified as, per the terms of the compromise award passed by the Supreme Court and the question is whether the parties are bound by this agreement for the calculations of the available surplus for the period in question.

89. I have already stated that the dispute referred to the Supreme Court was In respect of the bonus for the year 1953 and 1954 and In the agreement it has been stated: —

"The above method of calculating available surplus and the fixation of the amount to be distributed as bonus will be followed for the years 1953, 1054 and 1955 and the period from 1st January, 1956 to 28th November, 1956 the period during which the gold mines were under the manage- ment of the companies and for the subsequent years upto 31st March, 1961 by the Kolar Gold Mining Undertakings."

From this it is clear that the agreement was binding between the parties till the end of the financial year 1960-61. The present dispute is in respect of the bonus for the period 1st December, 1962 to 31st March, 1964. Clearly the agreement has expired and I do not think that the terms of this agreement are binding. TTie Mysore Government nationalised the undertakings in the year 1956 and there- after had preferred the appeal and the auestion is whether the employers are entitled to get the prior charges as claimed in the calculations.

90. I shall first deal with the two important items of prior charges—the statu- tory depreciation and rehabilitation as the management has claimed these items on the strength of the above mentioned agreement by which the bonus dispute for the year 1953-54 was compromised. It is clear from the statement Exhibit E-10 by which the management has calculated the available surplus that they are claiming an amount of Rs. 23.42 lakhs as statutory depreciation and Rs. 41.90 lakhs as rehabilitation charges. It is also not in dispute that by this agreement which is dated 7th October, 1958 they were entitled to claim statutory deprecia- tion which is the total depreciation that was allowable under the provisions of the Income-tax Act. It is not in dispute that the management has claimed thie amount of Rs. 23.42 lakhs as statutory depreciation because of the agreement.

The agreement specifically mentions total depreciation allowable under the pro- visions of income-tax law. However, I do not think that the management can claim the statutory depreciation as a prior charge in the ca'culation of available surplus for the purposes of bonus. It is true that in some earlier rulings statutory depreciation had been allowed to be deducted as a prior charge. There was a conflict of decisions. But this confusion was set at rest by the decision of the Labour Appellate Tribunal in the case of Uttar Pradesh Electricity Company and its workmen 1955 II LLJ 431 and after the decisions of the Supreme Court in the • Shree Meenakshi Mills case 1958 1 LLJ 239 and other cases it has been clearly established that it is the notional normal depreciation that should be allowed as prior charge in the calculations. In this ruling their Lordships have quoted the .following observations from 1955 II LLJ 431 and have further observed: —

"The initial depreciation and additional depreciation are in a sense abnor- mal additions to the income-tax depreciation and they are designed to meet particular contingencies and for a limited period. It would therefore not be fair to the workmen that these two depreciations are rated as prior charges before the available surplus is ascertained. It is likely that in many cases if these two depreciations are allowed as prior charges no surplus would be left even though workmen may have laboured during the year to the best of their ability and the concern was for all purposes prosperous.¹'

"Hence the provision for normal depreciation including multiple shift depreciation alone and not for additional or initial depreciation which form part of statutory depreciation should be made as a prior charge for the purpose of ascertaining the ava^able surplus.

91. Their Lordships have later In the further, ruling also made it clear that statutory depreciation should not be allowed as prior charge. In the ruling re- ported in 1960 II LLJ page 88 Anil Starch Products and Ahmedabad Chemical Workers' Union and others it has been observed: —

"NotionaJ normal depreciation and not the full statutory depreciation held should be aPowed as prior charge "

In view of this legal position I do not think that the management can claim statu- tory depreciation of Rs. 23.42 lakhs as prior charge.

92. Moreover what is claimed in the profit and loss statement is the deprecia- tion reserve and not depreciation and the witness speaks of It as contribution to the depreciation reserve. However, contribution to depreciation reserve and de- preciation are two different things. This amount has not been shown in the oalance sheet as an expenditure for the purpose of profit and it cannot be claimed as a prior charge.

93. It is significant to remember that when the undertakings were under the management of John Haylor & Sons and were governed by the Indian Companies Act the management used to show in the balance sheet the amounts of deprecia- tion upto that date in respect of every item of the fixed assets. After nationalisa- tion the management did not think it necessary to show the depreciation. They have only shown the depreciation on the items sold and from the record notional normal depredation cannot be calculated. The learned Counsel Shri Rangaswamy Tyengar has argued that the present statutory depreciation is the same as normal depreciation. The Income-Tax Act does not use the words normal depreciation and what has been charged to the normal depreciation and the amount of Rs. 23.42 lakhs la a proper charge. Considerinc the evidence on record I do not find any substance in the argument. Firstly the agreement under which the management has prepared the available surplus statement itself permits under clause l(h) (ii) the employers to charge total depreciation under the Income Tax Act. This total depreciation is known as statutory depreciation and the amount of Rs. 23.42 lakhs is the statutory depreciation.

94. It la clear from the deposition of the Chief Accounts Officer that the management has not calculated the notional normal depreciation. The Chief Accounts Officer has stated: —

"I have not calculated the notional normal depreciation for the period in question while preparing Exhibit E-10. I have deducted the entire statutory depreciation from the rehabilitation charge."

In fact it Is clear from the evidence of the Chief Accounts Officer that he has no idea about the notional normal depreciation for a particular period. He has

merely considered the provisions of the compromise agreement and calculated the amount of Rs. 23.42 lakhs. From his evidence it is clear that while preparing exhibil E-10 he had deducted this amount of Rs. 23.41 lakhs. The agreement clause 7(.b)(iii) regarding rehabilitation ieiers to the statutory depreciation as per 7ib;(.n) lo be deducted and it is clear UiaL the amount of Rs. 23.42 lakhs is the stalulory depreciation and it cannot be accepted that this amount is only the notional normal depreciation and the undertakings arc not entitled to claim this amount.

95. This infciece will be further corroborated from the circumstance that the amount oi deptGelation charged in the calculations oi. uvfulabie surplus for the bonus year lj >'.i-b± is almost the same. From the iiiiclmijs til Shti A. Das Gupta exhibit E-12 i will be ssen that the learned AdjudicaTur n^s taken the amounis o£ Rs. 6.96, 8.2J and 7- 1H is eyual to 22..H lakhs as dsprt.-,iaaan. At that time de- preciation wati to be charged as per the provisions of the Income-Tax Act and it was the statutory depreciation. Considering this amount it cannot be said that the amount of Rs. 2,1.42 Jakhs can be the no.ional normal depreciation and the contention raised at the time oi arguments cannot be accepted and it shall have to be held that Lhe management failed to prove the amount of depreciation.

06. It Is significant to remember that in the case of an ordinary company there is generally the certificate of the Income-Tax Officer to prove 'the amount of the statutory depreciation. In "the case of the undertakings there is no such certificate but a mere statement In the balance sheet and there is absolutely no proof about the depreciation of Rs. 23.42 lakhs and it shall have to be held that the manage- ment is nut entitled tu any amount as depreciation.

97. As regards the claim of the prior charge of Rs. 41,90 lakhs as additional provision tor rehabilitation and normal development reserve this item is also claimed on the strength of the agreement and the management has not calculated It for the period In question. The Chief Accounts Officer has stated: —

''Q. Have you taken the amount of Rs. 41.90 lakhs as rehabilitation reserve in exhibit E-9?

A. This amount of Rs. 41.90 lakhs is allowed in the compromise award for claiming towards rehabilitation and normal development purposes. It was the compromise of the 1953-54 bonus claim and in that com- promise this amount was allowc-.d—und hence it is claimed ±or u.is; period also."

He has further made It clear that the amount was not calculated:—-

"Q. Have you calculated any rehabilitation for the period in question. A. No."

98. The agreement exhibit E-13 clause 7(b) (iii) makes provision for calculat- ing rehabilitation charges. The learned Counsel for the management Shri Iyengar has argued that the amount of capital expenditure incurred by the management during this period is about Rs. 73.20 Jakhs and the difference bet- ween this amount and the statutory depreciation of Rs. 23.90 lakhs is about Rs. 51 lakhs but 7 per cent of the revenue expenditure of Rs. 588.77 lakhs alleged to have been incurred during the year comes to Rs. 41.90 lakhs which is less than the difference and hence as per the above clause the lesser amount has been claimed as rehabilitation charge. It has been further argued that during the proceedings of the bonus dispute for the year 1953-1954 the amount of rehabi- litation charge fixed by the Central Government Industrial Tribunal was about Rs. 58 lakhs but with a view to benefit the workers an agreement was reached and the employers were entitled to claim the amount of Rs. 41.90 lakhs as prior charges towards rehabilitation.

99. The learned Counsel on behalf of the management has further argued that during the proceedings of the bonus dispute for the year 1953-54 the Central Government Industrial Tribunal fixed the amount of the charge of rehabilitation. The pr^ent agreement has been based on the strength of the findings of the Tri- bunal and once the rehabilitation charges are determined it is not necessary to assess them again every year and under the circumstances the management is entitled to claim rehabilitation charges of Rs. 41.90 lakhs. The learned Counsel h.Tg Invirofl my attention to the ruling reported in 1961 1 LLJ 508 (Bombay Gas Co. Ltd.. and its workmen) and 1964 1 LLJ paga 370 (Burn & Co. Ltd., and their- workmen).

In the first ruling it has been observed: —

"When the annual requirement for rehabilitation was calculated by the Industrial Tribunal adjudicating the bonus dispuce between the parties the same amount minus the depreciation for the year in question must be allowed unless it is proved by the workmen that there has been change in the circumstances as for example isll in prices justifying reduction in the amount thus worked out or that the employer deliberately and without sufficient cause dees not use the ampunt allotted to him for rehabilitation."

.In the second ruling it has been observed: —

"There could be no doubt that once the question as 10 what is necessary for rehabilitation and over how many years It should be spread has been decided industrial adjudication alter proper investigation and careful scrutiny of the evidence adduced in any one year the assess- ment thus made ought not to be lightly disturbed when the question comes up again in any future year in respect of rehabilitation. The very nature of the problem makes it necessary for Industrial tidjudi- cation to project itself into the future and decide the total rehabili- tation charges over the years and the number of years over uhich rehabilitation has to be spread."

100. Leaving aside for a while the question about the binding nature of the agreement I shall first discuss the evidence and the effect of the findings of the Central Government Industrial Tribunal Shri A. Das Gupta which is the basis •of the agreement- It was contended that the agreement was entered into with a view to give some relief to the workers and the amount of the rehabilitation charge fixed by the Central Government Industrial Tribunal could not leave any available surplus. The findings of the Industrial Tribunal Shri A. Das Gupta on rehabilitation charges were given after the remand of the matter by the Supreme Court. After the findings were submitted the matter was pending before their Lordships of the Supreme Court but the appeal was not finally heard and the find- ings were not scrutinized in appeal as the parties settled their dispute by compro- mise. Consequently it has been contended by the unions that it cannot he said that rehabilitation charges have been decided by the Tribunal. The management has produced at exhibit E-12 the findings of Shri A. Das Gupta submitted Ir the •appeal before their Lordships of the Supreme Court Civil Appeal No. 648 '37 and the findings show that the learned Tribunal had come to the conclusion that the management was entitled to get rehabilitation charges of Rs 19.16 lakhs Rs. 18.94 lakhs and Rs. 20.5fi lakhs — Rs. 58.66 lakhs,

101. The unions have serious grievance about' the correctness of the findings oi Shri A. Das Gupta. It has been contended that the various inflated and ex- aggerated figures and the amounts of price etc-, were given the so-called experts who were the employees of the companies. They were interested and were not independent and the figures should not have been accepted. The unions had not properly taken part in the proceedings and the witnesses were not cross- examined. Due to financial difficulties the unions could not afford litigation with the management under whom they had to serve. The unions had nol taken In- spection of either the vouchers or registers or inventories. They had not also accepted the figures and the learned Tribunal had wrongly taken the multipliers and divisors ard the figures were one-sided and arbitrary.

102. Shri K. P. Sachlndranath on behalf of the unions has invited my attention io the following observations of the Hon'ble Supreme Court reported in 1959 1 LLJ 644 (Associated Cement Companies Ltd,, and their workmen):—

"In dealing with the employer's claim for rehabilitation tribunals have always placed the onus of proof on the employer. He has to Drove the piice of the plant and machinery, its age the period during which it requires replacement the cost of replacement

In calculating the rehabilitation amount the tribunals may take his con- duct into account in determining the actual allowance of rehabilita- tion to him.

Tt is necessary that the tribunal should reauire the employer to trive clear and satisfactory evidence about all the relevant facts on which it can make the requisite estimate. The Questions which the Tribunal has to consider under this item are essentiallv nuestionq of fact and Its final decision on them is bound to be hypothetical since It would be based on a fair evaluation of several circumstances which

are by no means certain and which cannot be predicated with any amount of precision or even denniteness. That is why it is oJ! the utmost importance that all relevant and material evidence should be adduced [by the employer and it should be properly tested by cross- examination. When tnat is done, the tribunal must do its best to consider the said evidence objectively and reach its final decision in a judicial manner.

Further in dealing with the problem of rehabilitation the tribunal must carefully examine the evidence and consider the employer's claim In all Its aspects before determining the amount which should claim allowed by way of rehabilitation as a prior charge in the relevant year."

103. I do not think it proper or necessary to enter into the question about the correctness or validity of the findings Riven by Shri A. Das Gupta, C G IT in the bonus proceedings. It shall have to be remembered that the C.G.I.T. was directed by the Hon'ble Supreme Court to record evidence and submit the findings. In the judgment of the Supreme Court exhibit E-ll it is observed:—

"We 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 with- in three months from today."

In accordance with this direction the learned Tribunal had recorded the evidence and submitted the findings.

104. It is significant to remember that the learned Counsel was not directed to dispose of the proceedings by passing a final award and had the findings "been accepted by the Supreme Court then they would have been binding on the parties and in view of the abortive nature of the proceedings it cannot be said that the amounts of rehabilitation charges stated in annexure 1 as Ks. 19.16 lakhs, 18.94 lakhs and 20.56 lakhs have been calculated by the Industrial Tribunal adjudicating the bonus dispute and the rulings will not be applicable. The prior charge of rehabilitation cannot be said to have been adjudicated after proper investigation and there is no question of lightly disturbing the assessment made in the proceeding.

105. Moreover after these findings the parties themselves thought it proper to keep them aside and settle the dispute by amicable settlement out of Court and the management cannot rely upon these findings for determining the amount of the prior charge.

106. The learned Counsel for the management has argued that the workmen had agreed to the formula for calculating the evailable surplus and the employers had accepted the same in the interest of the workers as there would have remained no available surplus if the amount of rehabilitation decided by the Tribunal would have been taken into account as a prior charge, and the amount of Hs. 41 f90 lakhs which is calculated on the basis of the lesser item between fl) the difference between the actual capital expenditure and statutory depreciation or (2) 7 per cent, of the total revenue expenditure, it is a reasonable charge find the employers are entitled to get the same, However, considering the term, of the agreement I do not find any substance in this argument also and I do not think that the management was very liberal towards the workers in agreeing to the formula incorporated in the agreement.

107. Rehabilitation charge has been agreed to under clause 7(b)(iii) of exhi- bit E-13 which provides for two alternative methods of calculations and the clause lays down that the amount which is less will be charged, However, if we carefully consider the effect of this clause we will find thdl 1he amount of rehabilitation charge has been made dependent on two variable items viz., capita! expenditure and revenue expenditure. The management may in any year incur a large amount towards these items and conseauently the amount of rehabilitation charge will increase and may exceed even the amount found and submitter! by the learned Tribunal.

108. It Is significant to note that though in annexure 1 of the findings the learned Tribunal has given the rehabilitation charges at 19.16 18.94 and 20.5R — 58.68 lakhs it is clear from the finding¹ itself lhat the amount is less. In paragraph 40 of its findings the learned Tribune! has observed:—

"I have indicated in arrnexure 1 t^at the annual burden for the require- ments for rehabilitation replacement and modernization on the revenue of the three mine" would be respectively Rs. 19.16 18,&4 and 20.56 lakhs when the total cost for rehabilitation etc., in respect of

the corresponding mines are Rs. 483.2, Rs. 518 and Rs 476 4 lacs Now that the total requirements are tound to be Rs. 4518 4tti4 and

S it K%5Ti" sa E " I ? : K S:

The learned Judge had calculated the amounts of rehabilitation charges for the

same ^ ^ o S S S^ * t h° a m ⁰ U nt °* B t e t u t o ry ^ - i a t i o ^ n d ^n the*

"°Ut T}Vfii^a^U?UShri

statut°ry depreciation of

Rs, e 96 Rs. 8.23 and Rs 7.18. The ibalance of Rs. 10.95. Rs. 9.37 and rls. 11.88 lacs has got to be provided for out of the revenue as a prior charge which comes to Rs. 32.1H".

Had the findings been kept up and been applicable to the year in question as the amount oi statutory depreciation i.e. Rs. 23.~il lakhs is almost the same the amount of rehabilitation charges oj; Rs. 32.18 would have been required to be provided for. However bv the agreement which is alleged to be in the interests of the •workmen the management is claiming Rs. 41.90 lakhs and I do not find any sub- stance in the contention about liberal attitude and the benefit to the workers.

109. It Is true that the unions had agreed to the method of calculating the available surplus as stated in the compromise. However, it is not in dispute that thi.-. agreement is not now in force. I have already quoted the relevant portion from the agreement. The agreement has already expired and the workers are in my opinion within their rights to say that the management ought to have led evidence to determine the amount of rehabilitation charges. It is clear from the evid?nce that the management has calculated the amount of Rs. 41.90 lakhs only on the basis of the agreement. They have not led any evidence. It is only in the cross-examination of EW-1 the Chief Account? Officer of the Undertakings it has come on record that the management has incurred an expenditure of Rs. 11.50 lakhs for replacement of plant and machinery. The management has also stated in exhibit E-37 that the amount of Rs. 11.50 lakhs has been spent towards replacement of plant and machinery. In the previous award between the same Dailies when the workmen had raised a dispute about bonus for the year 1952 the learned Tribunal Shrl Salim M. Merchant had awarded the actual expenditure on rehabilitation charge and at the most it can toe stated that the management Is entitled to claim this amount of Rs. 11.50 lakhs as rehabilitation charge.

110. It is not known why the management did not think of leading evidence to prove thi" claim. The agreement stated that the terms will be revised after 31st March 19G1. The present claim for bonus is for the period from 1st December, 3962 onwards and it was necessary on the part of the management to lead evi- dence to Drove the rehabilitation charges. It is significant to remember that the amount of rehabilitation charge was flied for the bonus year 1953-54 that is for a period before about 9 years and it is not known what plant and machinery has been scrapped and what additions have been made. The management of the undertakings have changed hands and after the undertakings are taken over by the Central Government there are important changes in respect of the finances. It is not in dispute that after the undertaking was taken over it is not required to pay anv income-tax charges. The management Is also entitled to charge only the notional normal depreciation and not the statutory depreciation. The position of reserves has also undergone a change and there should have been a fresh calculation of rehabilitation charge.

111. It will appear from the balance sheets for the period 1st January 1956 to 28th November 1956 that the companies had passed on the reserves to the Mysore Government and even at the time of the acquisition of these undertakings by the Central Government the same reserves hnd been massed on to the Central Govern- ment. The balance sheet of the undertakings for the neriod 1st April 1982 to 30th November 1963 will show t.hnt at the end of that period the reserves were—

•Rs.

f il Capital reserve (2) D e p r e c i a t i on reserve C3¹) T e r m i n a t i on gratuity e t c. (4) Rehabilitation a nd n o r m al d e v e l o p m e nt reserve . . .. 955 8 J 5 77 (4) A m e n i t i es fund reserve for h o u s i ng s c h e m es . . . .. 4,00,000 In view of reserves & Nos. 2 and 4 it can be legitimately stated that the manage- ment had Rot these amounts with them, for the purpose of rehabilitation and there is much force in the contention of the unions that the claim for rehabilitation should have been investigated and the management ought to have proved the same and It should not be allowed.

J.12. Even if an amount of rehabilitation charge has been fixed lor a particular year due to lapse ot poriod and change 01 circumstances it is necessary to calcu- late tne amount with necessary aojustments every year. It has been oDserved in the ruung reported in 195U 1 LLJ: 044:—

"Before actually awarding an appropriate amount in respect ot rehabilita- tion tor the bonus year certain deductions have to be rnaae on account ox the break-down value ot the plant and machinery which is usually calculated at tne rate of 6 per cent oi tue cost price oi me block in question, men the depreciation and general liquid reserves avail- aole to the employer are deducted. The reserves which have already been reasonably earmarked lor specific purposes of Ibe industry are however not taken into account in this connection. Last of ail the rehabilitation account which may have been allowed to the employer in previous year would also have to be deducted if it appears that the amount was available at tne time when It was awarded in the past and that it had not been used lor rehabilitation purposes in the mean- while. These are the broad features of the steps which have to be taken in deciding the employer's claim for rehabilitation under the working ot the formula."

it has been also observed in the ruling reported In 1963 II LLJ page 358 (Bengal Kagazkal Mazdoor Union and others and Titagarh Paper Mills Company Ltd., and others) :—

'"In calculating the rehabilitation charge for the year in question the re habilitatlon amounts allowed in the past years and remaining unused in the meantime must be taken into account."

For these reasons also I think the management is not entitled to claim rehabilita- tion charges of Rs. 41-90 lakhs as alleged.

113. It appears that the management has for the purpose of proving the prior charges of depreciation and the rehabilitation solely relied upon the compromisf agreement in the bonus dispute of the year 1953:54. The Chief Accounts Officer has stated:—

"I am aware that the compromise award expired in 1962 and is not appli- cable to this period. I have taken the 7ft per cent as rehabilitation claim because the learned Tribunal Shri A. Das Gupta had calculated the amount for claim towards this expenditure and the calculation holds good for twenty years. I am no I aware that the award of Shri A. Das Gupta is not applicable to this case. I have not looked to any other documents except the compromise award for arriving at the rehabilitation charge. I have taken into consideration the deprecia- tion reserve while arriving at the rehabilitation charge. I have; deducted the depreciation reserve from the rehabilitation charge. 1 have deducted Hs. 23-42 lakhs. 1 have deducted the whole of the amount of statutory depreciation."

In the present proceedings we are required to decide the question about the claim for bonus for the period 1st December, 1962, to 31st March, 1964, that Is for u period of sixteen months and it was necessary for the management to have proved the rehabilitation charges for the period in question. The amount of Rs. 11'50 lakhs expended for replacement has also come in cross-examination and the management has not given any evidence. When the unions contended that there was absolutely no proof about the amounts for these charges I had specifically asked Shri Iyengar about the evidence and proof regarding these charges and Shri Iyengar submitted that the management had led sufficient evidence to prove the charges. He added that the management had anticipated all these arguments and their case rested on the evidence produced. According to him the manage- ment has established the amounts of these charges. However, In my opinion the management has not proved that they are entitled to claim the amount of Rs. 23-41 and Rs. 41-90 lakhs as depreciation and rehabilitation charges respectively. It does not mean that there may have been no depreciation in machinery and the claim for rehabilitation and development reserve is baseless. However, when the management haa not led proper evidence I do not think that there is any other course left to the Tribunal but to reject their c'ahn except the amount of Rs. 11.50 lakhs actually spent for replacement.

114. It will appear from the available surplus calculations statement marked exhibit E-10 that the management has claimed interest of Rs. 16-85 lakhs on th 6a8 THE GAZETTE OF INDIA EXTRAORDINARY [PART .11—

borrowing, return of Rs. 9:04 on the fixed capital ol Rs. 301 lakhs and return oi Rs. 1.61 lakhs on reserves used as working capital at Z per cent. Thus they claim total amount oi Hs. ltt.U&4-0.U4-|-1.61=27.50 lakhs. The unions have con- tended that the capital structure oi the undertakings is quite anierent from tnta ot the establishments governed by the Companies Act. There is no nxed shure capital. Originally tne companies had a tixed snare capital of Rs. 104 lakns. Tno Mysore Government as well as the Central Government took over the undenuk ings as going concerns. What they have paid to the seller Is compensation and the fixed capital of the undertaking is the name amount ol Rs. 164 lakhs.

115. It has been further contended that there is absolutely no proof that the undertakings had any cash amount of reserves with tnem and that they have utilised thut amount of reserves as wonUng^cttpual. The reserves were locKed up with the State Government. There was no cash in band and no question of using reserve as capital and they, are not entitled to claim any return on the reserve. It is not in dispute that the undertaking have no tixed share capital. In the balance sheet they have used the word "Government Capital" ol Hs. 311 lakhB odd which Is in tact the compensation paid to the Mysore Government. It is also clear that the Full Bench formula permits 8 per cent return on the share capital. The amount of Rs. 301 lakhs is compensation and it at all under the formula any claim of return is to be considered it can be considered only in respect ot Rs. 164 lakhs. Considering the principles of accountancy and the taking over of the concerns there is much force in the arguments advanced by the unions. But u cannot be Ignored that after the undertakings were taken over by the Mysore Government and the Central Government they are not govered by the Companies Act. It is almost a proprietory concern of the Central Government and as per the principles on which the Labour Appellate Tribunal formula Is baaed the management will be entitled to claim return on the capital Invested and utilised in running the business.

116, However, it is clear from the evidence of the Chief Accounts Officer that this amount of Interest claimed by the management in the statement exhibit E-10 has been claimed at the rate of 6 per cent. He has stated:—

"The interest has been charged at 6 per cent both on the tixed capital that is compensation and also the working capital as per the compromise award."

Shrl Sachindranath on behalf of the unions has argued that the undertakings have not paid a single pie as interest while the management has claimed and shown large amount of interest In the statement E-10 of calculation of available surplus. Even the profit and loss statement gives a different amount and as the management Is not required to pay Interest they are not entitled to claim any in- terest as a prior charge against the workers. The evidence of the Chief Accounts Officer In my opinion supports the unions. The witness has stated:

"Q. Is the amount of Rs. 904 lakhs included in the amount of Rs. 16-85 lakhs In exhibit E-10.

A. The exact amount of Rs. 9-04 lakhs is not included In the amount of Rs. 1685 lakhs. I shall give the figure as to what part of it is in- cluded in Rs 16-85 lakhs.

Q. Have you shown the amount of Rs. 1685 lakhs in the printed profit and loss account exhibit E-7?

A. I have not shown the exact amount. A part of It is included In Rs. 16 '86 lakhs. The witness volunteers the rate at which this Interest is cal- culated in the profit and loss account Is according to the instructions of the Government and the rate given by them while the rate at •which the interest calculated for the available surplus ia ot 6 per cent.

Q. You will agree that the figure of Rs. 16-85 lakhs interest on borrowings.

Is not an actual interest paid towards that Item?

A. I agree."

This evidence leaves no doubt that the undertakings have' not paid any in- terest. They have calculated the return on capital at 6 per cent as per the agreement. However, I do not think they can claim interest at such a high rate simply because of the expired agreement. It is clear from the profit and loss statement that the total amount of Interest claimed by them is only Rs. 16,24,941

and I do not think that the management will be entitled to claim anything more than this amount and the amount win be taken as a prior charge.

117. The management has also claimed an amount of Rs. 32.33 lakhs as royalty which is required to be paid to the Mysore Government. The union have con- tended that this royalty has been calculate on the rate of gold which has been taken Into consideration by the Huttl mines for paying royalty. The manage- ment has valued gold in their balance sheet at the I.M.F, rate and the royalty should be calculated at that rate. Shri Thimmayya on behalf of the unions raised a strong objection to this claim by the management and has argued that royalty is to be paid by the subject to the, King. Now Parliament ia the ovv^er and there can be no charge of royalty and this claim should be rejected. It is not in dis- pute that royalty is being paid according to the rules framed under the Mines and Minerals Act. The two Governments have agreed for the payment of royalty at this rate and I do not think that the unions can validly dispute the correct- ness of this amount. The undertaking for winning the gold have to pay royalty to the State and this amount of Rs. 3238 lakhs has been properly charged and the management will be entitled to claim the amount from the profits.

118. Shri Rangaswamy Iyengar on behalf of the management has at the time of argument contended that the unions have by their statement of claim admitted the Items of the amount of costs depreciation, returns on capital, reserves etc., and now It would not lie in their mouth to say that the figures stated in the profit and loss statement and the calculations are incorrect. I do not think that the written statements can be considered on the same footing as pleadings in Civil Courts. In fact the unions have not stated the figures in their written statements but some figures are mentioned in their estimate statement which Is guess work. They have taken the figures from the statements of the management and I do not think the statements can be considered as admissions on their part. More- over, if the figures which they have stated are to be accepted the whole statement shall have to be considered. The books of accounts are in the custody of the undertakings. The workers can have no knowledge about the details and I do not think that the"¹ items stated in the statements can be considered as admissions. It li significant to remember that the workers have by their application dated 8th May, 1969, specifically requested the Tribunal to direct the management to produce the witness the Chief Accounts Officer for cross-examining him on the point of statutory depreciation and rehabilitation. This application was opposed on the contention that the unions had ample opportunity. It was not contended that the depreciation was admitted. This application was granted and the witness was cross-examined and the suggestion that because of the evidence they did not produce any evidence Is an after thought and cannot be accepted.

Valuation of Gold Produced

119. During the period in question the undertakings have produced gold of the total quantity of Ex. 4599432 grams and some quantity of silver. In the profit and loss statement the management has shown the amount of sale of gold and silver at Rs, 248 lakhs. In this statement there is a footnote which reads:—

"As the entire gold produced by the undertaking Is taken over by Govern- ment at the International Monetary Fund rate the revenue and profit and loss account shown above represents the Net Loss in winning Kolar Gold at the International Monetary Fund Rate."

In the statement of available surplus exhibit E-f) the management has taken the I.M.F. rate ana shown the total receipts at Rs. 271 lakhs while in a similar state; ment exhibit E-10 in which the Bold is alleged to have been valued at the Hutti Mine average rate the total receipts are shown at Rs. 518.34 lakhs.

120. Shri Rangaswamy lyennar on behalf of the management has argued that even if the I.M.F. rate for the valuation of gold is discarded as too low the Hutti rate of gold Is the market rate. The royalty paid by the undertakings to the Mysore Government is also calculated on the basis of the Hutti rate and even If the jyold produced is valued at that rate as the cost of production is Rs. 558 lakhs which far exceeds the va^e of the gold the workmen will not be entitled to claim bonus.

121. The unions have contended that the L.A.T. formula Is not applicable to the present undertakings and even if it be held that the L.A.T. formula should be aopHed It is necessary to value the gold at the market rate for finding the profit. Neither the I.M.F. rate nor the Hutti rate will be relevant and if the gold Is valued

at the market rate there will be surplus and the workmen will be entitled to get bonus. The union's witness has stated that the market price of gold la Ra. 130 per 10 gms and the total value would be about Rs. 897 lakhs and the Question is what should be the reasonable value of the gold produced by the undertakings.

International Monetary Fund Rate

122. In the balance sheet of the management the price of gold has been calculat- ed at the I.M.F. rate of Rs, 53'58 for 10 gms and considering the production cost oi Rs. 130 per 10 gms the I.M.F. rate is too low. If any Industry is to be run on commercial lines the products will be sold in the open market and the profits will be calculated on that basis and I do not think that the valuation of the gold produced by the undertaking at the I.M.F. rate will give any correct Idea about the results of the financial condition of the undertaking. The I.M.F. rate has been fixed by world countries which are predominantly gold producing countries. The fixing of it has got also political reasons. It is fixed by countries who as H matter of policy give subsidies to the Industry to a great extent. The I.M.F. rate has been fixed in the year 1936 and in my opinion It has no relevance for valuing the gold for the purpose of bonus.

Hutti Mine Rate

123. As regards the Hutti Mines rate the management has contended that the Hutti Mines rate is the market rate and the valuation of the gold at its average rate which ia Rs. 107-48 per 10 gms comes to Rs. 493 lakhs. This rate is reason- able and it should be accepted for the purposes of bonus calculations. It has been further argued that even the royalty is paid on the basis or this rate and the two Governments have agreed to it.

124. In further support of this contention the Chief Accounts Officer has stated In his deposition that the Hutti price is the market price. However, if we scruti- nize the evidence of this witness it will appear that he has no idea about the market price. It is not in dispute that the Hutti mines are permitted to sell gold to Industrial consumers and the witness has stated:—

"I am aware that Hutti gold mines supply gold to industrialists. I am not aware if Hutti mines were supplying low carat gold to industrialists. We were supplying to the Mint the gold as was produced in our mines."

He has further stated:—

"Prior to 1958 the gold produced was sold in open market and subsequently It was taken over by the Government. I do not know if this is the position in respect of the gold produced by the Hutti Gold Mining Company. I am not aware if the open market gold price Is much higher than the Hutti Gold Mines gold price."

In view of this evidence the contention of the management that the Hutti price is the market price cannot be accepted.

124-A It has come in evidence that the Hutti Mines are permitted to sell gold to Industrip] consumers and Shrl Thimmayya on behalf of the unions have erftu- ed that the Hutti Mines gold rate is not also re'evant for the purposes of the calculations of available surplus as it Is not the rate of a free market and Is not subject to the economic laws of supply and demand. It is not in dispute that the gold produced by the Hutti Mines is sold by the undertakings to licence holders through the State Bank of India. It is also clear from the correspondence between the Mysore Government and the Central Government that the rate at which gold is sold is required to be aoproved hv the Gold Control Board or Administration and there Is much force in the arguments that it Is not the rate of free market. Leaving aside this factor out of consideration and If it is decided to consider the Hutti mines rate for the purpose of calculating the available sur- plus I do not think that the management has proved that the Hutti Mines average • r i ce of c t o ld w as R E. 1 0 7 - 48 p er 10 g ms d u r i ng t he p e r i od in q u e s t i o n. T he

learned Counsel has argued that there was correspondence between the Central Government and the State Government for determining the amount pf royalty which was acreed to be said on the basis of the Hutti Mines xolu rate. The management has produced these letters at exhibits E-5 and E-6. It has been con- tended that these documents establish that the average price of Hutti gold during t>-o period was Rs. 107-48 for in gms.

125. I have gone through these letters exhibits E-5 and E-6 and 1 do not ihinfc that these letters were produced for proving the gold rate, Secondly the figures mentioned in these documents also do not prove the rate. Out of these two letters exhibjt E-6 dated 6tb April 1985 mentions the rate of gold for only six months from December 1962 to May 1963 and the average of these six months also is not Rs. 107:48 but Is Rs. 107-12. However, there are no rates lor the remaining months in this letter. As regards letter E-5 dated 15th August, 1964, It mentions the prices for five quarters the last two quarters being quarter ending June 1064 and September 1964. As the bonus period is upto 31st March 1964 the prices in the last two quarters will be of no use.

126. The remaining three quarters are quarter ending August 1H6;J. NovernDer, 1963 and the four months ending March, 1964 and in this document there are no prices for the period before the quarter ending August. 1963. If we take the average of these three quarterly crices it will come to Rs. 107.9 and If the rate Is calculated from both exhibits E-5 and E-6 it will be Rs. 107.5 and it is not known from what evidence the management has calculated the rate of Rs. 107.48 as average for the 10 months. It is significant to remember that the total pro- duction of gold during- the period is roughly about 46 lakhs grams and even a small mistake leading to a difference of Re. 1 in the crice of 10 gms will make a difference of Rs. 4.6 lakhs In the total and considering the Importance and the correctness of the rate for the purpose of arriving at the total receipts It was necessary on the part of the management to lead proper evidence from the man- agement of the Hutti mines themselves and it shall have to be held that the management has failed to prove that the average rate of Hutti gold during the period as Rs. 107.48 and the valuation made by them in exhibit E-10 cannot be accepted.

Reserve Bank Rate

127. At the time of the arguments Shri K, P. Sachindranalh on behalf of the unions has also referred to the Annual Numbers of the 'COMMERCE' in which there was a review of the gold prices and had also invited my attention to the Report on Currency and Finance issued by the Reserve Bank of India for the vear 1963-64 which mentions in statement No. 13 the average price of gold at Rs. 117.71 during the year 1962-63 and Rs. 111.98 during the year 1963-84. Shri Iyengar had also nroduced the report. These prices in the report have been quoted by the Reserve Bank and have not been challenged- I think it proper to consi- der these rates and I shall try to find the value of the gold produced at these rates.

128. The bonus dispute is for the period from 1st December, 1962 to 31st March. 1964, which is a period of 16 months. It is also clear that the first four months of the period are from the financial year 1962-63 and the rate of Rs. 117.71 will be taken for evaluating the gold produced during those four months. The balance sheet does not mention the monthly Droduction and for the purposes of rough calculations it can 'be ^resumed that the undertaking has nroduced durlne the four months from December. 1962 to March, 19G3 one fourth of the total gold i.e., 1,149.858 grams and the three fourth balance 3,449.574 for the remaining period. The valuation of the Il4th production at the average rate of Rs, 117.71 will romp to Rs. 1,35.34.978 and the valuation of the remaining three fourth at the rate of Rs, 11198 would be Rs 3.86.28.329 and thus the total valuation will be Rs. 521.63 lakhs and together wlih the other receipts the total will be Rs. 544.96.

Reitp given by the Unions' witness

129. The unions have examined Shri Parameswara Iyer who is a qualified accountant and has worked as such for about 30 years and has audited many companies' accounts as internal auditor. He has passed the Mysore Government Commercial Examination in Accountancy and Audit Dir/loma in 1960. He has prepared a statement of available surplus which has been produced at exhibit W-10. He has stated that he has taken the price of gold during the period In auestion at the rate of Rs, 130 for 10 gms and the market price of sovereign at that time was more or le<" the- same. In his cross-examination he had rtated that he himself had purchased gold at the rate of Rs. 130 tier 10 urns ,-md ^ccordin* to this rate the valuation of the total production would be about Rs. 597.92 lakhs, The witness Shri Rajagopal an office bearer of the union has also stated that the gold price during the period was Rs. 130 for one sovereign. It is true that these witnesses have not nroduced any documentary evidence or the receipts about the purchase of the gold. However, tha* would not mean that they are giving false evidence in respect of the rate.

130. It is true that transactions in pure cold have been prohibited and what- ever these witnesses have purchased can be said to be illegal dealings and. I do not think that this rate can be considered for the purposes of calculating the available surplus. It is not expected of the undertakings to sell gold in breach of the provisions of law. Under these circumstances I think the rates which are published by the Reserve Bank of India in its bulletins can be considered aa offi- cially correct rates and on the basis of these rates I think it proper to assess the value of the gold produced at Rs. 5,21,63,307 and together with the silver and sundry items the total receipts would be Ra. 544.96 lakha and I shall try to apply the Full Bench formula to find the position about available surplus.

131. I have discussed the evidence about revenue expenditure the value of gpld and the amounts of prior charges required under the formula of the Full Bench and taking the various rates of gold if the available surplus is calculated apply- ing the provisions of the Full Bench formula the result will be as follows:— (1) Taking, the I.M.F. rate there will be a deficit of Rs, 25 8.01 lakhs as follows:—

Ri. in lakm

G o ld a nd s i l v er a nd s u n d ry r e c e i p ts . . . . .. D e d u ct r e v e n ue e x p e n d i t u re ( C o s t s) . . . . ..

271 468 • 89

. . . . . ..

. . . . . ..

G r o se l ow . . . . . . . . . .. R e h a b i l i t a t i on . . R e t u rn on c a p i t al e t c. . R o y a l ty

• —I97-89 —11-50 —16-24 • —32-38

—258-01

1-67 l a k hs as ( 2) A c c o r d i ng to t he H u t ti G o ld p r i ce t h e re w i ll be a d e f i c it of R s, ic

follows :—

Rs. in hfktis

G o ld a nd s i l v er a nd s u n d ry r e c e i p ts . . . .. D e d u ct r e v e n ue e x p e n d i t u re ( c o s t s)

51834 468-89

•

G r o ss P r o f it . . . . ..

49 45

Rs. in lakhs

D e d u ct r e h a b i l i t a t i on R e t u rn on c a p i t al e t c. . . . . . . .. R o y a l ty

. . .

11-50 16-24 32-38

—60-12

60-12

— 1 0 - 67

( 3) A c c o r d i ng to t he R e s e r ve B a nk of I n d ia B u l l e t in r a te t h e re w i ll b<

: a s u r p l us of Rs. 16-63 I j k h s.

R s, in lakhs

*)45' 64 469-89 G o ld a nd s i l v er a nd s u n d ry r e c e i p ts . . . .. D e d u ct r e v e n ue e x p e n d i t u re ( C o s t s) . . . . ..

IS D e d u ct r e h a b i l i t a t i on D e d u ct r e t u rn on c a p i t a) e t c. . . . . .. D e d u ct R o y a l ty . . . . . . . ..

Rs. in lakh 11-50 16'24 32-38

6012

6O-X2

+ 16-63

Whether the Full Bench Formula is Applicable

132. In view of the above calculation according to the Full Bench formula there is no available surplus sufficient to be distributed amount the three parties and it shall have to be held that the second condition viz., industry making profits for granting bonus has not been satisfied. The learned Counsel Shri Eangaswamy

( J JJ • > L C. 3 ( n ;J T H Ia G A Z E T TE OF I N D IA E X T R A O K D W A KY

[yengar on behalf of the management has argued that when Itie formula shows no proUts the demand of the workers for bonus has no justification and. this Tribunal nas no power to pass an award grunting bonus. The unions have contended that there will be some surplus if the improper debits are made good at least there 'till be no loss—even 11 it be he.d mat tnere is no available suipius according to the bonus formula as the formula is not applicable to the K.u.M. ui.deiiaKings there is no question of this Tribunal being powerless for awarding bonus if the Tribunal thinks that the labour has contributed to the prosperity of the industry aild the further question is vrhcher the Full flencn lormula is applicable to the facts of this case, it has been further argued that the Legislature has accepted and recommended the principle of minimum bonus even u there is no prolit and the workers are entitled to claim bonus. Leaving aside the contentions abaut grant of minimum bonus I shall first consider the question whether the Full Bench formula is applicable in this case.

133. I have already quoted the observations ol their Lordships of the Supreme Court from the ruling reported in 1959 1 LLJ page 644 The Associated Cement Cos. Ltd. v. its workmen in which it has been observed: —

'The working of the formula begins with the figure of gross profits taken from the profit and .osa account which are arrived at after payment of wages etc."

This itself will show that the formula will be applicable only when the concern is capable of earning profits. There can be profits only when the management runs the industry with a motive to earn profits. It ia common knowledge that any manufacturer or industrialist after determining the cost price of the end product puts some profit and determines the selling price. The amount of pronto depends upon the sale, the quality of the goods the competency of the in manag- ing economics ly co-operation of the workers, market fluctuations and various other factors. When the undertakings were managed by the K.G.F. companies till the year 1956 clearly they were running the industry with the mouve lo earn profits. Alter nationalisation of the industry by the Mysore Government the gold produced was sold in the open marke; but after the undertakings are taken over by the Central Government the gold produced is not sold. I have already quoted the foot-note in the revenue and profit and loss account statement wh.ch state that the entire gold produced has been taken over by the Government at the inter- national monetary fund rate. Thus It is clear that there is no sale and there can be no question of profit or loss.

134. It is significant to remember that If the gold is valued at the I.M.F. rate the available surplus as per the formula would be minus 2J8.01 and If the HuUi rate is taken the available surplus will be minus 10-67 and taking the gold prices published by the Reserve Bank of India in its bulletins the available surplus wlU be Rs. 16.63 lakhs and If the rate slated by W Exhibit W 10 Statement is considered the unions there will be an available surp.us Rs. 92.92 lakhs. It is fur- ther significant to note that the management has accepted the I.M.F. rate for the purpose of the balance sheet and profit and loss statement to be submitted tefoie l^ariiament and for the purposes of paying Royalty to the Mysore Government they have accepted the Hutti Mines rate. So there is no unjfoimity about ihe rates. This clearlv shows that though it is stated that the undertaking are run by the department on commercial lines in fact they are not commercially run for the purposes of profit and there is much force in the contentions of the unions that the Full Bench formula will not be applicable to the facts of this case, ihis inference will be further corroborated from the circumstance that the Central Government while acquiring the undertakings have not also Hxed the price as would have been done by businessmen and it shows that the question of profit or loss is out the mind of the management in acquiring and running these mines,

135. The contention that the formula will not be applicable to the facts of the case will be further supported from the fact that neither the balance sheet nor the profit and loss statements are required to be drawn in accordance with the provisions or principles of the companies Act. It is not in dispute that the j'ormula is mainly meant for Joint Stock Companies or proprietary concerns run on such lines. It is significant to remember that there is no fixed capital of the undertakings as in limited companies. The formula provides for a return of 6 per cent over the share capital. The K.G.F. mining companies had a fixed share capital of Rs. 164 lakhs. When the Mysore Government took over they have paid this amount and the balance sheet for the period ending 31st March 1968 shows

Government capital at Rs. 164 lakhs. Surprisingly the fixed capital of the under- taking is changing irom year to year and tne balance sheet lor the subsequent years shows the following amounts as capital ending—

Rs,. in Iflkha

31-3-1959

187-^i 31-3-1900 31-3-1961 31-3-1962 .

30-11-1962

269-11 255-00 2 S l.i0 32009 Hnd when the Central Government look over fro mthe Mysore Government they have shown the capital of KB. 301 laKhs odd. As the formula provides return ai. higher rate on the tlxecl capital I do not think, that the framers 01 the lormuia had anticipated a concern naving a changing capital from ysar to year. The workers who are entitled to claim bonus mid are parties to the distributions have no control over the management changing the capital year to year and I do not thinX the Full Bench formula of available surplus will be applicable.

136. Learned Counsel for the management has argued that the woikers had by their statement of claim claimed profit sharing bonus, By their subsequent statement they had also claimed bonus as a term and condition of service and customary bonus which has not been proved and as there is no available surplus they are not entitled to claim any bonus. The Learned Counsel has invited my attention to the ruling reported in 1961 1 LLJ page 52 In which it has teen ob- served: —

''There is no doubt that It Is open to an Industrial Tribunal in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending existing agreement or making a new one. This however does not mean that an Industrial Court can do anything and everything when dealing with an industrial dispute. This power is conditioned by the subject matter with which it 1B dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it

and the fourth is profit bonus which was evolved by the Labour Appellale Tri- bunal In Millowners Association, Bombay V. Rashtriya Mill Mazdoor Sangh. Bombay (1960 LLJ 1247) and which has been considered by this Court fully in Muir Mills (1955 1 LLJ 1) and in the case of Associated Cement Companies 1959 ] LLJ 644. It has been further observed:—

"It would thus be clear that the essential concept of profit in bonus is thut there should be an available surplus determined according to tha principles laid down in the cases mentioned above for distribution. If there Is no such available surplus for distribution there can be no case for payment of profit bonus. This is the industrial law as laid down by the Supreme Court with respect to profit bonus in Associat- ed Cement Companies case 1959 1, LLJ 644.

Hence it would not be open to an industrial court or Tribunal to ignore the above law as to bonus and to extend an agreement for payment of bonus which is against the basic concept of bonus aa laid down by the decisions of the Supreme Court on the ground that an industrial court has power generally to extend agreements or to create new obligations."

Relying on these observations the learned Counsel urged that whatever n,ay be the other circumstances as thare Is no available surplus the demand of the workers for bonus will not be justified.

137. I do not think that the management of the Kolar Gold Mining under- takings can validly rely on this ruling- The principles laid down in this ruling will be applicable only to a concern which is run on commercial lines with the avowed object of making profits. All the decisions of the Supreme Court will be applicable only to such concerns and 1 do not think that the right of the Kolar Gold Mining Undertaking's workmen to claim bonus from Centre efter nation- alisation will be affected by the decisions.

138. It is significant to remember that till the year 1956 the sold mining com- panies were under private management and were governed by the Companies Act The decision of the Supreme Court in appeal against an award in the dispute raised by the workmen of these companies which is reported In 1958 1 LLJ also pertains to the claim of the workmen for bonus for the period 1953-54 when the concern was being run on commercial lines with the object of making profits and 1 do not think that the Tribunal will be precluded from granting bonus to the workers simply on the ground that there Is no sufficient surplus for distribution among Llw throe parties—If the demand is otherwise justified.

139. In the earlier part of any judgment I have discussed the evidence about the low wages paid to the workmen of the Undertakings and it is clear that there is not merely a gap but in the words of the union leaders there Is a 'Yawning gap' between the actual wages paid and the living wages required in the region. I have also discussed the wages paid to the workmen at Bangalore where the cost of living index is lower than at the K.G.F. It is not in dispute thnt the workmen are contributing to the prosperity of the undertaking and in my opinion these circumstance shall weigh In the mind of every Tribunal while considering the question about the bonus especially when the employers are not selling the gold.

140. Shrl C. M. Arumagam on behalf of the champlan reaf has very vehemently argueed that the labour at the K.G.F. are being exploited from the beginning. They could not organize. They cannot meet both in ends and this was a fit case for granting bonus. It Is significant to remember that formerly the labour unions due to law then existing could not function at K.G.F., and the labour movement in these undertakings started at a very late stage and they are not properly organized and the workmen are very low paid. The workers reside In colonies in thatties and when I had bten to the K.GJT. mines for conducting the cases. I happened to see the condition of the labourers who were conspicuous by their shabby and torn clothes walking by the road bare looted in groups. They have to go deep down in the dark and the damp for mining work and their contribution can not bo denied. The gold produced by them is not sold for making profit by the undertaking but It is taken over by the Government at the I.M.F. rate and if on this account there is no available surplus I do not think that the labour should be made to suffer on account of the same.

141. It is not in dispute that the workers' right to claim bonus had been recog- nised before the undertakings were taken over by the State Government in the year 1996. The gold mining companies have been giving bonus to their workmen every year either under an agreement or an award. The undertakings have been taken over by the Mysore Government under the K.G.F. Mining Undertakings and Acquisition Act, 1950, under the provisions of which in my opinion the lights and privileges of the workmen are not affected. Even after the acquisition the employees are entitled to hold office on the same terms and conditions having the same rights and privileges as to gratuity and other matters including the benefits of bonus. Even after nationalisation the Mysore Government has paid bonus- The Central Government has taken over the undertakings as a going concern and In my opinion the workmen of the undertakings will have the same rights to claim bonus from the Central Govt.

142. I have already observed that when the gold mining companies were under the management of John Taylor & Sons the gold produced was sold and fetched a profit. Even after nationalisation of the undertakings and taking over by the Mysore State Government the gold was sold and the workmen were paid bonus. But it was only after taking over of the undertaking by the Central Government the management declined to consider the demand of the workmen for bonus on the ground of want of available surplus.

143. It Is not In dispute that Government had promulgated the gold control rules and subsequently the gold control order and had put restrictions on the transactions of pure gold and it is because of the economic policy that the entire gold Is taken over by the Government at the I.M.F. rate. The gold produced by the undertakings has a cost price but it has no selling price. The Undertakings are not run with the object of making profit- The unions have invited my attention

to the remarks on page 126 of the book the salient features :of the working of Government and Government aided industries in Mysore State which Is a publi- cation by the Department oi IndusLries and Commerce. On this, page the depart- ment has given the working results of the K.G.M.U. undertakings and regarding the working from December 1B62 onwards they have mentioned below the column percentage of profit or loss etc. "The question of profit would not arise after taking over by the Central Government as the value of the gold Is taken over by the Government at international market rate." This also clearly proves that the deportment is not running the industry lor the purpose of profit.

144. Thus alter taking over the undertaking the Central Governmant has chang- ed the object of the undertakings and this change over takes it away from other similar industries and excludes it from the scope and restrictions of the bonus from applicable to other industries. The price of the produce of the concern is not subject to the laws of demand and supply as in free market. There is no price at all. Economic forces have no relation to it. There is no opportunity lor this product to earn or make profits and the contention of the management about the applicability ol the formula to the present case has been rightly criticised by the unions as a square peg in a round hole and the question about the bonus to be given to the K.G.F. workers cannot be decided on the working of the Full Bench formula but it shall have to be determined on other considerations.

145. The learned Counsel for the management has argued that as there is no sale of the gold and the entire quantity is taken over by the State the Tribunal should notionally valua the gold produced and find out the profits for bonus. How- ever it cannot be Ignored when the undertaking is not run with the object of pro- fit making the prosperity of the undertaking cannot be judged only from the profit and working results. When the object of running the industry undergoes a change the working of the organisation follows it. In such case there is a shut Irom the emphasis on profit to something else. The gold mining industry can now be said to be gold supplying service and the Full Bench formula will not be applicable. It is not the case of the management that the workers lost their right to claim bonus because of taking over of the gold and nationalising the undertakings and under these circumstances the question of the bonus dispute shall be decided on ell other considerations.

140. This conclusion will be further corroborated even from the conduct of the parties during the last so many years. I have already observed that the workers have been granted bonus every year and have also stated in a tabular form the amount paid. It is in evidence that the bonus was paid under certain agreements between the employers and tho unions and the contents of these agreements will throw sufficient light on the circumstnaces under which bonus was paid and would also reveal properiy the mind of the employers in granting the bonus Exhibit E*13 dated 7th October, 19.58 which pertains to the bonus agreement for the years 1953- 54 it is stated: —

"As the available surplus calculated in the manner mentioned above for the years 1953 and 1954 will not be appreciable and as hopes have been raised in the minds of the workmen by reason of the award of the Central Government Industrial Tribunal, Madras, and as tho repre- sentatives of workmen have agreed to calculate the available surplus in the manner set out In paragraphs 7 and 8 above for the years 1953 to 1960-61 and have agreed to an "Industrial truce regarding bonus" till the end of the Second Plan period and as the parties have agreed to settle the bonus for the four years 1933, 1954, 1B55 and 1956 together the management have agreed as a special case and on the distinct understanding that it will not form a precedent for other years to pay bonus to the workmen of the Gold Mines and the allied Establishments as follows: —

Exhibit E-14 dated 22nd January, 1960 is the agreement about bonus for the period 29th November, 1956 to 31st March 1968 and 1st April 1958 to 31st March 1959. In this agreement it has been stated: —

"In accordance with the principles laid down by the supreme Court In their Compromise Award dated 31st October, 1958 the net surplus- lor the purpose of payment of bonus was calculated which showed that there was no available surplus for bonus payment lor the 18 months and 2 days period ended 31st March 1958 or for the 12 months ended 31st March 1959

Was considered on an ad hoc basis and the following agreement was reached in regard to the payment of bonus ior tb<* above periods,"

Exhibit E-15 dated 30th December, I960 is the agreement for bonus lor the period 1st April 1059 to 31st March, I960. In this agieement it has been stated:

"Payment of bonus for the 12 months ended 31st March, 1900 was consider- ed on an ad hoc basis and the following agreement tyas reached. ."

Exhibit E-16 dated 21st December, 1961 is for bonus for the year 1960-61. In this agreement it has been observed: - -

'However the management have as a concession and on a purely ad hoc basis agreed to give bonus to the monthly rated and daily rated em- ployees of the Kolar Gold Mining undertakings at the following rates':—

Exhibit E-17 dated 23rd December, lt)62 is the agreement lor bonus for the year 1st April, 1961 to Hist March, 1962. In this agreement it has been stated: —

"Whereas the Managing Director held discussions with the representatives of the Unions and explained to them that there is no available sur- plus 10 warrant the grant of any bonus, whereas the representatives of the unions pressed for payment of some bonus on an ad hoc basis, whereas the management on considering the request of the workmen have as a concession and on an ad hoc basis agreed to give bonus u> the monthly rated and dally rated employees,,.."

Exhibit E-18 is the agreement dated tor 4th January, 1964 bonus for the period 1st April, 1961 to 30th November, 19B2. In this agreement it is stated: —

¹¹. . This was agreed to by the workers representatives and thereafter the management explained to the workers representatives that the indus- try was passing through a difficult time and that it has suffered a substantial loss du/ing the above period and it was therefore difficult to concede any demand for bonus- After protracted negotiations and with a view to maintain harmonious relations the following settlement was arrived at."

147. The observations In these agreements clearly point out that though rn the bonus dispute for the year 1953-54 there was a compromise under which the parties had agreed to calculate the available surplus upto 31st March, 19G1 In a particular manner they had not followed the same for considering the question of bonus in any year. It has been argued that bonus in those years has been paid under agreement. It is true that the decision to pay bonus has been incorporated in the form of an agreement. However it is an empty argument as nothing has flowed as a consideration from the workers. These documents merely indicate willingness of the employers to pay bonus, which further shows that management wanted to do justice to the workers and to keep them satisfied. When parties sign a series of agreements and iollow a certain course of conduct we can presume and Infer the real intention behind it. hen the Chief Accounts Officer was ques- tioned about the grant of bonus in previous years he has stated: —

"It is correct to say that bonus has been paid to the workmen irrespective of available surphis as per L.A.T. formula during the years of agree- ments. It was only for the period of 8 months from 1st April, 19Q2 to 30th November 1962 that bonus was paid in spite of a revenue loss.

14y. Taking the amerent raies of gold 1 have calculated the profits and have stated the resold m me earlier para. However, there is no sale in laet and mere is no question oi prom and mese calculations nave been mane wim it view to get some iaea a'jouu me imaneiaj. couuiuun aud uie wonting results of ine period, inough as per me *vese,.ve Bank oi India rates mere appears to w a surplus oi iti.b3 ibiuis 1 am aware that this surplus has been obtained oeeause the management has laiied to prove the prior charges ot uepreciauon and rehabui- tauon, had they taken care w prove tnosse charges perhaps uieie woula have ueen no iurplus. Buw in spite of tne want oi avauauie surpius in my opinion the demand oi the workers or the undertaking tor bonus tor tne reason stated is Justified.

150. ay calculating the woiking results at the 1-iulti average rate and the Reserve Bank rate there is some gross proht. 'ihere may not be availaoie surplus but there is no loss. It is iu>t in dispute that the Legislature has recognised the principle oi minimum bonus irrespective of the question oi pront and there is no reason why the tame prlncple should not be made applicable to the working oi the undertalangs. filter ail bonus arlorded tne means pi bridging the gap between the actual wage and ihe need "aased wage and it is because ol such considerations the State granted bonus every year. It is sigmilcant to remember that the Central Government has suosidising the Mysore Government lor running the Kolar Ltoiii mines and I do not think that the workers Bhouid be treated by the Central Uovern- rnent on dirterent lines- The Hutti Gold mines pay bonus to their workmen. Even ii the grant oi bonus necessitates the curtailment of other expenditure I think that will be preferable to the discontent that might be caused by singling out these workers especially when Government has taken the gold, changed the conditions and disable the industry from making profits and 1 think that the workmen are entitled to bonus on the basis as they were paid before.

151. The Mysore Government has paid bonus ot 2/3rds of 26 days basic salary for the period of eight months from 1st April, 1962 to November 1962. The present dispute Is for the bonus of 16 months and hi my opinion bonus equal to the basic •alary of 32 days shall meet the ends of justice.

I direct the management of the Kolar Gold Mining Undertakings to pay to the workmen of the Kolar Gold Mining Undertakings bonus for the period 1st December, 1962 to aist March, 1964 at the rate of 32 days basic salary for monthly rated employees and 32 days basic wages lor the dally rated employees on the role of the undertakings during the period. The above bonus will be paid to the employees as per existing practice on the field in regard to payment of bonus.

The above bonus will be disbursed by the management to the workmen with- in one month ;from the date of publication of the award.

The management to pay costs of Rs. 500/- to each union.

Hence my award accordingly.

(Sd.) A. T. ZAMBRK,

Presiding Officer,

Central Government Industrial Tribunal,

Bombay.

[No. 24/i8/64-LR.I/LR. IV-]

R. A N A N D A K R I S H N A. Jt. Secy.

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