JEEWANLAL (1929) LTD. Vs. FOURTH INDUSTRIAL TRIBUNAL

JUDGEMENT

(1.) THE facts in this case are shortly as follows: The petitioner is a company incorporated under the Indian Companies Act, having its registered office at Calcutta. Its business consists of the manufacture and sale of aluminium utensils, for the manufacture of which it has a factory at Belur in Howrah and at other places. The said factory is commonly known as the 'Crown Aluminium Works.' At all material times prior to about the middle of 1951, the petitioner's issued and subscribed capital was Rs. 36,00,000 divided Into Rs. 3,60,000 ordinary shares of Rs. 10 each, fully paid up. At or about that time, the total assets of the company had a book value of about Rs. 72.00,000. All the shares were held by or on behalf of Aluminium, Limited, a company incorporated in Canada. In the year 1951, the Canadian company sold out all its shares to Indian shareholders, who had to pay the book value of the assets, namely, Rs. 72,00,000. In other words, these shares of the face value of Rs. 36,00,000 were purchased by the Indian shareholders upon actual payment to the Canadian shareholders of Rs. 72,00,000. What was done afterwards was to increase the capital to Rs. 72,00,000 by the issue of bonus shares, to the extent of one share for every share already held. In order to do this, permission had to be obtained from the Controller of Capital Issues, New Delhi, and such consent was given upon the condition that no dividend should be paid for 1951 or any future years until after a reserve of Rs. 14,40,000 had been built up, to replace a portion of the reserves utilized in the capitalization effected by the issue of bonus shares. In accordance with the said condition, the company set aside in reserve a sum of Rs. 8,00,000 out of the profits for the year 1951. For the year ending 31 December 1952, there was a loss of over fourteen lakhs of rupees. For the year ending 31 December 1953, there was a loss of over six lakhs of rupees. Between 1954 and there were profits, but the final position in 1958 was that a net loss of Rs. 1,69,656 had to be carried forward. The result was that in 1958, which is the relevant period for our consideration, not only the reserve of Rs. 8,00,000 was not increased, but was substantially depleted. The position is made clear in the directors' report, dated 18 May Clause (7) and which runs as follows: In conformity with the requirements of the Companies Act, 1956, the general reserve and the reserve for replacement of fixed capital assets, the two together amounting to Rs. 8,00,001 has been placed against the net deficit of Rs. 1,69,656 and only the net amount of Rs. 6,30,344 has been shown under the head ' reserves and surplus' on the liabilities side, for the purposes of the balance -sheet. However, the necessity still remains to build up a general reserve of Rs. 14,40,000 prescribed by the Central Government in Its order in 1951. The company, has thus, yet to wipe off the net carry forward of losses of Rs. 1,69,656 and add a further sum of Rs. 6,40,000 to the general reserve fund before it can distribute dividends in cash. In respect of this official condition to build up prescribed reserve, your directors expect to try with success to get it relaxed in some measure to speed up prospects of an earlier cash dividend.

(2.) AS a result of this state of affairs, the shareholders have received no dividends since 1951 up to date, upon their investment of Rs. 72,00,000. By an order, dated 10 July 1959, the Government of West Bengal made a reference to the fourth industrial tribunal of West Bengal, respondent 1 herein, of an industrial dispute existing between the 'Crown Aluminium Works, 31, Netaji Subhas Road, Calcutta -1 and their workmen represented by Bengal Aluminium Workers' Union.' The issue was the question of the payment of gratuity.

(3.) SRI Ginwalla appearing on behalf of the petitioner, has taken several points which are as follows: