DELHI CLOTH & GENERAL MILLS CO. LTD. versus WORKMEN

Citation: [1972] 1 S.C.R. 594 · Decided: 03-09-1971 · Supreme Court of India · Bench: G.K. MITTER, C.A. VAIDYIALINGAM, P. JAGANMOHAN REDDY · Disposal: Appeal(s) allowed

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Judgment (excerpt)

594 
DELHI CLOm & GENERAL MILLS CO. LTD. 
v. 
WORKMEN 
September 3, 1971 
A 
[G. K. MITTER, C. A. VAIDIALINGAM AND P. JAGANMOHAN 
B 
REDDY, JJ.J 
Payment of Bonus Act, 1965, s. &-Whether on the facts and circums-
tances-of the case, the workers are entitled to higher bonus. 
The appellant is a public limited company owning various industrial 
units including the .Delhi Cloth Mills (0.C.M.) 
and 
the 
Swatantra 
Bharat Mills (S.B.M.). 
Although separate balance-sheet and profit and 
loss accounts were prepared for each of these two mills, their workmen 
have always been paid bonus calculated on the basis of pooled profits of 
the two units treating them as one unit. 
Disputes and differences having 
arisen as regards payment of bonus between the workers of these 
two 
units, the following questions were referred to the Tribunal for adjudica-
tion. 
(i) Whether in calculating the bonus table for the accounting year 
in question, the allocation separately made by the 
company 
towards 
capital and reserves of the two units (0.C.M. and S.B.M. units) is fair 
and reasonable. 
(ii) Whether workmen of these two mills are entitled to bonus at a 
higher rate for the said accounting year. 
On the basis of documents filed 
both by the management and the 
workers, it appeared that according to the company, direct taxes which 
have to be deducted for computation of allocable surplus for payment of 
bonus was much higher, while according to the workers, 
direct taxes 
should be much less. If the computation of the management were to be 
accepted, the rate of bonus to each employee would remain at 7.30 per 
cent, while according to workers, the rate of bonus would be I 6.64%. 
The Tribunal however, gave its awa-rd in favour of the workers. Allowing 
the appeal, 
· HEW : The direct taxes under s. 6( c) of the Bonus Act were proper-
ly quantified by the Appellant company in their calculation and the rate 
of Bonus to each employee is 7.3 I per cent of their annual wage bill and 
not 16.64 per cent as claimed by the workers. 
The bonus Act, being a 
complete Code, the provisions thereof must have effect of their own force. 
So far as the two mills are concerned, the gross profits must be computed 
in terms of the second schedule to the Act and the available surplus men-
tioned in s. 5, in terms of ss. 6 and 7 of the Act. 
Where a branch or 
undertaking has to be taken as an Establishment under the proviso to s. 2 
for the purpose of the Act, the gross profits, prior cbar~es, the available 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
DELHI CLOTH v. WORKMEN (Mater, !.) 
595 
surplus and the allocable surplus have all to be found 
out 
notionally 
applying the fiction to t!le bran~h or. establishment. When the fiction is 
to have effect with regard to all other matters, it is not possible to hold 
that for the purpose of computation of direct tax, it has to be given ~ 
go-by and the actu3:1 realities of the situation taken note of only in respect 
of Jhe amount of tax payable under the Income-tax Act for all the estab-
lishments_ which have to s_uffer taxation together and thereby to displace 
the fictional or"-notional_ \iability. [604 C, 605 E. 607 A] 
Metal Box Co. v. Workmen. [1969] 1 S.C.R. '750, Shree Meenaksfri 
Mills'!'· Their Workmen. 
[1958} S.p.R. 878, M/s. Tulsidas K]lemji 
v. 
Their Workmen. 
[19631 1 S.C.R. 
675 and M /s. Al/(Jy ·Sffri 1'rojecr v. 
The Workmen, [1971] 1 S.C. Cases 536, referred to. 
CIVIL APPELLATE JURISDICTION ; Civil Appeal No. 622 of 
1967. 
Appeal by special leave· irol)l the award dat~ February 28, 
1:967 of the Delhi Administration Special Industrial Tribunal, 
Delhi :i,h Reference No. 53 of 1966 .. 
G. B. Pai, D.R. Thadani and S.S. Sharma, for the appelli!Ills. 
M. N. Phadke, S. S. Khanduja, V. P. Ko,hli and Lalita Kolili, 
for respondents Nos. l(c) and 3(c)(i). 
M. K. Ramamurthi and 
Vinee~ Kuniar, for the respondent 
No. l(a). 
0. P. ~harma and K. S. Suri, for respondent No. 1 (b). 
The Judgment of the Court was delivered by 
Mitter, J. 
The only point of dispute between the parties 
to this appeal by special· leave, from an ord~r of an Industrial 
Tribunal relates to ·the quantum of direct taxes- deductible under 
s. 6 of the Payment of Bonus Act> .,1965. 
The appellant is a public µnlited company owning and run-
ning various· industrial units situate at different places in India. 
These are engaged in the manufacture of different 
kinds 
of 
articles such as ·cotton textiles, artificial silk fabric

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