MANAGEMENT OF CENTRAL COAL WASHERY versus WORKMEN & ANR.

Citation: [1978] 3 S.C.R. 1023 · Decided: 21-07-1978 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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1023 
MANAGEMENT OF CENTRAL COAL WASHERY 
v . 
. WORKMEN & ANR. 
July 21, 1978 
IP. N. BHAGWATI AND V. D. TULzAPURK.\R, JJ.] 
Paynient of Bonus Act, 1965, S. 16(1) (a) and Explanation II thereto, inter-
pretation of-Meaning and connotation of the word 'Profit' frorn the establish-
ment within the meaning of clause (a) of Sub-section (1) of S. 16. 
The appellant organisation, set up as an independent organisation separate 
from the Hindustan Steel Ltd. to manage the three Coal V/asheries at Dugda, 
Bhojudih and Patherdih, maintained separate accounts in respect of its esta-
blishment and also prepared a separate balance sheet and profit and loss account 
showing the aggregate financial result of the operation of these three coal 
washeries. 
The appellant adopted the straight line method of calculation of 
depreciation with the result that the Balance-sheets and Profits nnd Loss accounts 
. for the years 1964-65, 1965-66 to 1968-69 sho\ved profits. 
On this basis the 
Workmen of the Bhojudih Coal Washery pressed their claim for bonus from 
the year 1964-65. 
The appellant disputed the claim of the workmen and con-
tended that by reason of sub-section ( 1) of s. 16, the workmen were not entitled 
to be paid bonus under the Act. The industrial dispute arising out of the claim 
of the workmen \vas referred fo·r adjudication and the 'fribunal took the viev/ 
that since the appella•nt denied from its three coal v.-·asheri:!s in the year 1964· 
65, the \VOrkmen were entitled t_o be paid bonus under the Act from that year, 
but it was held that since the profits were inadequate lo warrant payment ot 
a larger bonus, the workmen were entitled to receive the n1inimum bonus of 
4% of the wages as provided in section 10. 
The Tribunc.1 thus awarded the 
minimum bonus at 4% of the wages to the workmen of the Bhojudh Coal 
Washery for the years 1964-65 to 1968-69. 
The appellant being aggrieved by the award preferred an appeal to this 
Court after obtaining special leave. 
During the pendency of the appeal a 
settlement was arrived at for ex-gratia payment of 4% of the wages for the 
years 1965-66 to 1967-68. 
In accordance with the terms of this settlement 
~ 
every \vorkrnan whether a member or not of the Hindustan Coal Washeries 
Workers' Union received payment. 
The appellant did not, therefore, press the 
appeal, and it \\'as dismissed. Though the appeal was dis1nissed and the award 
of the Industrial Tribunal which was in favour of the work1nen stood in tact, 
another union called the Hindustan Steel Coal Washeries Employees Union 
which is a minority Union filed C.M.P. No. 3382/78 claiming that the workmen 
represented by it were not party to the settlement and therefore, it was not 
_ 
binding ::ind prayed for setting a.side the order of dismissal of the appeal and 
rehearing of the appeal. 
Allowing the appeal and answering against the respondenls, the Court 
A 
B 
c 
E 
F 
G 
HELD : ( 1) Where an establishment is newly set-up, the "'·orkmen employed 
in such establishment are entitled to be paid bonus under the Act only from the 
accounting y·ear in which the employer derives profit from such establishment 
or from the sixth accounting year folJowing the accounting year in which the 
employer sells goods produced or manufactured by him from such establishment 
whichever, is earlier. 
So long as the employer does not start deriving profii 
from the establishment, he is exempt from liability to pay bonus to the workmen 
under the Act. 
But, even if he· is not able to derive profit from the establish-
ment, he does not enjoy perpetual immunity, 
because in any event from the 
H 
sixth . accounting year following the accountinj?" year in which he starts selling 
goods produced or manufactured by him, he becomes liable to pay bonus to 
tile workmen. [1027 D-EJ 
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B 
c 
D 
F 
1024 
SUPREME COURf REPORTS 
[1978] 3 S.C.R. 
i 
(2) The word "profit" within the ikeaning of clause (a) of sub-section (1) 
of S. 16 must be construed according! to its ordinary sense·-a sense in which 
it is understood in trade and industry because the rationale behind clause (a) 
of sub-section (1) of section 16 is that it is only when the employer starts making 
profit in the commercial sense that he should become liable to pay bonus to 
the workmen under the Act. Now profit in the commercial sense can be ascer-
tained only after deducting depreciation and since there 3re several 
methods' 
of computing depreciation the one adopted by the emplo

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