judgement:
minal Appeal No. 101 of 1969.
Appeal by special leave from the judgment and order dated April 16, 1969 of the Rajasthan High Court in section B. Criminal Appeal No. 558 of 1966.
A. section R. Chari and section B. Wad, for the appellant.
K. B. Mehta, for the respondent.
The Judgment of the Court was delivered by Jaganmohan Reddy, J.
This is an appeal by special leave against the judgment of the Rajasthan High Court.
The accused was initially charged on three counts, firstly, under section 5(2) read with section 5(1)(c) of the Prevention of Corruption Act 1947 (hereinafter referred 'to as 'the Act '), secondly, under section 409, I.P.C., and thirdly, under section 477A, I.P.C. Thereafter on 15 1 1964 another Special Judge charged him on two counts, namely, under section 5 (2) read with section 5 ( 1) (c) and section 5 (2) read with section 5 (1) (w) of the Act.
After the trial, the appellant was, however, convicted under section 409, I.P.C. and section 5(2) read with section 5(1)(c) and (d) of the Act and sentenced to rigorous imprisonment of 18 months and a fine of Rs. 250/ under section 409, I.P.C. and 18 months ' rigorous imprisonment, and a fine of Rs. 250/ under section 5(2) read with sections 5(1)(c) and 5(1)(d) of the Act.
The sentences on both these counts were, directed to run concurrently.
The High Court, however, thought that the Special Judge had not recorded any conviction under section 5(1)(d) of the Act and in that view confirmed the conviction and sentence of the appellant of 18 months" rigorous imprisonment on each of the counts, namely, under 499 section 409, I.P.C. and section 5(2) read with section 5(1)(c) of the Act, but reduced the fine for each of the offences from Rs. 250/ to Rs. 150/ .
The appellant was employed as a Traffic Assistant in the Indain Airlines Corporation 's office at Jaipur and his duty was to make reservations of the passengers intending to go by air and issue tickets.
As it happens, when the quota of seats allotted to Jaipur is full, intending travellers who request for accommodation would be required to pay trunk telephone charges for enabling the Airlines Corporation to obtain release of seats from quotas allotted to other centers.
The practice of the Airlines was to collect the approximate charges and issue a receipt therefore and if a seat was available, the reservation would be confirmed and accommodation given to the passengers if seats could be released from other centers for Jaipur.
The appellant who was incharge of these arrangements between 16 2 62 and 30 8 62, collected Rs. 184.90 towards trunk telephone charges but actually deposited with the Airlines Corporation a sum of Rs. 44.91 and misappropriated the balance of Rs. 139.99.
The modus operendi followed by him, it is alleged, was that he would demand a higher amount for Trunk Call charges than were likely to be incurred and he would issue a correct receipt for those amounts on behalf of the Airlines Corporation but after making the trunk call, he would alter the counter foil with the actual amount of trunk call charges.
On the same day he would make a daily return showing the actual amounts and deposit them with the Cashier.
A typical sample of the receipts given by him on behalf of the Airlines Corporation is Exhibit 40 which is as follows INDIAN AIRLINES CORPORATION NEW DELHI.
No. 354577 Station Jaipur.
Date : 30 8 62.
Received with thanks from M/s. M/Travels, Jaipur sum of Rupees Twenty three and forty nP, being the amount T/Call charges to Udaipur and AMD for re lease of seat.
for INDIAN AIRLINES CORPORATION.
Sd/ Cashier".
Rs. 23.40 On 31 8 62, one M.D. Singh of_the Mercury Travel Agency, Jaipur complained to B.S. Gupta, Incharge of the Office of the Indian Airlines Corporation at Jaipur that the appellant had 500 collected Rs. 23.40 for proposed trunk call charges from the Agency but made no call and no seat was allotted to the passenger of the Mercury Travel Agency even though one was available and that seat was given by B. section Gupta to someone else.
B. section Gupta questioned the appellant who then made; a confession of his having collected the amount but not having made a call.
After making this confession he immediately resigned his job.
A preliminary inquiry was conducted by the Area Manager who thereafter lodged the First Information Report.
The accused denied having collected the amounts or of having issued the receipts and further stated that whatever amounts were; collected by him were paid in the office of the Airlines everyday.
Both the Courts found on the evidence that the appellant used to make trunk calls whenever he was on duty from the Indian Airlines Corporation office at Jaipur for the release of seats and that he would call for and receive trunk call charges from intending passengers.
It was further held proved that the appellant gave receipts Exhibited in the case which were in his own hand writing and signed by him; and that it was he who realised the total sum of Rs. 185/ which was entrusted to him and over which he, had a dominion in his capacity as a public servant.
We have already pointed out that the High Court did not confirm the conviction of the appellant under section 5(2) read with section 5(1)(d) on the assumption that the said Special Judge had not convicted the accused for that offence, and since there is no appeal by the State against this part of the judgment, the contention on behalf of the State that he was convicted under section 5(1)(d) has no merits and cannot be sustained.
On behalf of the appellant it was urged before the High Court that as the appellant had to fare a trial extending over more than 3 years incurring enormous expenses for coming to and from Chandigarh where he was practicing law and was also in Jail for some time, the benefit of the Probation of Offenders Act should be given to him] This contention was rejected because the provisions of that Art were inapplicable in view of his conviction under section 409, I.P.C.
As the offence of criminal breach of trust under section 409, I.P.C. is punishable with imprisonment for life, the High Court, in our view, was right because the provisions of section 4 are only applicable to a case of a person found guilty of having committed an offence not punishable with death or imprisonment for life.
Apart from this reasoning, section 18 of the Probation of Offenders Act makes, the provisions of that Act inapplicable to are offence under sub section (2) of section 5 of the Prevention of Corruption Act.
On behalf of the appellant it is submitted by the learned Advocate that the prosecution case as disclosed by the evidence was that the appellant had collected excess charges from the passengers 501 representing them to be the actual charges for trunk calls and not that any excess over the actual charges would be returned to them.
In view of this evidence, the appellant could not be convicted either under section 5(2) read with section 5(1)(c) of the Act or under section 409, I.P.C. because the important ingredient which is entrustment of the amounts is absent.
In order that any amount can be said to be entrusted it should be lawfully made over, but in this case the appellant obtained the amount by cheating and by the commission of an offence.
If there was no entrustment of the moneys to the appellant, he could not be convicted either under section 409 or under section 5(2) read with 5(1)(c) of the Act and is accordingly entitled to an acquittal on both these charges.
In support of this contention reliance has been placed on Surendra Pal Singh vs The State(1), where a Bench of the Allahabad High Court held that the amounts collected from cultivators by the Canal Amin in excess of the amount actually due from them and misappropriated by him, did not amount to an entrustment as he could not be a trustee of that money on behalf of the cultivators, from whom he realised it because when they banded over the money to the accused, they purported to surrender all their rights in that money, nor could it be said that this money had become the property of the Government at any stage for him to be considered a trustee on its behalf.
This decision was, however, disapproved in The State vs Dahyalal Dalpatram(2), by a Bench of the Bombay High Court, a view with which the High Court agreed.
In that case the accused who was employed as a Talati in the Revenue Department, was invested with the authority to collect land revenue and fines.
He was ordered to recover from the land holders who had defaulted in paying the moneys but having collected them, be did not pay them into the Government Treasury as required by the rules made under the Land Revenue Code.
The accused was convicted under section 409, I.P.C.
On the question that when the accused collected the amount as tax alleged to be due by the land holder though the liability whereof could not be enforced according to law.
could it be said that he was then entrusted with the money, the High Court after noticing that the Allahabad High Court appears to have taken the view that a public servant collecting the money claiming that it was, due to the State but which in fact was not due to the State, could not be regarded as entrusted with the money collected by him, held that that was not a necessary ingredient of section 405.
The learned Advocate sought to distinguish this case on the ground that in the Bombay case there was a definite direction to collect a specific amount and when that amount was collected there was entrustment of that money which was lawfully collected, as such the accused was rightly convicted.
It was further contended that if looked at from the point of view of the passengers from whom (1) A.I.R. 1957 All. 122.
(2) A.I.R. 1960 Bom.
502 trunk call charges were collected, they had not entrusted money to the accused because they had parted with the proprietary rights thereon and if viewed from the point of view of the Airlines Corporation, the money collected did not be come the property of the Corporation and consequently there was no entrustment of it.
There can be no doubt 'that before a public servant can be convicted of an offence under section 5(1)(c) or under section 409, I.P.C. the property which is said to, have been misappropriated must be entrusted to him.
Section 405 merely provides, whoever being in any manner entrusted with property or with any dominion over the property, as the first ingredient of the criminal breach of trust.
The words 'in any manner ' in the context are significant.
The section does not provide that the entrustment of property should be by someone or the amount recieved must be the property of the person on whose behalf it is received.
As long as the accused is given possession of property for a specific purpose or to, deal with it in a particular manner, the ownership being in some person other than the accused, he can be said to be entrusted with that property to be applied in accordance with the terms of entrustment and for the benefit of the owner.
The expression 'entrusted ' in section 409 is used in a wide sense and includes all cases in which property is voluntarily handed over for a specific purpose and is dishonestly disposed of contrary to the terms on which possession has been handed over.
It may be that a person to whom the property is handed over may be an agent of the person to whom it is entrusted or to whom it may belong in which case if the agent who comes into possession of it on behalf of his principal, fraudulently misappropriates the property, he is nonetheless guilty of criminal breach of trust because as an agent he is entrusted with it.
A person authorized to collect moneys on behalf of another is entrusted with the money when the amounts are paid to him, and though the person paying may no longer have any proprietary interest nonetheless the person on whose behalf it was collected becomes the owner as soon as the amount is handed over to the person so authorized to collect of different High Courts in this country for nearly a century, a few of which alone need be examined.
In the matter of Ram Sounder Poddar & Ors.(1), a Deputy Magistrate convicted the accused under section 406, I.P.C., an offence over which he had jurisdiction, instead of under section 409, i.p.c.
which was cognizance only by the Court of Session.
on revision the High Court held that the proceedings were contrary to law and the Deputy Magistrate was directed to commit the accused for trial by the Court of Session.
It appears that the accused who were charged were Treasury employees.
One of the accused (1) 1878 (2) al.
L.R. 515.
503 was allowed to, write the Treasury Cash Book which was the duty of the Treasurer.
Taking advantage of it, he misappropriated Rs. 16/ by scoring off the entry in the account book.
In this misappropriation he was assisted by the other accused who was employed to do stamp work.
While holding the trial to be without jurisdiction, it was observed that section 409 does not as supposed by the Deputy Magistrate, require the property in respect of which criminal breach of trust is committed, to be the property of Government, but only requires that it should be entrusted to a public servant in his, capacity as such public servant.
In re : Ramappa(1), the accused who was the Superintendent of some Coffee Curing Works was convicted of criminal breach of trust by misappropriating a large sum of money made up of amounts which he had received from the Manager on the false pretense that they were required for paying coolies who garbled coffee.
One of the arguments urged against the conviction was that the receipt of the money by false representation amounted to an offence of cheating and that the subsequent appropriation of it by the accused to his own use was not a criminal breach of trust as the criminal intent was present at the time of the receipt of the moneys from the Manager.
Benson and Sundara Aiyar, J., while rejecting that argument, observed: "When the accused received the money he did so as a servant of the Company for the express purpose of using it for his master 's benefit in a particular way.
He was, therefore, entrusted with the money and his appropriating it to himself clearly amounts to criminal breach of trust".
In Venkata Raghunatha Sastri(2), Spencer, J., held that where a person who had pledged promissory notes with another as seenrity for a loan dishonestly induced the latter to hand over the same to him by pretending that he required the same for collecting money from his creditors with the aid of which he would pay cash to the complainant, his act constituted an offence of cheating punishable under section 420, I.P.C. and that when he dishonestly disposed of the notes in violation of his contract with the pledgee to use the money collected in paying off his debt, there was both entrustment and dishonest misappropriation and that the conviction for the offence of criminal breach of trust under section 406, I.P.C. was legal.
Both these cases were referred to in The Crown Prosecutor vs J. McIver and K. section Narasimhachari(3).
The facts in this case also were somewhat similar to those in Venkataraghunatha Sastri 's case (4 ) Madhavan Nair, J (as he then was) examined the meaning of the word 'entrusted ' in section 406 and rejected a similar contention as was urged in this case on behalf of the appellant that when the accused by deceiving the complainant fraudulently and (1) (3) (2) (4) 504 dishonestly induced him to part with the property in question, the offence of cheating was complete and that there is no room for further holding that the accused have committed criminal breach of trust also by their subsequent misappropriation of the property.
In the case before us, the practice which was being followed by the Jaipur office of the Indian Airlines Corporation is spoken to by M. U. Menon, P.W. 6, who was a Personal Assistant to the General Manager of the National Engineering Industries Ltd., Jaipur.
He says that on 16 2 1962 his General Manager had directed him to issue instructions to the accounts branch for arranging for flight tickets by air for Delhi.
He first rang up the Indian Airlines Corporation about the air passage for eight persons and received, a reply from that office that 8 tickets were not available at Jaipur and they would try from Udaipur and Ahmedabad by trunk calls.
After some time the Indian Airlines Corporation people rang up telling him that tickets can be arranged and he should end the money amounting to Rs. 410.50 which included trunk call charges of Rs. 26.50.
He thereupon sent a slip, Exhibit P 6 to the accounts department for further necessary action.
There was no cross examination on behalf of the accused.
Similarly Ganesh Singh, P.W. 3 who is working for the National Engineering Indus ' his people contacted Indian Airlines tries Ltd., Jaipur said that when Corporation on telephone and enquired about the fare etc.
they would ask for trunk call charges along with the amount for tickets.
This would be paid and in fact he pointed out to the accused and said that he might be one of the persons whom he met at the office and after he paid the amounts for the tickets and trunk call charges, he would obtain a receipt and give it to the company.
This evidence read with other evidence which has been accepted by both the Courts would show that whatever may have been the criminal in tention of the accused, the amounts for trunk call charges were demanded on behalf of the Indian Airlines Corporation and were paid to the corporation.
The receipts in respect of the sums were given on behalf of the Corporation and it would be the Corporation that would be liable directly to the person who had paid this amount, if no trunk calls were made, or any excess over the actual amount of the trunk call charges was charged by it.
The amount was not paid by passengers to the accused as such but to the Indian Airline.
,, Corporation and as soon as the receipt for the amount actually received from the passengers was given by the accused on behalf of the Corporation, he was entrusted with that amount.
His subsequent conduct in falsifying the counter foils and fraudulently misappropriating the amounts would make him guilty of criminal breach of trust punishable under section 409, I.P.C. as also under section 5(2) read with section 5(1)(c) of the Act.
There is, therefore, no merit in this appeal and it is accordingly dismissed.
Appeal dismissed.

summary:
The appellant who was an employee of the Indian Airlines Corporation was convicted under section 409, Penal Code, and section 5(2) read with section 5 (1) (c) of the Prevention of Corruption Act, 1947.
The appellant 's duty was to make reservations for the passengers.
The practice was that whenever the quota was full intending travellers were re quired to pay trunk telephone charges for enabling the Corporation to obtain release of seats from quotas allotted to other centers.
The appellant who was incharge of this arrangement, it was alleged, collected Rs. 184.90 towards trunk telephones charges but actually deposited with the corporation only a sum of Rs. 44.90 and misappropriated the balance.
The modus operandi, it was alleged, was that he would demand a higher, amount for Trunk Call charges than was likely to be incurred and he would issue a correct receipt for this amount on behalf of the corporation but after making the trunk call, he would alter the counterfoil with the actual amount of trunk call charges.
In the appeal to this Court it was urged that since the prosecution case as disclosed by the evidence was that the appellant had collected excess charges representing them to be actual charges for trunk calls and not that any excess over the actual charges would be returned to the appellant he could not be convicted either under section 5(2) read with 5(1)(c) of the Prevention of Corruption Act or under section 409 penal code, because, the important ingredient, viz., entrustment of the amount was absent.
Dismissing the appeal, HELD : (i) The expression, 'entrusted in section 409 is used in a wide sense and includes all cases in which property is voluntarily handed over for a specific purpose and is dishonestly disposed of contrary to the terms on which possession has been handed over.
As long as the accused is given possession of property for a specific purpose or to deal with it in a particular manner, the ownership being in some person other than the accused, he can be said to be entrusted with that property to be applied in accordance with the terms of entrustment and for the benefit of the owner.
It may be that a person to whom the property is handed over may 'cc an agent of the person to whom it is entrusted or to whom it may belong in which case, if the agent who comes into possession of it on behalf of his principal, fraudulently misappropriates the property, he is nonetheless guilty of criminal breach of trust, because, as an agent he is entrusted with it.
A person authorized to collect moneys on behalf of another is entrusted with the money when the amounts are paid to him, and though the person paying may no longer have any proprietary interest, nonetheless, the person on whose behalf it was collected become the owner as soon as the amount is handed over to the person so authorized to collect on his behalf.
[502 D] 498 The State vs Dahyalal Dalpatram, A.I.R. 1960 Bom.
53; In re: Ram Soonder Poddar & Ors.
1878 (2) Cal.
L.R. 515; In re : Ramappa, ; in re : Venkata Raghunatha Sastri, (1923)45 M.L.J. 133 and the, Crown Prosecutor vs J. Mclyer and K. section Narasimhachari, , referred to.
(ii)In the present case the amounts for trunk call charges were demanded on behalf of the Corporation and were paid to the Corporation.
The receipts in respect of the sums, were given on behalf of the Corporation and it would be the Corporation that would be liable directly to ,the person who had paid this amount, if no trunk calls were made, or any excess over the actual amount of the trunk call charges was charged by it.
The amount was not paid by passengers to the accused as such but to the corporation and as soon as the receipt for the amount actually received from the passengers was given by the accused on behalf of the corporation, he was entrusted with that amount.
His subsequent con.duct in falsifying the counterfoils and fraudulently misappropriating the amount would make him guilty of criminal breach of trust under section 409 I.P.C., as also under section 5(2) read with section 5(1)(c) of the Act.
[604 E H]


judgement:
Appeals Nos.
109 to 115 of 1952.
Appeals from the Judgment and Decree dated the 9th day of March 1950 of the High Court of Judicature at Calcutta in Appeal from Appellate Decree Nos.
1841 1847 of 1945 arising out of the Decrees dated the 16th day of September 1944 of Munsiff 3rd Court, Burdwan.
P. K. Chatterjee, for the appellant.
section C. Das Gupta, (Sukumar Ghose, with him), for the respondents in Civil Appeals Nos.
109 to 112 of 1952 and respondents 1, 2(a), 3 and 4 in Civil Appeal No. 113 of 1952 and respondents 1 and 3 in Civil Appeals Nos. 114 and 115 of 1952.
December 20.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
The appellant is the Mahant of a religious institution known as Rajgunj Asthal in Burdwan, and the suits out of which the present appeals arise, were instituted by him to recover possession of various plots of land in the occupation of the defendants, or in the alternative, for assessment of fair and equitable rent.
It was alleged in the plaints that the suit lands were comprised in Mouza Nala forming part of the permanently settled estate of Burdwan, and were Mal lands assessed to revenue, and that more than 200 years previously there had been a permanent Mokarrari grant of those lands by the Maharaja of Burdwan to the Rajgunj Asthal; that in the record of rights published during the settlement in 1931 they were erroneously described as rent free, and that on the strength of that entry the defendants were refusing to surrender possession of the lands to the plaintiff.
It was accordingly prayed that a decree might be passed for eject ment of the defendants, or in the alternative, for assessment of a fair and equitable rent.
1170 The defendants contested the suits, and pleaded that the lands were not Mal lands comprised within Mouza Nala, that they did not form part of the zamindari of Burdwan but had been granted as Lakheraj to their predecessors in title long prior to the permanent settlement, that neither the Maharaja of Burdwan nor the plaintiff claiming under him had any title to them, and that the entry in the record of rights in 1931 was correct.
The defendants also pleaded that as they and their predecessors had been in possession of the lands for over 200 years under assertion of an adverse title, the claim of the plaintiff was barred by limitation.
The District Munsif of Burdwan who tried the suits held that the lands were included in Mouza Nala in Thouzi No. 1, which was comprised in the permanently settled estate of Burdwan, that their income was taken into account in fixing the revenue payable by.
the estate., that they had been granted in permanent Mokarrari by the then Maharaja of Burdwan to the Rajgunj Asthal, and that the plea of the defendants that they held them under a Lakheraj grant made prior to the permanent settlement was not true.
He also held that the documents on which the defendants claimed to have dealt with the properties as owners under assertion of an adverse title were not proved to relate to the suit lands, that the relationship subsisting between the parties was one of landlord and tenant, that as there had been no determination of tenancy, no decree in ejectment could be passed but, that the plaintiff was entitled to fair rent, and that the claim was not barred by reason of article 131 of the Limitation Act.
In the result, he granted decrees for rent.
The defendants appealed against this decision to the Court of the District Judge of Burdwan, who agreed with the District Munsif that the suit lands were Mal lands within the zamindari of Burdwan, and that they had been settled on the plaintiff by the Maharaja of Burdwan.
But he held that as the defendants and their predecessors had been in posses sion of the lands for a very long time without 1171 payment of rent, a presumption of a lost grant could be made in their favour.
He accordingly dismissed the suits.
Against this decision, the plaintiff appealed to the High Court, which agreeing with the District Judge on both the points dismissed the appeals, but granted a certificate under article 133(1) (c), as it was of the opinion that the question of lost grant raised an issue of great importance.
The substantial question that arises for our decision is whether on the materials on record the Courts below were right in presuming a lost grant in favour of the defendants.
The grounds on which the District Judge made that presumption are that the defendants, and their predecessors had been in possession of the lands for a long time without payment of rent, that they had been asserting continuously that they were holding under a Lakheraj grant, and that they did so to the knowledge of the plaintiff.
It must be mentioned that in dealing with this question the District Munsif held that the documents put forward by the defendants as containing assertions by them that they held under a Lakheraj grant were not shown to relate to the suit lands.
The District Judge differed from this finding, and observed: ". . . there are some unmistakable names of tanks, etc., by which some of the lands of these documents at least can be connected with the suit lands . .
These documents relating to these holdings cannot, therefore, be discarded as unconnected with the suit lands".
These observations are vague, and do not lead anywhere, and cannot be taken as a finding on the question.
No attempt was made before us on behalf of the respondents to connect any of the documents with the lands held by them.
In the circumstances, the finding of the District Munsif on the point must be accepted.
On the further question whether the plaintiff had knowledge of the assertion of any hostile title by the defendants, the learned District Judge answered it in the affirmative relying on Exhibits A to A 24, 150 1172 which are receipts for realisations of cesses from the defendants.
But the High Court held and its finding has not been attacked before us that there was no proof of the contents of these documents, and that they must therefore be excluded.
The position thus is that there is no proof that the respondents set up any adverse title prior to 1931, much less that the plaintiff bad knowledge of the same.
We are therefore left with a bare finding that the defendants and their predecessors in title had been in possession for a long period without payment of rent; but here again, there is no finding as to the precise length of time during which they held possession.
The question is whether in this situation a presumption of lost grant could be made.
The circumstances and conditions under which a presumption of lost grant could be made are well settled.
When a person was found in possession and enjoyment of land for a considerable period of time under an assertion of title without challenge, Courts in England were inclined to ascribe a legal origin to such possession, and when on the facts a title by prescription could not be sustained, it was held that a presumption could be made that the possession was referable to a grant by the owner entitled to the land, but that such grant had been lost.
It was a presumption made for securing ancient and continued possession, which could not otherwise be reasonably accounted for.
But it was not a presumption juris et de jure, and the Courts were not bound to raise it, if the facts in evidence went against it.
"It cannot be the duty of a Judge to presume a grant of the non existence of which he is convinced" observed Farwell, J. in Attorney General vs Simpson(1).
So also the presumption was not made if there was any legal impediment to the making of it.
Thus, it has been held that it could not be made, if there was no person competent to be the recipient of such a grant, as where the right is claimed by a fluctuating body of persons.
That was held in Raja Braja Sundar Deb vs Moni Behara and others(1).
There will likewise be no scope for this (1) , 698.
(2) ; , 416.
1173 presumption, if there is no person capable of making a grant: (Vide Halsbury 's Laws of England, Vol.
IV, page 574, para 1074); or if the grant would have been illegal and beyond the powers of the grantor.
[Vide Barker vs Richardson(1) and The Rochdale Canal Company vs Radcliffe(1)].
In the light of these principles, it has now to be seen whether on the facts found a lost grant could be presumed in favour of the defendants.
The finding is, as already stated, that they were in possession without payment of rent for a considerable length of time, but it has not been established precisely for how long.
In their written statements they pleaded that they bad been holding under a Lakheraj grant made prior to the permanent settlement, and had been in possession by virtue of that title for over 200 years.
On this plea, the grant to be presumed should have been made 200 years prior to the suit.
There is an obvious difficulty in the way of presuming such a grant on the facts of this case.
There was a permanent settlement of the zamindari of Burdwan in 1793, and it has been found by all the Courts that in that settlement the suit lands were included as part of the Mal or assessed lands of the estate.
Now, the scheme of the settlement of the estates was to fix the revenue payable thereon on the basis of the income which the properties were estimated to yield, and Regulation No. 8 of 1793 contains elaborate provisions as to how the several kinds of property are to be dealt with.
Section 36 of the Regulation provides that "the assessment is also to be fixed exclusive and independent of all existing lakheraje lands, whether exempted from the kheraje (or public revenue) with or without due authority".
Therefore, when it is shown that lands in an estate are assessed, it must follow that they could not have been held on the date of the permanent settlement as Lakberaj.
It would be inconsistent with the scheme of the settlement and section 36 of Regulation No. 8 of 1793 to hold that the assessed or Mal lands in an estate could have been held on an anterior Lakheraj grant.
It was for this (1) (2) [18521 18 Q. B. 287.
1174 reason that the defendants pleaded that the suit lands were not comprised in the Mal lands of the zamindari of Burdwan.
But that plea has been negatived, and it has been found that they are part of the Mal lands within the zamindari assessed to revenue, and in view of that finding there is no scope for the presumption of a lost grant.
Learned counsel for the respondents relied strongly on the record of rights made in 1931 with reference to the suit lands as supporting his contention.
The entry in question describes the lands as "Bhog Dakhal Sutre Niskar", and has been translated as "without rent by virtue of possession and enjoyment".
The plaintiff attacked this entry as made at the instance of the defendants acting in collusion with one of his agents.
The Courts below, however, have held that had not been established, and therefore the entry must be taken as properly made.
The respondents contended that a strong presumption should be made in favour of the correctness of the entry, because it was made in the ordinary course of business, and that it was sufficient to sustain a presumption of lost grant.
Giving the entry its full value, does the word "Niskar" import a rent free grant? Rule 37 of the Technical Rules and Instructions issued by the Settlement Department for observance by the settlement authorities provides that if property is found in the possession of a person who is not actually paying rent for it should be described as "Niskar", and if no sanad or title deed is produced by the occupant showing a rent free title, the words "Bhog Dakhal Sutre" (by virtue of enjoyment and possession) should be added.
In the written statement it was stated that (as the defendants could not produce any 'revenuefree grant ' they (Settlement Officers) recorded Niskar Raiyati right in a general way".
Reading Rule 37 along with the written statement it is clear that the entry in the record of rights in 1931 was made in compliance with that Rule, and that what it imports is not that there was a rent free grant, but that the person in possession was not actually paying rent.
Whatever weight might attach to the word "Niskar" in a 1175 record of rights in other context, where the question is whether a presumption of a lost pre settlement Lakheraj grant could be made, the inference to be drawn from that word cannot outweigh the effect of the non exclusion of the lands from the Mal or the regularly assessed estate.
We are therefore of opinion that a presumption of lost grant cannot be founded on the entry in the record of rights.
There are also other difficulties in the way of presuming a lost grant in favour of the predecessors of the defendants.
The suit properties formed part of Mauza Nala within the zamindari of Burdwan, and if a grant had been made in favour of the predecessors of the defendants, it must have been made by the Maharaja of Burdwan or by the Rajgunj Asthal.
But the defendants have in their written statements denied the title of both the Maharaja and the Asthal, and having failed in that plea, cannot fall back on a presumption of lost grant by the very persons, whose title they have repudiated.
This does not exhaust all the difficulties of the defendants.
According to the District Judge, the suit properties had been settled on the Rajgunj Asthal more than 200 years ago.
Therefore, the grant to be presumed must have been made by the Mahant of Asthal in favour of the predecessors of the defendants.
But before raising such a presumption, it must be established that the grant was one which could have legally been made by him.
It is well settled that it is beyond the powers of a manager of a religious institution to grant perpetual lease binding the institution for all times to a fixed rent, unless there is a compelling necessity or benefit therefor.
Vide Palaniappa Chetty vs Sreenath Devasikamony(1).
And what is pleaded in the present case is not even so much as a permanent lease, because there is neither premium paid nor rent reserved but a Lakheraj grant unsupported by any consideration.
That would clearly be beyond the powers of a Mahant, and no presumption of a lost grant could be made in respect thereto.
In Barker vs Richardson(2) , an easement was claimed (1) [1917] L.R. 44 I.A. 147.
(2) , 1176 both on the ground of prescription and presumption of a lost grant by a rector.
In negativing this claim, Abbot, C. J. observed that a grant could not be presumed, because the rector had no right to bind his successor by it, and it would therefore be invalid.
In The Rochdale Canal Company vs Radcliffe(1) where the Court was asked to presume that a company had made a grant of its surplus waters for use by the Duke of Bridgewater, Lord Campbell, C. J. observed that "if they had made a grant of the water in the terms of this plea, such a grant would have been ultra vires and bad", and on that ground, he refused to raise the presumption.
We are accordingly of opinion that on the facts found, no presumption of a lost grant could be made in favour of the defendants, and that the plaintiff was entitled to assessment of fair and equitable rent on the holdings in their possession.
Learned counsel for the respondents also raised the plea of limitation.
The Courts below have held that the suits were within time under article 131 of the Limitation Act, as the final settlement of records was published on 16 6 1931, and the present suits were filed within 12 years thereof for establishing the right of the institution to assessment of rent.
It was observed by the learned Judges of the High Court who heard the application for leave to appeal to this Court that it was not suggested before them that the decision on the question of limitation was erroneous.
The contention that is now pressed before us is that in the view that there was no rent free grant in favour of the predecessors of the defendants they were all trespassers, and that the title of the Asthal had become extinguished by adverse possession for long over the statutory period.
But the question of adverse possession was not made the subject of an issue, and there is no discussion of it in the judgments of the Courts below.
We have already held that the documents relied on by the defendants as containing assertions that they held under a Lakheraj grant are not shown to relate to the suit lands.
We (1) ; , 1177 have also held that there is no proof that the defendants claimed to hold under a rent free grant to the knowledge of the plaintiff prior to 1931, and that what all has been established by them is non payment of rent for a considerable but unascertained period of time.
That, in itself, is not sufficient to make their possession adverse.
It was only in 1931 that the defendants could be said clearly to have asserted a hostile title, and the suits are within time from that date.
There is no substance in this plea, which is accordingly rejected.
In the result, the appeals are allowed, the decrees ,of the District Court and of the High Court are set aside, and those of the District Munsif restored with costs in this Court and in the two Courts below.
The decrees of the District Munsif will stand as regards costs in that Court.
Appeals allowed.

dataset_name: IN-Abs

summary:
A presumption of a lost grant arises in favour of a person who does not claim adversely to the owner but who on the other hand proves ancient and continued possession in assertion of a title derived from the owner without any challenge and such possession and assertion cannot be accounted for except by referring to a legal origin of the grant claimed.
But the presumption of a lost grant is not an irrebuttable presumption of law and the court cannot presume a grant where it is convinced of its non existence by reason of a legal impediment, as where the presumption of a lost grant is claimed by a fluctuating body of persons.
Similarly a presumption of a lost grant cannot arise when there is no person capable of making such a grant or if the grant pleaded is illegal or beyond the powers of the grantor.
A presumption of a lost grant by way of Niskar cannot be im puted to the Mohunt of an Asthal inasmuch as he is legally incompetent to make any Niskar grant.
When a defendant who denies the title of the plaintiff in respect of any land, fails in that plea, he cannot fall back on the presumption of a lost grant from the very person whose title he has denied.
Findings of fact arrived at by courts should not be vague.
Attorney General vs Simpson ([1901] , Raja Braja Sunder Deb vs Moni Behara and others ( [1951] S.C.R. 431), Barker vs Richardson ( , The Rochdale Canal Com 1169 pany vs Radcliffe ([1852] IS Q.B. 287), and Palaniappa Chetty vs Sreenath Devasikamony ( [1917] L.R. 44 I.A. 147), referred to.


judgement:
Appeals Nos. 1291 and 1292 of 1967.
Appeals by special leave from the award dated June 30 1967 of the Additional Industrial Tribunal, Bangalore in A.I.D. Nos.6 ',and 8 of 1966.
O. P. Malhotra and D. N. Gupta, for the appellant.
I. N. Keshava and K. Rajendra Chowdhary, for respondents Nos.2 and 3.
Vineet Kumar, for respondents Nos. 4 to 10.
On December 8, 1965, the Government of Mysore referred to the Industrial Tribunal for adjudication the following question "Is the Management of the Bangalore Woollen, Cotton and Silk Mills Company Limited, Bangalore, justified in announcing payment of one month 's basic wages as advance against wages for the half year ending June 1965 instead of declaring this payment as an ad vance against payment of bonus as was being, done all these years ? If not, what other relief the workers are entitled to.
This was numbered as Reference No. A.I.D. 6 of 1966.
Civil Appeal No. 1291 of 1967 is directed against that part of the order of the Tribunal regarding this Reference.
On March 5, 1966, the Government of MysorE referred to the same Tribunal for adjudication the following question "Whether the demand of the workers of Bangalore Woollen, Cotton and Silk Mills Co., Ltd., Bangalore, for additional bonus for the year 1962 and 1963 at the rate of 2 months additional bonus and4 months additional bonus on total wages respectively is justified.
If not, to what other relief or reliefs are the workmen entitled ?" This Reference was numbered as A.I.D. 8 of 1966.
Civil Appeal No. 1292 of 1967 is directed against that part of the order of the Tribunal regarding this Reference.
Both the appeals are by the Company.
We will first take up Civil Appeal No. 1291 of 1967.
appellant was making two payments of bonus every year, one for the half year ending 30th June and half year ending 30th December.
The accounting year is the Calendar year.
The half yearly payments were unilaterally declared by the appellant and not on the basis of any agreement between the parties.
The quantum of bonus that was paid for each half year was also not constant.
Half yearly payments were made at the end of the half year when 466 the working result of the said year was known and if there was sufficient profit to pay bonus.
The payment of bonus for the half years also depended upon the approximate estimate that the Directors used to make about their prospective future earnings for next half year.
According to the appellant the bonus amounts were paid out of profits.
As the (hereinafter to be referred as the Act) had come into force on August 28, 1965, the appellant issued a circular to the effect that for the half year ending June 30, 1965, payments will be made as advance of wages equivalent to 1/6th of the basic earnings of the employees.
In this circular there is a reference to the Payment of Bonus Ordinance 1965, promulgated on May 29, 1965 and that under the terms of the Ordinance, bonus is payable only within a period of 8 months from the end of the accounting year.
The circular further states that no bonus is payable for the accounting year 1965 until the accounts for the year are closed.
It was further mentioned that the amounts are paid as advance wages in view of the representations made by the employees.
The circular further mentioned that the amounts paid as advance wages will be set off against the bonus that may be found payable for the ac counting year 1965 and that if no bonus is payable, the amount paid will be adjusted against the wages due for any month after March, 1966.
The issue of the above circular led to the Unions concerned raising a dispute with the Management that the payment of bonus at the end of each half year has become a condition of service of the workmen as the same was being paid for several decades without any relation to profits.
The appellant was charged by the Unions of having changed the conditions of service by offering to make payments as advance against wages instead of payment by way of bonus.
As conciliation proceedings failed, the workmen resorted to a strike in December 1965, which led to the Reference being made by the State Government on December 8, 1965, No. A.I.D. 6 of 1966.
The short stand taken by, the appellant before the Tribunal was that the payments were being made as bonus at the end of each half year on the basis of the profits earned by the Company.
Such payment was a voluntary act of the appellant and related to profit and it had not become a condition of service of the employees.
The further case of the appellant is that as the Act had come into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965.
The Unions pleaded that the payment of bonus at the end of each half year, which was being done for a long number of years, 467 has become a condition of service and the amounts paid were not related to the profits earned by the Company.
The Unions further contended that the Act has not in any manner affected the right of the employees getting bonus in the manner paid by the appellant namely , at the end of every half year.
The Tribunal has recorded the following findings : The pay ment of bonus was not a settled condition of service, but is dependent upon the profits earned during the half year.
Payments made by the appellant at the close of the half year cannot be considered as customary or festival bonus and that the appellant has made no change in the conditions of service of the workmen by altering the quantum of bonus.
Though bonus was paid at the close, of each half year, the quantum of such bonus varied depending upon the profits earned by the Company.
The Company has no doubt been paying for a long time profit bonus in two instalments, namely, in the month of August for the half year ending 30th June and in the month of March or April of the succeeding year for the half year ending 31st December.
The coming into force of the Act has, not created any right in the appellant to withhold the payment for each half year as it used to do.
The appellant will be entitled to deduct the amount of bonus paid for the first half year from the amount of bonus payable to its, employees under the Act in respect of the accounting year and the employees will be entitled to receive only the balance for the second half year.
On these findings the Tribunal held that the appellant was not justified in announcing the payment of the amount towards advance wages under the circular dated August 28, 1965.
In the end the Tribunal gave a direction to the effect that the appellant is liable to pay profit bonus in two instalment as advance against the final declaration of bonus to be paid during the last week of August or first week of September and the balance, if any, was to be paid in the month of March or first week of April of the succeeding year.
It further gave a direction that the first payment that is to be paid is to be as advance against payment of bonus and not as against wages.
Mr. Malhotra, learned counsel for the appellant, has chal lenged the above directions given by the Tribunal.
The counsel pointed out that after the coming into force of the Act, the rights and liabilities of the parties, regarding bonus, are governed by its provisions.
Under the Act, the computations of the available and allocable surplus have to be made on the basis of the gross profits ascertained at the end of the relevant accounting year and the payment of bonus has to be made within eight months of the close of the accounting year.
As the Act envisages payment of only one bonus, at the end of the accounting year, after computation of the amount as per the Act, the direction given by the Tribunal 468 regarding payment of half yearly bonus is illegal and contrary to the provisions of the Act.
This direction, the counsel pointed out, given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years.
On the other hand, Mr. H. K. Puri, learned counsel for the respondents Nos. 2 and 3, whose contentions have been accepted by the, counsel for the other respondents, urged that the Act does not prohibit an employer from paying bonus at the end of each half year.
The appellant has been paying bonus in two installments, namely, at the end of each half year.
It is always open to the appellant, both by virtue: of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus at the end of the accounting year, any amounts that may have been paid for the first half year.
Therefore, according to Mr. Puri, the directions given by the Tribunal are neither illegal nor contrary to the provisions of the Act.
We are not inclined to accept the contention of Mr. Puri.
We have already referred to the findings of the Tribunal to the effect that the amount that was paid by the appellant as bonus at the end of each half year was on the basis of the profits earned by it The Tribunal has rejected the claim of the Unions that the payment of bonus, in the manner claimed by them, was not a condition of service and that the payment had nothing to do with any custom or festival.
These findings have not been and in fact could not be challenged by the respondents.
There is also no controversy that payment of bonus for the accounting year 1965 is governed by the provisions of the Act.
If so, the question is whether the directions given by the Tribunal and referred to above, can be supported by the provisions of the Act.
The Act has come into force with effect from August ' IS, 1965.
As provided under sub section (4) of section 1, it applies to all accounting years commencing on any day in the year 1964 and in respect of every subsequent accounting year.
Section 2 defines amongst others the expressions, "accounting year", "allocable surplus", "available surplus" and "gross profits" Section 4 deals with the computation of gross profits.
So far as the appellant is concerned; under section 4, cl.
(b) the gross profits are to be calculated in the manner specified in the Second Schedule.
Section 5 provides for computation of available surplus.
It is to be ascertained after deducting from the gross profits the various items, referred to in section 6.
Section 6 deals with the items to be deducted as prior charges from the gross profits.
Section 10 makes it obligatory on an employer to pay minimum bonus to the employees in an accounting year of 4% of his salary or wages or Rs. 40/ whichever is higher.
This payment is irrespective of the 469 fact whether a Company has or has not earned profits in an accounting year.
But this provision is subject to the provisions of sections 8 and 13.
Section 11 provides for payment of bonus subject to a maximum of 20% of the salary or wages, if the conditions mentioned therein are satisfied.
Section 17 enables an employer, who has paid during any accounting year Puja Bonus, or other customary bonus or a part of the bonus payable under the Act before the due date, to deduct the amount so paid from the amount of bonus payable by him to an employee under the Act in respect of that accounting year.
It further provides that under such circumstances the employee will be entitled to receive only the balance.
Section 19 fixed the time limit for payment of bonus.
If there is a dispute regarding payment of bonus pending before any authority, the bonus will have to be paid within a month from the date, on which the Award becomes enforceable or the settlement comes into operation.
In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year.
Under the proviso to section 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein.
Section 34 provides that the Act except as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965.
We have referred to some of the relevant provisions of the Act.
From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross profits which are determined at the close of the accounting year.
The Act itself provides as to how the gross profits are to be calculated and the available and allocable surplus arrived at The Act also provides the outer limit, the period within which bonus has to be paid.
It further gives the employer a right to deduct any amount that any have been paid during the accounting year as part of the bonus payable under the Act.
It will be seen from the scheme of the Act that the claim for bonus can be made only after the close of the accounting year and in accordance with the provisions of the Act.
The gross profits can be calculated only at the end of the accounting year and the available and allocable surplus can also be worked out only at the end of the accounting year.
There is no question of an employer computing the gross profits,, available and allocable surplus in the middle of an accounting year or at any time before the close of the relevant accounting year.
The direction given by the Tribunal really amounts to the employer having to make, two 831 Sup CI/72 470 computations at the end of each half year.
No doubt the Tribunal has given a direction to the effect that any amount paid for the first half year can be deducted when the final bonus is paid at the, end of the accounting year.
Even without any such consideration being shown by the Tribunalallowing an employer to so deduct section 17gives such a right to an employer.
We are not impressed with thecontention of Mr. Puri that as there is no prohibition in theAct against an employer making the payment by way of bonus at the end of a half year, the direction given by ' the Tribunal can be sustained.
Mr. Puri referred us particularly to the provisions contained in section 17 of the Act.
He pointed out that though a time limit is fixed by section 19, the Act itself as is evident from section 17, clearly envisages payment of bonus at the end of each half year.
We are not inclined to accept this contention of Mr. Puri.
The direction given by the Tribunal making it obligatory on the Management to make half yearly payment of bonus apart from being opposed to the scheme of the Act, also runs counter to the provisions of section 19.
Whether it is the minimum bonus of, 4% under section 10 or ' the maximum bonus of 20 % under section 11, they have to be paid, as, is made clear by s ' 19, only within the period mentioned therein. ' It may be that an employer voluntarily pays amount during the accounting year by way of part bonus which he is entitled to take into account and adjust when making final payment at the close of the accounting year.
It is one, thing to say that an employer can make voluntary payment, but it is a different thing for the Tribunal to give a direction to that effect.
Section 17 on which reliance, is placed by Mr. Puri is as follows: "Where in any accounting year (a) an employer has paid any paid bonus or other customary bonus to an employee; or (b) an employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable, then, the employer shall be entitled to deduct amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the; balance.
Clause (a)has no application as the Tribunal has categori cally held that there is question of any payment by way of puja bonus, or other customary bonus.
Even then if any such bonus 471 has been paid the employer is entitled to deduct the same from the amount of bonus payable under the Act.
Clause (b) is an enabling section in favour of the employer in that it visualizes a situation or contingency where he may have paid during the accounting year a part of bonus payable under the Act "before date on which such bonus becomes payable".
If an employer has paid any amount during an accounting year by way of part of the bonus, he, is entitled lo deduct the same from the final amounts that may be payable under the Act.
That provision does not give a right to an employee to claim payment of bonus even by way of part payment during the currency of the accounting year.
If so, the Tribunal has also no jurisdiction to give a direction to an employer to pay bonus at the end of each half year.
In this case,it is no doubt, seen that the appellant has been paying bonus atthe end of each half year.
But the Tribunal has found that suchpayment has not become a condition of service.
Therefore by the mere fact that the appellant has been making payments on previous occasions every half yearly, does not confer a right on the employee to have such payments by way of bonus in the same manner even after the Act came into force,.
From the above discussion it follows that the directions given, by the Tribunal in A.I.D. No. 6 of 1966 have to be set aside.
Now coming to Civil Appeal No. 1292 of 1967, as mentioned earlier, it is against that part of the Award of the Tribunal in A.I.D. No. 8 of 1966.
The question that was referred to the Tribunal has also been extracted in the earlier part of the judgment.
That relates to a claim for additional bonus for the years, 1962 and 1963, There is no controversy that the appellant has already paid for the year 1962, three months basic wages as bonus.
Similarly for the year 1963 also four months basic wages as bonus has already been paid.
The claim was for, two months total wages as additional bonus for the year 1962 and four months ' total wages as additional bonus for the year 1963.
The findings recorded by the Tribunal in A.I.D. No. 6 of 1966 regarding the nature of bonus paid to the employees have been adopted for this reference also.
The respondents Unions do not challenge those findings.
Therefore, even in respect of the years 1962 and 1963, what is payable is only profit bonus.
There is also no controversy that for these two years the quantum of bonus payable has to be calculated in accordance.
with what is known as the Labour Appellate Tribunal Full Bench Formula, which has been approved by this Court in The Associated Cement Companies Ltd. Dwarka Cement Works, Dwarka vs Its Workmen and Another(1).
Both the parties have filed statements of calculations according to (1) 472 the said Formula.
The statements Exs.
M. 1 and M.2 filed by the Management represent the computation of available surplus for the years ended December 31, 1962 and 1963 respectively.
exhibit M. 1 is as follows : "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD.
Statement showing the computation of available surplus for the year ended 31st December, 1962 (Under L.A. T. Formula) Profit as per profit and loss Account6801756 Add: Provision for Bonus 1614000 Depreciation on Fixed Assets 1696481 Donations 107362 Additional Bonus for 1961 146000 3563843 10365599 .Less: Profit on sale of assets 1745426 8620173 Less Normal Depreciation and Shift Allowance1465812 7154361 Less: Tax Liability Profit as above 7154361 Less Development Rebate 586415 6567946 Income tax Liability at 50 Y. on Rs. 65534083276704 Income Tax at 25 % on Rs.145383635 65679463280339 Super Profits Tax on Rs. 6553408409158 3689497 Return on Capital employed Preference Share Capital 78 %.
on Rs. 60000046800 ordinary Share Capital 729000 6% on Rs. 12150000 Reserves employed in the business 4% on Rs. 469379 471787 3325545336244030 Available Surplus.
910331 Subject to claim for rehabilitation.
473 We have prepared the above statement from the audited accounts of the Company and is in accordance therewith.
The return on Capital and Reserves is as claimed by the Company.
Sd/Illegible Chartered Accountants." Similarly exhibit M2 regarding the year 1963 is as follows : "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD.
Statement showing the computation of available surplus for the year ended 31st December 1963 (Under L. A. T. Formula) Profit as per Profit and Loss Account 5239220 ADD : Provision for Labour Bonus 2245000 Depreciation on Fixed Assets 1733719 Donations 8804 Provision for Taxation 8110000 12097523 17336743 LESS: Profit on Sale of Assets 83093 Excess Provision of Electricity charges and interest written back 675184 758277 16578466 LESS: Normal depreciation and Shift Allowance 1647555 14930911 LESS Tax Liability Profit as above 14930911 Less Development Rebate 460548 14470363 Income tax Liability at 50% on Rs. 14455825 7227912 25 % on Rs. 145383635 Dividend tax 164025 Companies (Profit) Surtax Liability on Rs. 1445582 51786212 9181784 Return on Capital Employed Preference Share Capital 7 .8 % on Rs. 600000 46800 Ordinary Share Capital 6 Y. on Rs. 12150000 729000 Reserves employed in the business 4 % on Rs. 46937947 .1877518265331811835102
Available surplus 3095809 Subject to claim for rehabilitation.
474 We have prepared the above statement from the audited accounts of the company and certify that it is in accordance therewith.
The return on capital and reserves is, as claimed by the company.
illegible Chartered Accountants.
The Tribunal has accepted as correct the gross profits as given by the appellant in these, two exhibits for the two years in question.
Even though the Unions contested the return on Preference Share Capital at 7.8%, the Tribunal has rejected their objections.
it has held that under the Preference Share Regulations Act, the Company is bound to pay 7.8% on Preference Share Capital.
Ile Workmen did not raise any controversy regarding the return on Ordinary Share Capital at 6%.
The Tribunal, therefore, accepted the figures given in both Exs.
M. 1 and M. 2 and to the return of Ordinary Share Capital.
But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years.
It will be noted that neither in exhibit M. 1 nor in exhibit M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement that they are subject to a claim for rehabilitation.
The two points in controversy between the parties regarding these two years were (1) The claim for Return on Reserves and (2) Provision for Rehabilitation.
We will first take up the question regarding the claim of the appellant for return on Reserves.
In exhibit M. 1, the appellant has claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00 being the amount employed in business.
Similarly in exhibit M.2, for the year 1963, it had claimed Rs. 1877518.00, being 4% return on Reserves on Rs. 46937947.00, employed in the business.
The Unions contested the claim of the appellant on the ground that they are not entitled to any return on Reserves.
The appellant had filed two statements Exs.
Ml (a) and M.2(a) for the years 1962 and 1963 respectively, showing how the amounts claimed as Reserves employed in business have been arrived at exhibit M. 1 (a).
for the year 1962 is as follows THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD.
Year ended 31st December 1962.
Reconciliation of Capital employed in the business during the year ended 31st December.
475 "As at 31 12 1961: Fixed Assets and Capital Works 43139570 in Progress Investments 595216 Interest accrued on Investments 17477 Stores and Spare parts 6179042 Raw Materials 6886058 Process Stocks 5053558 Finished Stocks 1381082 Sundry Debtors 2473722 Advances 2768233 Balance with Railway and Excise Authorities 292529 Deposits 18993 68806470 LESS Sundry Creditors 7077709 Due to Directors 63744 Unclaimed Dividends 18257 Provision for Taxation 1057850 Proposed Dividends 1481400 Provision for Gratuity 1860431 Officer 's Retiring Fund 26764 (Fund loss investments) 11588155 57218315 LESS: Share Capital 12750000 Rs. 44468315" Exhibit M.2(a) for the year 1963 is as follows "THE BANGALORE WOOLLEN, COTTON & SUR MILLS CO. LTD.
Year ended 31st December, 1963.
Reconciliation of Capital employed during the year ended 31 12 1963.
As at 31 12 1962 45229453 Investments 548575 Interest accrued on Investments 8703 Stores and Spare Parts 6553343 Raw Materials 4701434 Process Stocks 7285534 Finished Stocks 1688931 Sundry Debtors 3429299 Advances 3165324 Balances with Railway and Excise Authorities 346450 .Deposits 24234 729811280 476 LESS: Sundry Creditors 7686123 Due to Directors 65278 Unclaimed Dividends 22837 Provision for Taxation 2305645 Proposed Dividends 1481400 Provision for Gratuity1 706251 Officers Retiring Fund 25799 (Fund less investments) 13293333 59687947 Less Share Capital 12750000 Rs. 46937947" It will be seen that the last figures shown in both the statements have been claimed by the appellant as Reserves employed in business for each of these two years.
The Tribunal after a reference to the evidence of the Char tered Accountant,, M.W.1, has held that the amounts which should have been used as Working Capital are those mentioned in Exs.
M.1(a) and M.2(a), less the fixed assets and capital works in progress.
The Tribunal has further held that the working capital cannot include fixed assets nor the capital works in progress, as they represent the funds required for day to day work of the Company.
According to the Tribunal these fixed assets have been accumulated over years and they cannot form part of the working capital.
However, the Tribunal accepted the claim of the appellant that the other items in Exs.
M.1(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc.
are the amounts available to be used as working capital.
On this reasoning the Tribunal held that in calculating the return on working capital, the amounts mentioned in exhibit
M.1(a) and M.2(a) less the amount sunk in fixed assets and working capital in progress, have to be deducted.
On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570, and fixed a sum of Rs. 1328745, as Reserves employed in business during the year ended December 31, 1962.
On this amount it allowed a sum of Rs. 53150/ as return on Reserves at 4% for the year 1962.
Similarly, for the year 1963, it deducted from Rs. 46937947 a sum of Rs. 45229423, and fixed a sum of Rs. 1708524/ as Reserves employed in business during that year.
On this amount it allowed Rs. 68340/ as return on Reserves at 4%.
Mr. Malhotra, learned counsel for the appellant, while accepting that the principle adopted by the Tribunal in this regard is 477 correct, contended that it had made a mistake incalculation.
According to the learned counsel, the claim musthave been allowed in the manner calculated by the appellant.
In this connection, the learned counsel pointed out that even in cases where the evidence regarding the utilization of Reserves as Working Capital as claimed by the Company, is not very satisfactory, this Court,, on the basis of the balance sheets, which indicated that some amount must have been used as working capital has allowed such a claim.
In this connection, he relied on Workmen of M/s Hindustan Motors Ltd. vs M/s Hindustan Motors Ltd., and Another(1) and Messrs. Aluminium Corporation of India vs Their Workmen (2).
We may straightaway say that these decisions do not assist the appellant.
In the case before us it is not necessary to do any guess work as the appellants wants us to do.
The appellant has filed statements showing how it has calculated the amount of Reserves utilized as working capital and we have to find out whether the calculations made by it are correct.
In fact, Mr. Malhotra has not been able to point out from the balance sheets, as to what amount, according to the appellant, can be considerd to have been used as working capital.
In the two decisions,, relied on by him, the company concerned was able to refer to the figures in the balance sheets from which this Court was able to draw a conclusion regarding the approximate amount that would have been utilized as working capital.
The position before us is entirely different.
On the other hand, Mr. Puri" learned counsel for the respon dents, referred us to the balance sheets for the years in question regarding the share capital of the company being shown as Rs. 12750000/ .
The counsel further pointed out that the said share capital must have been sunk in acquiring the fixed assets and for capital works in progress and, therefore, the Tribunal was justified in deducting the amount of fixed assets and capital works in progress shown in Exs.
M. 1 (a) and M.2 (a) from the total shown by the appellant in those statements.
The counsel further urged that in considering the claim for return on working capital two questions have to be kept in view: (1) Whether the Reserves were available, and if they were (2) whether they were used as working capital and if so what is that amount.
The Tribunal in our opinion, has correctly kept these two principles in view in arriving at the amount of Reserves used as working capital and on which a return is to be allowed.
We see no error committed by the Tribunal in the calculation made for arriving at the, Reserves which must have been used as working capital, especially as the evidence on the side of the appellant was very unsatisfactory.
Even the appellant has deducted the amount of share capital before (1) ; (2) 478 arriving at the final figures mentioned in Exs.
M.1(a) and M.2 (a).
But the appellant was claiming the whole of the final amount shown in these two statements as Reserves used as working capital, which it was not certainly entitled to in law.
We have already pointed out that the Tribunal has held that the working capital cannot include fixed assets nor the capital works in progress as it represents 'the funds required for day to day running of the Company.
The, Tribunal has further held that the appellant is entitled to deduct investments, interest accrued on ,investments etc.
which have been shown in Exs.
M 1 (a) and M.2(a) on the ground that they must be considered to be the amounts available to be used as working capital.
These findings have not been challenged by the learned counsel for the appellant.
The appellant has also filed details of Reserves employed in the business during the years ended 31st December, 1962 and 1963 as shown in Exs.
M. 1 (b) and M.2(b) respectively.
Even ,there the appellant has deducted the share capital before giving final figures.
Therefore, the contention of Mr. Malhotra that the Tribunal 'has committed a mistake in calculating the amount of Reserves used as working capital for these two years, cannot be accepted.
If so, it follows that the amount fixed by the Tribunal as return 'at 4% on Reserves used as working capital for these two years, is correct.
The second question that arises for consideration is the claim made by the appellant for provision for rehabilitation for the two years and which claim has been rejected by the Tribunal.
The claim made by the appellant for provision for rehabilitation for the year 1962 was Rs. 18030871.00 and for the year 1963 Rs. 18062336.00.
Thus the appellant was claiming for each year provision being made of more than a crore of rupees for rehabilitation.
The appellant has filed a chart exhibit M.8 giving the calculations for the year 1962, its claim for rehabilitation for Rs. 18030871.00.
If the claim for rehabilitation is accepted, then the result will be that there will be no profits at all from and out of which any bonus can be paid for the years in question.
The claim of the appellant has been opposed by Mr. I. N. Keshava, learned counsel for the first respondent and his contentions have been adopted by the counsel appearing for the other respondents Unions.
The claim of the appellant is opposed mainly on two grounds, namely, (1) that the appellant has no scheme for rehabilitation for the relevant years and (2) in any event there were huge Reserves available from which the, claim for rehabilitation can be easily met.
The Tribunal has rejected the claim for rehabilitation both on the grounds that the appellant 479 has no scheme for rehabilitation and that the rehabilitation claim can be adequately met with from the huge Reserves of nearly four crores of rupees that the appellant had.
It must be noted that Rehabilitation Reserve is a substantial item which goes to reduce the available surplus and as a result affects the right of the employees to receive the bonus.
Hence the employer will have to place all relevant materials and the Tribunal will have to scrutinize them carefully and to be satisfied that the claim is justified.
It is no doubt true that it is but proper in the larger interest of the industry as well as the employees that proper rehabilitation Reserve should be built up taking into consideration the increase in price in plant and machinery which has to be replaced at a future date and by determination of multiplier and its deviser.
It is also clear from the decisions of this Court that if a Company has no scheme for rehabilitation, then of course, its claim on that head must be rejected.
[vide Azam Jahi Mills, Ltd. vs Their Workmen(1)].
Further, since it is the employer who seeks replacement costs, it is for him to satisfy the Tribunal as to what will be the overall cost of replacement and in doing so, it is he who has to discharge, this burden by adducing proper evidence and giving other party an opportunity to test the correctness of that evidence by cross examination.
[vide National Engineering Industries Ltd. vs Its Workmen(2)].
It is also now well settled that in determining the claim of the employer for rehabilitation, two factors are essential to be ascertained, namely, (1) the, multiplier, and that has to be done by reference to the purchase price of the machinery and the price which has to be paid for rehabilitation or replacement; and (2) the determination of the deviser and that has to be done by deciding the probable life of the machinery.
[vide The Honorary Secretary, South India Millowners ' Association and others v The Secretary Coimbatore District Textile Workers ' Union(3) and M/s Gannon Dunkerley and Co. Ltd. and another vs Their Workmen(4)].
Mr. Malhotra, learned counsel for the appellant, very strongly relied on the statement exhibit M.S. as well as the evidence of M.W. 2, the Mill Manager and M.W. 3, the Assistant Officer, Efficiency Section of the Mill, in support of his contention that the appellant has a scheme for rehabilitation and that the claim made by the appellant for making provision for rehabilitation is proper.
The counsel also pointed out that the evidence of these two witnesses clearly establishes that most of the items of machinery have long out lived, their normal age of 25 years and (1) (2) [1968]1 S.C.R. 779.
(3) [1962] Supp.
2 S.C.R (4) A.I.R. 1971 S.C. 2567.
480 therefore they require replacement in order to ensure proper production.
The counsel further pointed out that the rejection by the Tribunal of the claim made by the appellant, on the basis that the life of the textile machinery is only 25 years, is not correct and that the view of the Tribunal that the normal age is more than 25 years is opposed to the decisions of this Court.
So far as the age of the machinery is concerned, it is no doubt true that in The Honorary Secretary, South India Millowners ' Association and others vs The Secretary Coimbatore District Textile Workers ' Union(1), this Court, after a reference to the evidence adduced confirmed the findings of the Tribunal that the estimated life of the textile machinery in question should be taken to be 25 years, but in the said decision itself it is observed ,is follows "We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties.
" But it is unnecessary for us to pursue this aspect further as we are disallowing the entire claim for rehabilitation.
Mr. Malhotra, also criticized the view of the Tribunal that in this case the evidence of the witnesses on the side of the appellant clearly shows that the machines are working very efficiently though they have been running for over 50 years.
On the other hand, the counsel urged that the principle to be borne in mind, when considering the claim far rehabilitation, is that the life of the machinery is the period during which it is estimated to work with reasonable efficiency and not the period during which it has actually been operated, that is, till it becomes too deteriorated for use.
No doubt the last proposition enunciated by the counsel in the abstract is correct; but the question is whether the appellant has discharged its burden of satisfying the Tribunal that it had a scheme for rehabilitation and whether it had placed the necessary mate rials for the purpose of working out the multiplier and the deviser.
Mr. Keshava, learned counsel for the first respondent, referred us to the written statement filed by one of the Unions, Benny Mills Labour Association, wherein it has specifically stated that the plant and machinery owned by the Mills are amongst the most modem, machineries and that no provision for rehabilitation is necessary.
The appellant, it is pointed out, in its reply statement did not controvert these averments.
EN en in the statements Exs.
M. 1 and M. 2, filed by the appellant, no claim for rehabilitation has been made.
He also referred to the evidence or (1) [1962] Supp. 2.
S.C. R. 926.
481 M.Ws. 2 and 3 and pointed out that their evidence does not show that the Company had any scheme for rehabilitation.
On these grounds, the counsel pointed out that the appellant has not placed sufficient materials before the Tribunal to sustain its claim for rehabilitation.
It must be emphasized that in dealing with the claim of an employer for rehabilitation, as pointed out earlier, the onus of proof is on the employer.
He has to prove the price of the plant and the machinery, its age, the period during which it requires replacement, the cost of replacement, the amount standing in the Debentures and Reserve Funds and to what extent the funds at its disposal would meet the cost of replacement.
If the, employer fails lo lead satisfactory evidence on these points, the result will be that the claim for rehabilitation will have to be totally rejected.
It is no doubt true that a chart exhibit
M. 8 has been filed by the appellant and M.W. 3, the Assistant Officer, Efficiency Section, has spoken regarding the same.
But he has admitted that the original quotations received from the dealers regarding the price of new machinery for the purpose of replacement have not been produced before the Tribunal.
He has further admitted that the appellant has not produced the letters written by it calling for quotations regarding the price of the machinery.
He has further admitted that no charts have been produced to show the value of the machineries in 1962.
The multipliers, according to this witness, have been adopted as advised by the appellant 's Legal Adviser.
It is clear from the above answers of the witness that there is no material placed before the Tribunal by the appellant from which the multiplier and deviser can be properly worked out for the purpose of considering the claim for rehabilitation.
In fact the Mill Manager, M.W. 2 has stated that the company has floated a debenture for 1 1/2 crore for buying new machinery.
This clearly shows that the appellant had no scheme for rehabilitation and that explains the reason why it had not made any provision for rehabilitation.
Mr. Malhotra, then urged that at any rate the Tribunal itself has proceeded on the basis that some amount for rehabilitation is necessary to be provided for each year.
Based on this observation of The Tribunal, the counsel pointed out that the appellant should be allowed at least the amount that it has actually spent for replacement of machineries in the years 1962 and 1963.
According to him a sum of Rs. 2619608 and Rs. 2124102 have been spent in the years 1962 and 1963 respectively for machinery and plant installed in those years.
In this connection he referred us to the balance sheet and profit and loss accounts for these two years and stressed that the Tribunal has committed an error in not 482 allowing at least these amounts by way of provision for rehabilitation.
it is no doubt true that these amounts are shown in the schedules to the balance sheets for the years concerned.
Admittedly, there is, no such claim made in the written statement filed by the appellant before the Tribunal.
When the Unions were contesting the claim of the appellant on the ground that it has no, scheme for rehabilitation and that it has not spent any amount by way of replacement of old machinery, it was the duty of the appellant to have made a proper claim and it should have adduced evidence regarding that aspect before the Tribunal.
Mere production of balance sheet and profit and loss accounts by themselves will riot entitle the appellant to sustain its claim for rehabilitation.
For all the reasons given above, it is clear that the Tribunal was justified in holding that the appellant has not been able to make out its claim for making provision for rehabilitation.
In this view the Tribunal was justified in rejecting this claim of the appellant.
We may also state that the Tribunal is also of the view 'that the appellant has large Reserves with which it can meet rehabilitation expenses of the machinery.
In this connection the Tribunal has also referred to the evidence on the side of the appellant, that even according to the appellant rehabilitation will have to be completed only within eight years from 1962 and that only a sum of rupees eighty lakhs will be required for each year.
On 'this reasoning the tribunal has held that this amount of rupees eighty lakhs can be easily met with from the large Reserves available with the appellant.
It is not necessary for us to consider this aspect further because we have already agreed with the findings of the Tribunal that the appellant has no scheme for rehabilitation and that it has not placed any satisfactory evidence before the Tribunal in support of its claim.
The last point that arises for consideration is regarding the available surplus for the years 1962 and 1963 as calculated by the Tribunal and the award by it of 1/3rd of the amount as additional bonus for the two years after deducting the bonus already paid by the appellant.
The Tribunal, after rejecting the appellant 's claim for rehabilitation and also allowing return on Reserves used as working capital in the manner, already referred to, had arrived at the available, surplus for the year 1962 in the sum of Rs. 2635914 and for the year 1963 at Rs. 4904987.
The appellant filed a statement exhibit M. 4 showing the Amount of bonus already paid for the years 1962 and 1963 to all employees drawing a total of Rs. 500/ and less per mensem.
From that statement it is seen that for the year 1962 it had paid a sum of Rs. 1441455 and for the year 1963 a sum of Rs. 1960795.
On the basis of the available surplus worked out for the years 1962 and 1963, the balance 483 available surplus after deducting bonus already paid will be as follows: 1962 Rs. Available surplus as worked out by the Tribunal2635914 Amount already paid as bonus by the appellant1441455 Balance . .
1194459 1963 Available surplus as worked out by the Tribunal4904987 Amount already paid as bonus by the appellant1960795 Balance .
. 2944192 What the Tribunal has done is to distribute 1/3rd of the, amount shown as balance above, for each of the years as additional bonus.
That results in the workmen getting Rs. 398153 representing 25 days basic wages as additional bonus for the year1962.
Similarly, the workmen get Rs. 981397 representing two months basic wages as additional bonus for the year 1963.
Therefore, it will be seen that the total bonus thatthe workmen will get for each of the years will be as follows 1962 Rs. 1.
Amount already paid by the appellant 1441455 2.
Additional amount awarded by the Tribunal 398153 TOTAL . .
1839608 From the available surplus of Rs. 2635914 in 1962, the work men will get a total sum of Rs. 1839608 as bonus for that year which works out to more than 60% of the available surplus.
Similarly for the year 1963 the figures are as follows 1963 Rs. 1.
Amount already paid by the appellant 1960795 2.
Additional amount awarded by the Tribunal981397 TOTAL .
2942192 From the available surplus of Rs. 4904987 in1963, the workmen will get a sum of Rs. 2942192 for that year which works out more or less about 60% of the available surplus, falling short by a sum of Rs. 800/ .
484 Mr. Malhotra, learned counsel for the appellant attacked the method of calculation adopted by the Tribunal.
According to him the Tribunal should not have fixed more than 60% of the available surplus as bonus payable for a year.
On the other hand, the amounts of bonus now awarded by the Tribunal and already paid by the appellant exceed 60%.
In our opinion, there is considerable force in the contention of the learned counsel.
The available surplus, as found by the Tribunal for the year 1962 is Rs. 2635914.
Working out roughly 60% of this surplus to be distributed as bonus to the workmen, the amount of bonus will be about Rs. 1581600.
The appellant has admittedly paid a sum of Rs. 1441455.
The balance that the workmen will be entitled to will be Rs. 140145.00, whereas the Tribunal has directed the appellant to pay for this year by its Award a sum of Rs. 398153.
The award of this amount is not .justified.
So far as 1963 is concerned, the available surplus as found by the Tribunal is Rs. 4904987.
60% of this available surplus, to which the workmen will be entitled to will be Rs. 2942992.
On the other hand, the total amount that the workmen will get as per the award including the amount already paid by the appellant as bonus is Rs. 2942192.
The appellant will have to pay only an additional sum of Rs. 800/ to make up 60%.
There is no appeal by the Unions and therefore, the bonus awarded for the year 1963 does not require any interference.
In allocating the available surplus between the company and the workmen, it has been held by this Court that it will be equitable if roughly 60% of the surplus is distributed as bonus to the workmen and the Company is left with the remaining 40%.
The Company will get in addition to this 40%, the benefit of the Income tax rebate on the 60% bonus payable to the workmen.
[vide M/s. Gannon Dunkerley and Co. Ltd. and another vs Their workmen(1)].
We have 'adopted the same principle in the case on hand.
To conclude the Award of the Industrial Tribunal in A.I.D. No. 6 of 1966 is set aside and Civil Appeal No. 1291 of 1967 is allowed.
There will be no order as to costs.
The Award of the Industrial Tribunal in A.I.D. No. 8 of 1966 is modified to the following extent: For the year 1962 the appellant will be liable to pay as additional bonus only a sum of Rs. 140145 instead of a sum of Rs. 398153 as directed by the Tribunal in the Award.
To this extent Civil Appeal No. 1292 of 1967 is allowed in part.
In other respects, it is dismissed.
There will be no order as to costs.

summary:
The appellant company was making two payments of bonus every year one for the half year ending 30th June and the other for the half year ending 31st December.
The payment was on the basis of profits earned by it and the payment was not a condition of service and had nothing to do with any custom or festival.
When the came into force, the appellant issued a circular that as bonus was payable under law only within a period of 8 months from the end of the, accounting year (the appellant 's accounting year was the calendar year), no bonus was payable for the accounting year 1965 until the accounts for the year are closed, and the announced payment of one month 's basic wages as advance against wages for the half year ending 30th June 1965.
The questions, (1) whether the appellant was justified in announcing the payment as advance against wages instead of as advance bonus, and (2) whether the respondents were justified in claiming bonus for the years 1962 and 1963, in addition to what had already been paid by the appellant were referred to the Industrial Tribunal.
On the first question the Tribunal held.
that the appellant was not justified in announcing the payment towards advance wages and directed the appellant to pay profit bonus in two installments one as advance against the final declaration of bonus, and the balance, if any, as the second instalment.
On the second question the Tribunal held that the question of bonus payable was to be calculated in accordance with the Labour Appellate Tribunal Full Bench Formula approved in Associated Cement Companies Ltd. vs Workmen, r 19591 S.C.R.25; that in calculating the return on Reserves the claim of the appellant to include in the working capital the amounts sunk in (a) fixed assets and (b) capital work in progress should be disallowed; and that the claim of the appellant for a provision for rehabilitation should be rejected.
In appeal to this Court.
HELD : (1) (a) Under the Act, bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross profits determined at the close of the accounting year.
The Act makes provision as to how the gross profits, available and allocable surplus are to be calculated, and section 19 prescribes 8 months from the close of the accounting year as the period within which the bonus was to be normally paid.
The scheme of the Act shows that a claim for bonus can be made only after the close of the accounting year, because., gross profits and the available and allocable surplus can be worked out only at the end of the accounting year and not earlier, whereas the direction given by the Tribunal requires the employer to make two computations at the end of each half year.
[469 E H; 470 A B] 463 (b) The direction given by the Tribunal making it obligatory on the management to make half yearly payments of bonus apart from being opposed to the scheme of the Act, runs counter to section 19.
Under the section, whether it is the minimum bonus of 4% under section 10 or the maximum bonus of 20% under section 11, they have to be paid only within a period of 8 months from the closing of the accounting year.
[470 C E] (c) Section 17(b) is an enabling section in favour of the employer in that it visualizes a situation when he may have paid during the accounting year a part of the bonus payable under the Act, before the date on which such bonus becomes payable.
If the payment was by way of profit bonus, he is entitled to deduct it from the final amount that may be payable under the Act.
But that provision does not give a right to an employee to claim payment of bonus by way of part payment during the currency of the accounting year.
Therefore, the mere fact that the appellant has been making payments on previous occasions half yearly, does not confer a right on the employee to have such payments by way of bonus in the same manner after the Act has come into force.
Hence, the Tribunal had no jurisdiction to give a direction to the appellant to, pay bonus at the end of each half year.
[471 A C] (2) (a) In considering the claim for return on working capital two questions have to be kept in view : (i) whether Reserves were available, and (ii) whether they were used as working capital, and if so, what was, the amount used.
1477 GI In the present case, the Tribunal has correctly kept the two principles in view in arriving at the amount of Reserves used as working capital and on which a return is to, be allowed.
The balance sheets of the appellant do not have any figures from which the Tribunal would be able to, draw a conclusion.
The Tribunal, therefore, while accepting the statements.
of account filed by the appellant for the two years, for showing how it had calculated the amount of Reserves utilized as working capital, held, that the two items should be deducted; because, working capital represents the funds required for day to day Work of the company and cannot include,, fixed assets, and the capital works in progress.
[477 G H; 478 A C] Workmen of M/s. Hindustan Motors Ltd. vs M/s. Hindustan Motors Ltd. & Anr. ; and M/s. Aluminium Corpn.
of India vs Workmen, , referred to.
Therefore, the contention that the Tribunal had committed a mistake in calculating the amount of Reserves used as working capital cannot be accepted.
[478 D E] (b) A company should build up rehabilitation reserve taking into consideration the increase in price in plant and machinery which has to be replaced at a future date.
But since it is a substantial item which goes to reduce the available surplus and as a result, affects the right of the employees to bonus, the employer will have to place all relevant material, before the Tribunal for its scrutiny.
The burden of proof is on the employer to prove the price of the plant and machinery, its age, the period during which it requires replacements, the cost of replacement, the amount standing in the Debenture and Reserve Funds and to what extent the funds at its disposal would meet the cost of replacement.
If the employer fails to lead satisfactory evidence on these points his claim for rehabilitation will be rejected.
Also, if a company has no scheme for rehabilitation then its claim on that bead must be rejected.
[479 A E; 481 B C] 464 Azam Jahi Mills Ltd. vs Workmen, and National Engineering Industries Ltd. vs Workmen, ; , referred to.
in the present case, the averment in the written statement of the respondents, that the appellant 's machinery was among the most modern and no provision for rehabilitation was necessary, was not controverted by the appellant.
The balance sheets for the two years showed that some amounts were spent on machinery.
But when the respondents were contesting the claim of the appellant on the ground that it had no scheme of rehabilitation and that it had not spent any amount by way of replacement, it was the duty of the appellant to have made a proper claim and to adduce evidence regarding that aspect.
Mere production of balance sheets and profit and loss accounts and adding a note in the statements, of account filed that the figure is 'subject to claim for rehabilitation ' will not entitle the appellant to sustain its claim for rehabilitation.
Moreover, the appellant had large Reserves to meet rehabilitation expenses.
It had also 'Boated a debenture for buying new machinery.
[481 G H; 482AC, D] Further, in determining the claim of an employer far rehabilitation, two, factors are essential to be ascertained, namely, (i) the multiplier, which has to be done by reference to the purchase price of the machinery and the price which has to be paid for replacement; and (ii) the divisor, which has to be done by deciding the probable life of the machinery.
[479 E F] Honorary Secretary, South India Millowners ' Assn.
vs Secretary Coimbatore District Textile Workers ' Union, [1962] Supp. 2 S.C.R. 926 and M/s. Gannon Dunkerley & Co. vs Their Workmen, A.I.R. 1971 S.C. 2567, referred to.
In the present case no material was placed before the Tribunal by the appellant from which the multiplier and divisor can be properly worked out.
[481 E F] Therefore, the Tribunal was justified in holding that the appellant had not made out its claim for making provision for rehabilitation.
[482 C D] (c) The equitable method of allocating the available surplus between the company and its workmen is to distribute 60% as bonus to the workmen leaving the remaining 40% to the company.
In the present case, the method of calculation adopted for 1962, by the Tribunal, shows that the amount of bonus awarded by the Tribunal together with the amount already paid by the appellant exceeded 60% and the award of the excess was not justified.
[484 A C] M/s. Gannon Dunkerley & Co. vs Their Workmen, A.I.R. 1971 S.C. 2567.
referred to.