THE EMPLOYERS OF AZAM JAHI MILLS LTD. versus THE WORKMEN

Citation: [1967] 2 S.C.R. 520 · Decided: 30-01-1967 · Supreme Court of India · Bench: M. HIDAYATULLAH · Disposal: Disposed off

Judgment (excerpt)

THE EMPLOYERS OF AZAM JAHI MlllS LTD. 
A 
v. 
THE WORKMEN 
(January 30, 1967) 
[M. H!DAYATULLAH, V. BHARGAVA A~D G. K. M1nrn. JJ.] 
lndust~ial Dispute-Bonus agreed to be paicl 011ly on availabi<· surplus 
-:--calcu/atron of sru J!fu$--Whe1IJ.!r gratuity and retrenchment co11Jpensa-
t1on 10 be deducted "J one year or spread o'•er 1nore-Whe1her deduction 
of a1nount i11 respect of idle rnachinery from notional amount uf normal 
depreciation justified-Rehabilitation clrarges-Nllture of evidence r~quir­
ed to illJtify deduction. 
The appellanls and their workmen had entered into an agreement in 
February 1960 which provided that a claim for bonus would only arise 
tf there should be an available surplus after malting a provision for all 
lbc prior charges including a fair return on paid up capital and on reserves 
utilised towards the working capital in terms of the .Full Bench formula 
In a dispute between the appellants and their workmen relating to the 
paymenl of bonus for the years 1960-61 and 1961-62, the lnd11<trial Tribu-
nal found lhat !here was an available surplus for the first year but none 
!or the second. and therefore directed payment of bonllS of one week's 
wages to all the workmen over and above the two weeks' bonus which 
fhe employees had agreed to pay irrespeclive of any profils made hy the 
company. 
In lhe appeal before this Coun it was coniended, inter a/ia, on behalf 
of the appellants 1ha1 in the calculation of the ~oss profits, the entire 
amount in rcs~ct of gratuity and retrenchment paid by the company dur-
ing lhe year 1960-61 should have been excluded as it had to be paid out 
of the profits of lhc company curing the relevant year and lhe Tribunal 
had wrongly de~~ided that it should be spread over five years; that in cal-
culaling prior charges, the Tribunal had wrongly deducted a sum Qf 
Rs. I.SO Jakhs in respect of idle machinery from the figure of notional 
normal depreciation ancl some of the olher prior charges were not dealt 
with in accordance with the terms of the agreement between the parties; 
and that if calculation~ were made on a correct basis there 
would 
be 
no available surplus. 
HELD : On a recalculation of the gra<s profits and prior charges. that 
the Trib11nal was not right in finding that there wu an available surplus 
for calculation of bonus for the year I 960-61. [527 A-Bl 
Graluity would have to be paid year afler year to workmen who rellre 
or leave the company's service in term'\ of the scheme of gratuity and 
retrenchment compensation may have to be paid in any year if there be 
modemisalion of the plant or for any other reason ·which renders any 
workmen surplus. The Tribunal's decision that the amount on this aeeo11nt 
should be ~pread over five years was therefore erroneous and the ,.-ass 
profit as calculalcd by the appellants was the correct figure. [523 A-CJ 
Britannia Engineering Co. V. Tlieir Workmen (1965] n L.L J. 
144; 
ref'errcd to. 
The depreciation taken into account bein!l. in accordance with well 
settled principlC", a nolional amount of normal depreciation, the Tribunal 
was not juslifled in deducting lherefrom a fllnher sum in respect of idle 
r.iachiner. [523 H; 524 C-D] 
B 
c 
D 
E 
., 
G 
ff 
A 
B 
c 
D 
E 
F 
G 
H 
AZAM JAHI MILLS v. WORKMEN (Mitter, J.) 
521 
U.P. Electric Supply Co. Lta. v. Their Workmen [1955) II L.L.J. 431; 
Surat Electricity Compa11y's Staff Union v. Surat Electricity Co. Ltd. 
[1957) II L.L.J. 648; The Associated Cement Companies Ltd. v. 
Its 
Workmen [1959] S.C.R. 925, 960; referred io. 
On the facts, thore was sufficient evidence to show the need for rehabi-
litation and there was no force in the contention that there •.vas no. basis 
for calculation of the provision for rehabilitation because no rutperts were 
examined before the Tribunal. [526 CJ 
MI s Peirce Ledie & Co. Ltd. Kozhikode v. Their Workmen [1960) :\ 
S.C.R. 194 Aluminium Corporation of India, Ltd. v. Their 
Workmen, 
(1963}-II L.L.J. 629, distinguished. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 971 and 
972 of 1965. 
Appeals by special leave from the Award dated December 21, 
1963 of the Industrial Tribunal, Andhra Pradesh, Hyderabad in 
Industrial Dispute No. 28 of 1963. 
A. K. Sen, R. V. Pillai and B. K. Seshu, for the appellant (in 
C.A. No. 971 of 1965) and the respondent (in C.A. No. 972 of 1965) 
M. K. Ramamurthi, for the respondent (in C.A. No. 971 of 
1965) and the appellant (in C.A. No. 972of1965). 
The Judgment of the Court was del

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