NATIONAL ENGINEERING INDUSTRIES LTD. versus ITS WORKMEN

Citation: [1968] 1 S.C.R. 779 · Decided: 06-10-1967 · Supreme Court of India · Bench: J.M. SHELAT · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

• 
NATIONAL ENGINEERING INDUSTRIES LTD. 
A 
v. 
ITS WORKMEN 
October 6, 1967 
IJ. M. SHELAT AND V. BHARGAVA, JJ.J 
Industrial Dispute-Bonus-Calculation of rehabilitation cost of 
machinery-Use of multiplier whether necessary when relevant 
quotations of price of machinery available-Item-wise and block-wise 
estimate when desirable-Need of araduated divisor when machinery 
installed over several years-Interest allowable on paid up capital, 
rate may be adjusted reasonably-Life of machinery, estimate of-
Laches may be taken into account in considering claim for bonus. 
B 
c 
The workmen of the appellant company demanded bonus for 
the years 1956-57 to 1959-60. The Tribunal disallowed the claim for 
195&-57 on the ground that it was belated and allowed the demand 
for the rest of the years 1957-58 to 1959-60. In working out the avail-
able surplus for distribution as bonus the Tribunal in general followed 
the Full Bench formula evolved by the Labour Appellate Tribunal. 
Against the Tribunal's award the company as well as the workmen D 
appealed to the Supreme Court by special leave under Art. 136 of 
the Constitution. Both sides raised contentions with regard to the 
rehabilitation allowances in respect of plant and machinery for the 
three years in question and the method followed by the Tribunal in 
calculating them. The main question for decision arose out of the 
company's contention that since it furnished quotations for all 
machinery including the old machinery, the Tribunal ought to have E 
accepted those quotations as equivalent to replacement cost as it 
did in the case of new machinery instead of adopting the notional 
method of working out multipliers and then arriving at replacement 
cost by multiplying that multiplier with the estimated cost to the 
sellers. 
HELD: (i) The multiplier is at best an approximation arrived 
at from the trend of price level during the ascertained intervening 
period. But when the cost of replacement is ascertained from quota- F 
tions of prices for the year of replacement ,such cost is more accu-
rate than a notional one worked out from the multiplier. It is 
therefore not always necessary to arrive at a multiplier for estimat-
ing the probable cost of replacement. (789 C-D]. 
In the present case since the Tribunal accepted the quotations 
and worked out the multiplier in the case of new machinery by 
dividing the quotations by the original cost it ought to have G 
followed the same method in the case of old machinery as it had 
before it the cost of the old machinery as new and the cost of re-
placement, both unchallenged by the Union. If the rehabilitation 
cost was calculated in this manner there would be no available 
surplus with the company and hence no bonus would be payable. 
(787 H-788A; 787 A-B]. 
(ii) It is well established that in the case of old machinery the 
employees cannot insist that such machinery should be replaced by B 
old machinery. For working out the rehabilitation oost of such 
machinery it is the cost of new machinery that is to replace the old 
which has to be taken into consideration. (787 F-GJ. 
(iii\ Whenever it is possible to estimate itemwise the probable 
cost of machinery in the year of replacement such a method is not 
only permissible but is more desirable. The blockwise estimate bas 
779 
780 
SUPBBKil COUBT BllPOBTS 
[1968] l s.c.B. 
A to be resorted to when itemwise estimate is not possible as when 
the industry owns several factories and the number of plant and 
machinery is so large that it becomes difficult to make an estimate 
of replacement cost itemwise. [789 B-C; 788 G-H]. 
(iv) The contention on behalf of the workmen that the replace-
ment cost should be worked out on the basis of the price level dur-
ing the bonus year could not be accepted. The test is the probable 
B cost of replacement when rehabilitation becomes due. If the bonus 
year and the year of rehabilitation coincide, the price level during 
the bonus year would nci doubt pe the relevant basis. But when they 
do not coincide and the due year of rehabilitation is the year beyond 
the bonus year that which is relevant is the probable cost of replace-
ment during that year. [790 H; 791 A-B]. 
0 
(v) Ordinarily, the Tribunal has to satisfy itself that no coat 
of expansion is injected in the rehabilitation cost. In the present 
case, however, it did not appear from the record that any questiOll 
of expansion arose as the Union accented the quotations as equiva-
lent to t

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