WORKMEN OF M/S. HINDUSTAN MOTORS LTD. versus M/S. HINDUSTAN MOTORS LTD., & ANR.

Citation: [1968] 2 S.C.R. 311 · Decided: 21-11-1967 · Supreme Court of India · Bench: M. HIDAYATULLAH · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A 
WORKMEN OF M/S. HINDUSTAN MOTORS LTD. 
v. 
M/S. HINDUSTAN MOTORS, LTD., & ANR. 
Norember 2 ~, 1967 
8 
!M. HIDAYATULLAH, V. BHARGAVA AND C. A. VAID!ALINGAM, JJ.J 
c 
D 
E 
F 
G 
H 
Industrial Dispute-Bo1111s-Rehahilitatio11 surpl;1s, 
calcu/!:1tio11 
oj-
Age of machinery-Multiplier-Deductions to be made-Depreciation-
Returns 011 H-·orkine caoita/ nr,d oai-1 uo 
canital--E-ttr-anC'OU'i 
i11con1c-
lnterest on fixed deposits-Home delivery 
commission paid by foreign 
collaborator. 
The workmen of the respondent company raised an industrial dispute 
about bonus claimed by them for the year 
1960-61. 
The 
Industrial 
Tribunal applying the Full Bench Formula held that the sum needed for 
rehabilitation of machinery exceeded the surplus otherwise available and 
therefore no bonus was payable. 
Against this decision of the Tribunal 
the workmen appealed to this Court and raised various objections as ft) 
the manner in which the available surplus was calculated by the Trihu-
na I. 
HELD : (i) On the facts and .the evidence produced in the case the 
life· of the respondent company's machinery should be taken at an average 
of 15 years if the machinery is worked in two shifts. and 10 years if it 
is ·worked in three shifts. 
The artificial rule laid down in the Income-tax Act for calculation of 
notional depreciation can provide no criterion at all fot determining the 
life of the machinery, and the Tribunal committed an error in proceed-
ing on that basis. [319 HJ 
The life Of machinery taken in other ca.s>~s is also net a correct basis 
for fi.xing tLJ· life of machinery in a particular case. 
Various factor< 
come _in that affect the useful life of a machinery. Factors such as the 
qualitv of the material used in the machines, and the nature of the mate-
rial on which the machines are to operate, very materially affect their life. 
Funher the life. of a machine will also depend on the manner in which 
it is handled in a particular factory. 
Consequently the correct principle 
is to determine the life of machinery in each case C'ln ·the evidence adduced 
by the parties. [3 I 9 E-F: 320 DJ 
Further what has to be determined is the useful life of the machinerv 
rather than itS ecoilomic life. 
In fact one of the very major considera-
:ions which should be taken into account is the actual P'"actice of the 
manufacturers using the machinerv and, if the evidence be available, to 
find out hov.' long the manufacturers continue to use the machinery as a 
rule. 
r324 D~Hl 
· 
The fact that in the Full Bench Formula the br<'kdown value of 
machinery is taken at 5 % is certainly an aspect to be taken into account. 
but it cannot be accepted that a machinery should be deemed to have 
useful life until it reaches the st~ge of havin.I! a breakdowr valu·e of 5%-
No such ahsolut~ rule can be inferred. f328 Al 
The Tribunal was wrone in not takinl! into account machinerv instal-
led during- the b_onus year itself for making provision for rehabilitation. 
1f any machiricry is iristalk.J in th'? bonus yea.r. the company. would h-: 
312 
SUPREME. COURT 
REPORTS 
[I 968) 2 S.C.R. 
justified in claiming that it must immediately start making provision 
for 
A 
1" ~ohabili'tation, though the period for rehabilitation of that machinery 
would only start at the end of ·th·o bonus year. [330 A-Cl 
(ii) The multipliers given by the company in the schedule originally 
submitted by the company which were not objected to by the workers 
\Vere the correct basis for calculation of the rehri.bilitation ·cost and the 
Tribunal should not have departed' from them. 
There was no justifica-
tion for taking an average of the multipliers submitted at first and those 
B 
submitted thereafter in a second schedule. 
The Tribunal also was not 
justified in reducing the multiplier~ on the ground that the new machines 
which would be purchased to replace the original ones would necessarily 
have more productive capacity. There was no material .at all from which 
the Tribunal coulcL justifiably have inferred that the increase in produc-
tion would be so material as to attract the principle of 
apportionment 
Iafd down by this Court in the case of the Associated Cenu~nt Co1npanies 
Lid. [331 A-F; 332 D-E] 
C 
(iii) Io calculating the rehabilitation requirement for the machinery 
the depreciation pro\ision .made in accordance with the principles of con1-
mercial accounting has to be deducted from the amount that would be 
required to purchase the new machinery for repl

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