TATA OIL MILLS COMPANY LIMITED Vs. ITS WORKMEN

JUDGEMENT

(1.) THE following Judgment of the court was delivered by

(2.) THIS is an appeal by special leave against the award of the Industrial tribunal, Bombay, in a dispute between the Tata Oil Mills Co. Ltd., Bombay (hereinafter referred to as the company) and its workmen, in the matter of profit bonus for the year 1955-56. The dispute arose over a demand made by the workmen for payment unconditionally as bonus for the year 1955-56 of a sum equivalent to four months' wages/salary for all employees drawing wages/salary of less than Rs. 500.00 per menses. THIS dispute was referred to the Industrial tribunal by the government of Bombay by its order dated 18/06/1957. The company had already paid 21 months' basic wages as bonus to its workmen and the real dispute was thus only about the remaining bonus for a month and half.

(3.) IT was further observed at page 999- ` IT is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits. If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus.` IT is clear from these observations that this court was not dealing with the question of extraneous income as such in the Muir Mills Case (1). The principles laid down in that case show that there must be profits in the particular year for which bonus is claimed, resulting in an available surplus before profit bonus can be awarded. IT is only when profits are made that profit bonus can be awarded, subject to two further conditions, namely, (1) wages fall short of the living standard and (2) the industry makes large profits part of which are due to the contribution which the workmen make _in production. IT is this last condition which seems to have been relied upon by industrial tribunals in holding that there must be direct connection between the efforts of labour and the profits, and unless that direct connection is established the profits must be treated as unrelated to the efforts of labour and thus become extraneous income. There is no doubt that there must be contribution of the workmen in earning profits before they are entitled to profit bonus; but it was not laid down in the Muir Mills Case (1) that direct connection between the efforts of the workmen and the particular item of profit earned must be established before the profit can be taken into account for the purposes of arriving at the available surplus. An industrial concern carries on a certain business. In carrying on that business it employs. capital as well as labour, and generally speaking the profits earned in the normal course of business at the end of year are the result of the joint effort of capital and labour. Even so, it may be recognized that there may be instances of extraneous income for the purpose of the full bench formula due (i) either to some part of the profits not having been earned in that year, (ii) or to some part of profits arising out of fortuitous circumstances altogether unconnected with the efforts of labour. A third category may be the income arising out of sale of fixed or capital assets. Such income or profit may be called extraneous income as either it did not really arise in that year or though it has arisen in that year, labour has not contributed anything towards its accrual; it may therefore not be taken into account in calculations according to the full bench formula. But apart from these cases, we cannot see how income arising during the year in the normal course of business of the concern can be called extraneous income merely on the ground that no direct connection between the efforts of labour and the accrual of the income has been established. In this very case we find an instance of the first category in two items relating to return of excess provision for expenses and refund of excess profits tax. These two amounts have gone to swell the profits of this year; but they have not arisen in this year and may, there fore, properly be treated as extraneous income. An instance of the second kind is to be found in the profit of Rs. 3 lacs made in this year by a change in the method of valuation of the company's assets, which is entirely unconnected with the efforts of labour. But so far as the other four items are concerned, they are earned by the company in the normal course Of its business and there is no reason why they should be excluded on the ground that it has not been proved that they are the result of direct efforts of, labour in this year.