the Honorary Secretary, South India Millowners' Association and Others v. the Secretary, Coimbatore District Textile Workers' Union

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeals Noe. 419of1960, 302of1959and159of1961, !i211 Appeals from the Awards dated September 5, 1958, September 15, 1958 and January ll, 1960, of the Industrial Tribunal, Madras, in I.D. Nos. 13 of Hl58, 32 of l9fi7 and 47 of 1959 respectively. A.V. Viswanatlui Sastri and G. Gopalakrishnun, for the appellants. .B.R. Dalia and Rame,shwar Nath, for respondent No. l (in Appeals Nos. 419 of 60 and 159 of 61). M.K. Ramarnurthy and T.S. Ve:nkataraman, for respondent No. 2 (in C.A. No. 419 of 60) and respondents Nos. 2 and 4 (in C.A. No. 159 of Hl6l ). M.K. Rarnamurthy and Rarneshwar Nath, for the respondent (in C.A. No. 302 of 59) . 1962. February l. The Judgment of the Court was delivered by Thi Honaraty Secretory, South India Milt-owners' Association T~ 8ecrttt#y, Coimhator• District Textili Workeis'

Union GAJENDRAGADKAR, J.-These three appeals arise Gajendrafadkor J. out of an industrial dispute between the industrial employers who are the appellants and their respective workmen who are the respondents in respect of the latters' claim for bonus. They have been heard together because they raise some common questions of general importance. We would first set out briefly the material facts in the three respective· appeals. The Honorary Secretary, The South India Millowners' Association, and other mills are the appellants in Civil Appeal No. 419/60. A dispute arose between 44 mills and their respective employees in regard to the bonus for the year 1956. The said dispnte wns referred for industrial adjudication to the Industrial Tribunal, .l\fadras.' State Government on the 13th March 1958. To this reference, the different mills and three unions which represented the employees were made parties.

It appears that for the four years prior to 1956, the question of bonus had been disposed of by a tripartite Boan! of Arbitration appointed for each year by the Government. For the year 1956, negotiations were TAI H.-ary 8e&r11-,, Btidia /Adi. J1Ulou.11s' AssO<ialion TA. 8«t1l4r:1, o~Dislric1 r.mu w ... m,, u,.;,,,, Glfi-.,.il4• J · 930 SUPREME OOURT REPORTS (1962] SUPP. held at governmtnt&l level to evolve & &&tiafaotory solution by consent but since the eaid negotiation11 failed, the parties agreed on some interim payment leaving the rest of the dispute to be adjudicated upon by the Industrial Tribunal. That Li the genesis of the reference On the 5th of September, 1958, the Tribqnal made its award. It considered the several rival contentions raised by the parties in support of their respective claims and awarded bonus ranging from 7 months' basic wages to I month's basic wagoa according to its finding as to the available 8Urpln1 in respect of each mill.

It is against lriis award that the appellants have come to this Court by special leave. At the time when the award was pronounoed tho decision of this Court in the Assooiated Cement Cos. Lt.d., Dwarka Cement Works, Dwarka v. lt8 Work men (') h&d not been pronounced, In that decisioi;i, this Court has considered all the relevant probloms which arise in the working of the Full Bench formula governing tho award of bonus to industrial labour :ind some of the points which the appella.nts wanted to raise againllt the award in question are now concluded by that decision. That is how in the present appeal, the appellants have oonfined themselves to the points on whioh the Industrial Tribunal has deoided oontrary to the deoision of this Court in the case of Assooiated Cement Companies Ltd. or which are not oovered by that Judgment.

Civil Appeal No, 159/61 arises out of & reference made by the State Government of Madras on the 3rd October, 1959, in respeot of an industrial dispute for bonus for the year 1958 between 51 mille and their respeotive employeee. The Industrial Tribunal whioh heard this dispute pronounoed its award on the 11th of January, 1960. In dealing with this (I) (1!159] S.C.R. 9'l5. 2. s.c.R. SUPREM~ COURT REPORTS dispute, it naturally followed the same Iirle of app· roach which it had adopted in dealing with a similar dispute for the year 1956 from whi<.Jh Civil Appeal No. 419160 arises. As a re~ult of its finding, the. Tribunal has directed 24 mills to pay bonus to their re8pective employees, the rate for the same ranging from 6 months' to half a month's basic wages according to the available surplus in each case. It is against this award that the 23 mills have come to •this Court by special leave in this appeal. Civil Appeal No. 3(2/59 arises from an industrial dispute for bonus between the appellant, the Management of the Express Newspapers (rrivate)

Ltd. and its employees, the respondents. i Tl)e claim for bonus which has been referred by the State Government for adjudication to the Industrial Tribunal at Madras on the 19th.August 1957, relates to the years 1954-55 and 1956-1957. The appellant in this case carries on the business of publishing certain newspapers and periodicals in English and in thevernacular from four centres in India. viz., Madras, Madurai, Bombay and Delhi. After hearing the PIJ!ties an<l considering the evidence adduced by them in support of their respective contentions, the Tribunal disallowed the respondents claim for bonus for the years 1954-55 but allowed it for the years 1956·57. It has found that for the year 1956-57, the appellant had in its hands Rs. 1,60,000 as available surplus and so, it has directed that not less than 80 per cent of the said surplus should be made available for bonus; that is to say, it has held that Rs. 1.25 lakhs should be distributed by way of bonus which worked roughly@ halfa month's total wages including dearness allowance.

It is a~fust this award that the appellant has come to t~is Court by special leave. In Civil Appeal No. 419/00, the first P"int which has been raised by Mr. Sastri on behalf of the appellant relates to the question of rehabilit tion. In the working of the formula the multiplier has been IHI TA,lil_.,.,, 8'&r1lor~, Snlh lndi• JlUltwt"1'1• A.SJ..W... Thi Sur,,.,.7, Ooimb•tor• Dislri<I _Tex'til.- Wtriets' Unitn Gajentlr•t.&Ur J. TluH-ory S#r1t11ry, 80Mlb /Wia Millownns~ A s.st¥Uttioll S,c-r1ttll'_,, c..ln.Neo. 1 Diahiel TtJdil1 Wod.,r1' u,.;.,, 932 SUPREME OOURT REPORTS [1962] SUPP. duly determined by the Tribunal and there is no dispute about it before us. It is against the divisor adopted by the Tribunal that the appellant is aggrieved and so, the question to consider is whether the Tribunal was right in holding that the life of the textile machinery should be taken to be 25 years and not 15 as alleged by the appellants, Mr. Sastri contends that the appellants had examined two experts Mr. K. Srinivasan and Mr. Seetharaman and their evidence consistently was that the life of the machinery would be 15 years and no more.

It is urged that this evidenoe should have been accepted by the Tribunal bee&Ul!ll it has not been shaken in crQBS-examinatien. We are not impressed by this argument. The Tribunal has carefully examined the evidence of the two experts and has given .satisfao. tory reasons for holding that the estimate made by them in regard to the life of the machinery is too modest. In fact, as the Tribunal has pointed out, though the experts purported to eay categorically that the lifo of the machinery could not be more than 15 years, they had to admit that in several cases machinery which was muoh older than 15 years was working not llll8&tisfactorily and so the statement about the estimated life of the machinery made be the witnesees could not be accepted at its face value.

Indeed, as the Tribunal observes, experts while giving evidence about the estimated life of the machinery are apt to be too teehnioal and sometimes dogmatic but their evidence has to be judged in the light of tho probabilitee, the admiaeione made by them in crOBS-examination and other evidence about older machinery which wae found working in the different mills. Therefore, we do not think that on the question as to the estimated life of the textile machinery in question we would be justified in interfering with the conolueion of the Tribunal that the said life oan be reasonably estimated at 25 years. It is then contended that the estimate made by the experts a.bout the life of the textile machinery was consistent with the period of 15 years allowed for the rehabilitation of textile machinery be the Labour Appellate Tribunal which evolved the formula in the case of The, Mill Owne,rs' Associatian, Bamhay v. The, Rashtriya Mill Mazdoor Sangh, Bamhay(').

The argument is that since 15 years' period was allowed for rehabilitating the machinery, that should be taken to the normal estimate about the life of the machinery. On the other hand, it is urged by the respondents that 15 years' period was allowed by the Labour Appellate Tribunal in the case of The, J1 ill OW'Mrs Association (') even though the machinery was more than 25 years old and that would suggest that the life of the machinery is 40 years. We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be dete1mined in the light of evidence adduced by the parties. What the Labour Appellate Tribunal did in the ca8e of The, Mill Owne,rs' 4ssociation(')wa.s to adopt an adhoo basis for allowing rehabilitation within 15 yea.rs because it was obvious, and indeed not disputed, that the textile machinery with which the Tribunal was dealing had become obsolescent and very badly needed rehabilitation.

Indeed, it was because of this admitted position, that the problem of rehabilitation assumed an important place in the discussion before the Tribunal when it evolved the formula. Therefore, from the decision in the case of The, Mill OW'Mrs' Associatian(1) no rule can be safely evolved as to the probable life of the textile machinery. An attempt was then made to suggest that the rate of 15 per cent at whioh depreciation is allowed under s.10 (2l(vi) of the Income-tax Act for machinery which is used in multiple shift would approximate to the estimate of 15 years made by the experts in the present case. But when the actual (I) [1950] L.L.J. 1247. Th• Honorory Becrltary, ~ India M illomturs' Association Th. Stcr1tarJ, Coim6at0re Disltiet Textile Work.rs' U11ion G•ftndrfllll"fkar· J. IHI n.H-"'7 ....... &u<J. IW Millffl'"lf'I' n. ll ..... .,, c.w.i..1 District T,_,U. W•iw,' calculations were ma.de, it was conceded that the rate of 15% at which depreciation is allowed in respect of machinery used under multiple shifts works at 18 yea.rs and not 15 years.

Therefore, even the argument based on the depreciation rate permitted by the Income-tax Act is of no avail. In conclusion, we confirm the finding of the Tribunal that tho estimated life of the textile machinery in question should be taken to be !!5 years. The next contention which has been seriously pressed before us is in regard to the finding of the Tribunal tbat some addition should be made to the estimated life of the machinery by reference to practical considerations as to when the employer would be able to make rehabilitation in fa.ct. The Tribunal oonsidbrcd the financial position of the respective mills, the availability of the new textile machinery, the difficulty about the foreign exchange, and so it came to certain ad hoc conclusions while deteqnining the divisor to be adopted. It held that in' the C&&e of machinery purchased before 1947 whose life expired by that year, the period for rehabilitation should be 15 year from 1917.

In regard to machinery purchased prior to 1947 whose life does not terminate by that year, the period for carrying out modernisation would be fixed at 10 years after the expiration of the life and in the case of machinery purchased after 1947, that period will be 5 years nfter its normal life. In other words, the Tribunal decided that the rehabilitation requirement a.bout· the first category of machinery should be lipread over 15 years, that1for the second category should be spread over the remainder !lf its life plus JO years and for tho third category, the normlll life of 25 years plus 5 years. Mr. Sastri contends that this ad hoc addition made to the lifo of the machinery determined by the Tribunal hypothetical or practical considerations 1s justified. In our opinion, this contention is wellfounded.

It is now well settled that in determining the claim of the employer for rehabilitation, two factors essential to ascertain; first the muJt.iplier and that has to be done by reference to the purchase price of the machinery, and the price which has to be pa.id for rehabilitation or replacement; the second problem is the determination of the divisor and that has to be done by deciding the probable life of the machinery. Once the probable or estimated life of the machinery is determined there is no scope for making any. additions to the number of yea.rs thus determined on any extraneous considerations as to the financial position of the employer or the availability of the machinery. If the amount awarded for rehabilitation for any given year is not utilised for that purpose, the same may be ta.ken into account the next year-that is a.II.

But when determining the divisor, it is not open to the Tribunal to add to the estimated life of the machinery on the ground that the employer may, in fact, not bl' able to rehabilitate or replace his machinery. Therefore, there is no doubt that the Tribunal was in error in ma.king further additions to the estimated life of textile machinery. The divisor must be adopted on the basis of the finding that 25 years is the estimated life of the machinery and no more. The next contention raised by Mr. Sastri is in regard to the rehabilitation allowed by the Tribuna.l in respect of the second hand machinery purchased by Lotus Mills Ltd., one of the appellants before us.

The Tribunal thought that in the case of old machinery purchased, only half the claim for rehabilitation should normally be allowed and it added that whether more or less should be allowed would depend upon the age of the machinery at the time of the purchase. 'J'hen it considered the evidence in respect of items I to M as disclosed in the rehabilitation statement Exhibit M. 47 (B) furnished by the Lotus Mills Ltd. It appears that the item~ of machinery in question had all been I96a Tiu HonotlllJ S1cr1tary, 8outA India M illOWllffs' AastWitllion TM Seeretary, Coimbator1 DUtriet T .xtik WorUr1 1 Unioii !'AIR__, 8HT1t.:/, SINIA l.&MiU.,_,l AssoA•INtt Tl» 81nt'4r7, C,.,..1or, Di11rict T11tli/1 Woritri' u,.;,,, G•jm<lrq.U.• J, purchased prior to l!HO and so, the Tribunal fixed the rehabilitation at 30%.

In dealing with this question, however, the Tribunal has observed that full rehabilitation requirement cannot he allowed in respect of second hand machinery without the depreoi'l.tion being deducted from out of the total requirement. Acting on this basis, the amount has been fixed at 30%. Mr. ~astri contends that if tho Tribunal proceeded on the bal!is that second hand machinery must ho replaced only by second hand machinery. It was obviously wrong. We think this contention is well founded. It no doubt appears that in the case of Associated lndustrie.~ Ltd., and Its Workmen (1) the Industrial Tribunal has observed that in the case of second hand machinery it would be reasonable that the employer should meet half the cost of the rehabilitation of the plant from other sources, either by increasing its share capital, Qr from other reserves that may have accumulated in the course of years.

Indeed, it iii on this decision · that the Tribunal has founded its decision in dealing with the question about the second hand machim·ry purchased by the Lotus Mills Ltd. in I!HO. In our opinion, it would not be right to insist that an employer who purebases second ham! machinery must r~habilitnte it by purchasing second hand machinery in tum. Tnat would be obviously unreasonable and unjust, for ought one knows second hand machinery may not be available. BeBidee, the employer is entitled to say that he wants ro purchase now machinery by way of replaeement. Therefore, if thn Tribunal intended to lny down a general rule that in dealiug with the question of the rehabilitation of a scccmd hand machinery purchased by an cmplciycr only 50% of rehabilitation amount should Ii<' all.med, that would bo e1·ro11cou8. 011 the otl11•r hand, it is true that in determining tho amount of r<•habilitation and rleciding the q111•Htio11 of mult.ipli"r, thi: (ll [1951!]2 L.LJ. 1311, H".

SUPREME OODR.T REPORTS cost price of the machinery must be ascertained and this can be done only by enquiring for how much the machinery was originally purehased when new,. Depreciation amount accruing due after the first purchase must also be ascertained. If the purchas~ money is determined but it is difficult to ascertain the depreciation amount thereafcer, then at the highest the whole of the purcha.se money could b3 adopted as depreciation amount and then the amount of rehabilitation can be determined. Whatever relevant facts are required to be considered in dealing with this question must no doubt be ascertained. But if all relevant factors are ascertained, then it cam1ot be said that because rehabilitation is claimed in respect of second hand machinery, therefore only half or one-third of the amount should be allowed.

In the present cabe, the relevant material about 'the original price and subsequent depreciation prior to the purchase by the appellant mills has not been adduced before the Tribunal and so, the Tribunal was justified in adopting some ad hoc basis. But grievance is made not so much against the particular ad hoc basis adopted by the Tribunal in the present case as against the general principle about which the Tribunal has made certain observations. As we have already made it clear, those observations do not correctly represent the true legal position in the matter. That takes us to the last point raised in this appeal on behalf of Saroja Mills Ltd. which is one of the appellants. Saroja Mills Ltd. is a compauy which runs two mills, viz., Saroja Mills Ltd., Coimbatore. and Thiagaraja Mills at Madura. The latter has been started in 1956, while the former has been in existence for many years.

It was urged on behalf of the appellant befor? the Tribunal that in dealing with tho question of bonus payable to the employees in the ~wo respective mills, the two mills should be T/,. Hwt!'Y S1cr1tat,, Botti A: India MjJJewrurs' iJ.saotiilt Oii The 8w1lar_v, Ca~ot1.Dist1icl T1x1ile Wor1trs• um.. Gojendrogadhr J. lHB 938 SUPRJDIE OOURT REPORTS (1962) SUPP. treated as 11eparate unitR and not as one. The Tribunal has rejected this contention and it has held that the two mills constitute 0no unit and tho question of bonus payable to the employees working in the two respective mills, must be oon· sidered on that basis. It iB against th is finding that Mr. Sastri has made a serious grievanca before us. He <'ontends that there are several factol'B which militate against tho validity of the conclusion of the Industrial Tribunal that the two mills consti· tute one unit.

The two mills are situated at two different places separated by a dishnce of nearly 150 to 200 miles; in starting the Thiagaraja Mills, the necessary cotton, stores and personnel were secured by the Company from Mcenakshi Mills at Madura; the workers working in the two mills are different and they arc not transfcrablo from one mill to the other; the two mills manufacture different counts of yarn and diffrrent qualities and the raw material required !Jy them is different; they maintain different accounts and their Tex-marks are differ1·nt; when the Thiagaraja Mills was started in I 9;i6, the Co., b'.lrrowed an amount uf nearly Rs. 3~.:iO lakhs from the Indian Finance Corporation and Pudukottai Co. Ltd. and the same WBB debited to the Thiagaraja Mills. Therefore, all these factors inclicato that the two mills are different units, they work as such and sh011ld not b1• takon to constitute one unit for the purpose of determining tht• question of bonus. On the other hand, Mr. Ramamurthy contends that there aro sevt•ral other conoiderations which jw;tify the conclusion of the Tribunal that the two mills constitute one unit.

Ho argues that it is important to bear in mind that the two mills are owned and conducted hy one Company, the Saroja Mills Ltd. in fact, the Thiagarnja Mills at Madura has no independ1·nt l1·gal existence except a~ a noucern run by tho Company; ultimately, the profit and loss aCC<?,~nt for both the Companies is one consolidated account and dividend would be paid on the said account; separate accounts are no doubt kept for convenience because the two mills are situated in two different places; but the maintennnce of separate cash hook and ledger are not behalf as important as the maintenance of one profit and loss account which the Company has to keep as a whole; the borrowing on which the appellant reliPR is the borrowing of the Company and as such, the Company is the debtor and not the mills at Madura; the distance between the two mills can hardly be important because the features on which the appellant relies may well be present in the case of two mills owned and run by the same Co. though the mills may be situated side by side in the same locality; what is important in this connection is the fact that the business carried on by the two mills is of the same type and character though the quality of yarn produced may not be the same.

Therefore, it is urged that the Tribunal was right in holding that the two mills constituted one unit. The question thus raised for our decision is not always easy to decide. In dealing with the problem, several factors are relevant and it must be remembered that the significance of the several relevant factors would not be the same in each case nor their importance. Unity of ownership and management and control would be relevant factors. So would the general unity of the two concerns; the unity of finance may not be irrelevant and geographical location may also be of some relevance; functional integrality can also be a relevant a.nd important factor in some cases.

It is also possible that in some cases, the test would be whether one concern forms an integral part of another so that the two ·together constitute one concern, and in dealing with this question the nexuR of integration in the form of some essential dependence of the one on the other may assume The Honoraf'y Secretary, South India Millownn•' Association The SecrelO'l'y, Coimbatore District Textile Worker1l Union GnjendragadkJr J. TitH_.,, Bm1tar,, &1111' loii• Milloam' Au«ictiOfl T/I, s,.,.i.ry, CoiwtHton Di•lriet Tuli/1 Workers' Unit>• 940 SUPREME OOURT REPORTS [1962] SUPP. relevance. Unity of purpose or design. or even parallel or co-ordinate activity intended to achieve a common object for the purpose of carrying out the busineSB of the one or the other can also aasumo relevance and importance, r;ide Ahm~ M anuja.cturitl{J & Oalioo Printing Co. LU. v. Their If orkrnen ('). Mr. Sastri, however, contends that functional integrality is a very important test and he went so far as to suggest that if the said test i~ not satisfied, then the claim that two mills constitute one unit must break down.

We are not prepared to accept this ar1mment. In tho complt1x and complicated forms which modern industrial enterprise assumes it would be unreasonable to suggest that any one of the relevant tests is decisive; the importance and si,iDifica11ce of the tests would vary according to the facts in each caoe and so, the question must always be determinetl bearing in mind all the relevant tests and co-relating them to the nature of tho enterprise with which the Court is concerned. It would be soen that the test of functional integrality would be relevant and very significant when the Court is dealing with difforenl. kinds of busi· nesses run bv the samo industrial cstabli~hmt>nt or employer. Where an <-mployer runs two different kinds of businell8 which are allied to each other, it is pertinent to enquire whether the two lines of businel!ll are funotionally integrat!>d or are mutually inter dependent.

If they arc, that would, no doubt, be a very important factor in favour of the plea that the two lines of business constitute one unit. But the test of functional in'.egrality would not be as important when we are dealing with the case of an employer who runs the sam11 business in two different plaotll!. Tho fact that the test uC fun<•· tional integrality ie not and generally cannot be satisfied by two such concerns run b;v the i.ame (I )[1951] 2 L.l.J. ~7. 2 s.c.R. employer in the same line, will not necessarily mean that the two concerns do not constitute one unit. Therefore, in our opinion, Mr. Sastri is not justified in elevating the test of functional integrality to the position of a decisive test in every case. If the said test is treated as decisive, an industrial establishment which runs different factories in the same line and in the same place may be able to claim that the different factories are different units for the purpose of bonus.

Besides, the context in which the plea of the unity of two establishments is raised cannot be ignored. If the context is one of the claim for bonus, then it may be relevant to remember that generally a claim for bonus is allowed to be made by all the employees together when they happen to be the employees employed by the same employer. We have carefully considered the contentions raised by the parties before us and we are unable to come to the conclusion that the finding of the Tribunal that the two mills run by the Saroja Mills Ltd. constitute one unit, iil erroneous in law. In this connection, it would be necessary to refer to some of the decisions to which our attention was drawn. In the case of Asaociatbl CemR,nt Campanies LUl. and their Workmen (1), this Court held that on the evidence on record, the limestone quarry run by the employer was another part of the establishment (factory) run by the 11ame employer within the meaning of Section 25E (iii) of the Industrial Disputes Act.

It would thus be seen that the question with which this court was concerned was one under s. 25E (iii) of the Act and it arose in reference to the limestone quarry run by the appellant Company and the cement tactory owned and conducted by it which are normally two different businesses. It was in dealing with this problem that this Court referred to several tests which would be relevant, amongst (1) [1960] l.S.C.R. 703, The Bonorazy Secree.r,,- South India M illowners' Association The Swrd"'1f, Coia1"tor1 Di$hid T .xti/1 W erM•' UniMI GqjendragAl/br J, 'l'IN Hooarory Bmll!'li.!:.:," hdia Mil A.ss°'*ioft :flw !it<rolary, Coimb_, District T ,.1;i, Wtriers' u.Um them being the test of functional intogrality. In dealing with tho question, S. K. Das, J., who spoke for the Court, observed that it is perhaps impoBBible to lay down any one test as an absolute and invari· able test for all cases.

The real purpose of these teats is to find out thl' true relation betwee:Q the parts, brancbAs, units, et-0. If in their true relation they constitute one integrated whole, we say that the establishment ie one; if, on the contrary, they do not constitute one inter<,rated whole, each unit is then a separate unit.. It was also observed by the Court that in one case, the Wlity of ownership, management and control may be tho important test; in another case, functional integrality or gene· ral unity may be nn important test; and in still another case, the important test may be the unity of employment. Therefore, it is clear that in applying the test of functional integrality in deal· ing with the question about the interrelation between the limestone quarry and the factory, this Court has been careful to point out that no test can be treated as decisive and the relivance and importance of all the test will have to be judged in the light of the facts in each case.

In the oase of Pratap Pr(',88, m. and Their Workmen,(') this Court had to deal wit.h the question as to whether the Pratap Press started by tho proprietor, Narendra, in 1951 and the newspaper 'Vir Arjun' started by him in 1954 constituted one unit. It appeared in evidence that the Press also printed and published Daily Pratap which was ownod by Narondra and his partner. Thus, the problem raised before this Court was whl'ther the business of running Vir Arjun which is distinct and different from tho business of running a Pl'f'8B, constituted a part of the same unit as tho Pratap Press itself and in dealing with this question, this Court reiterated the same principle that the applicability and the signifi0&noe of the relevant tests would (I) [1960J I LJ.J. •97. depend upon the facts in each case.

Where the Court is dealing with two different kinds of busi - ness conducted by the same owner, th1> test of functional integrality naturally aesumes importance and it was that the test which was empha.11ised by this Court in coming to the conclusion that the Press and the Paper did not constitute one unit. Besides, the conduct of the proprietor in dealing with the two businesses and other relevant facts were taken into account in reaching that conclusion. In Palcshiraja Studios v. Its Workmen, (1) this Court was dealing with a case of the managem('nt of a cinema studio which also carried on the business activities of producing films and taking dist,ribution rights of pictures, and in coming to the conclusion that the two lines of business were not distinct but together constituted one single industrial unit, this Court emphasised the importance of the \est as to whether there is functional integrality and unity of finance and employment of labour.

Thus, it would be seen that the question as to whether two different concerns run by the same employer constitute one industrial unit for the purpose of bonus, has to be determined in the light of facts in each case. As we have already indicated, after carefully considering the relevant facts in the present case, we are unable to hold that the conclusion of the Tribunal is erroneous in law. That takes us to Civil Appeal No. 159/61. The first point which has been raised in this appeal relates to the claim made by the Coimbatore Cotton Mills Ltd., one of the appellants, in respect of the development rebate "llowed to it to the extent of Rs. 1,25,000. Before the Tribunal it was urged that this amount should be treated as a prior charge but the Tribunal rejected the contention and we think, rightly. In this Court, the argument has (I) (1961] 2 L.L.J. 380.

J96S 1h1 Ho1uw•f"J St&rttar_1, South India Millownera• As•oet.Nn Tiu r1er1l•r.J, ~m/Jattll'I Dlffricl Te~tih Wor.bfos• Uniott Gajrndrattvl/oar J, 11161 '1At llottoraty, /he•""'· S...1' I .Uc Ji tlltwtUrJ • . 4Hl!Ci9'io• 7".&.n-11•')', Co"""'11tte Diltricl Te.dill Worier•' u111 .. G.;-k•,.,,.... J. SUPREME COURT REf()RTS [1962] SUPP. ta.ken another form. It is urged that this rebate must ho loft out of account in determining the available surplus because there is a statutory bar which precludes thu appellant from utilising this amount for the payment of bonus. This argument ~ ba.sed on the provisions contained in proviso (b) to explana.tion ( 2) of Section IO (2 )(vi) as intro· duoed by the Finance Act XI of 1958. The relevant portion of the statutory provision on which reliance has been placed reads thus :- "Provided that no allowance under this clause shall be made unless :- (a) .................... ··········· ............ .

(b) o.xcept where the asset!Seo is a company being a licensee within the mea· ning of the Electricity (Supply) Act, 1948 or where th(l ship has been acquired or the machinery or plant has been installod before the I st day of January, 1958, an amount equal to 75% of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by him during a period of ten yea.rs next following for the purpos~ of the business of the undertaking, except : (i) for distribution by way of divi· donda or profits : .................. " It is the last clause which is the b11.11is of the present argument. Mr. Saatri contends tba.t bonus is awarded out of profits available in the bands of the emplo· yer and the statutory provision just quoted prohibits the employer from distributing tho development rebate a.mount allowed to him by way of profits. There is no substance in this argument.

What the statute prohibits is the distribution of the amount in question by way of dividends to the ahare-holdere or profits to the partners. In the ~ S.C.R. context, the distribution by way of profits means nothing else than the distribution of profits to the partners. Besides, it is obvious that the amount of bonus paid by an employer to his errployees is allowed to be treaterl as admissible expense under s. llJ(2)(x) of the Incometax Act. It is clear that the ,development rebate allowed is in part recognition of the claim for depreciation and the provision in question cannot, therefore, be treated as constituting a bar against taking the said amount into consideration in ascertaining the available surplus in the hands of the employer during the year in question. Therefore, the argument which has been urged before us in respect of the development rebate of Rs. 1,25,000 cannot be upheld. It is true that in support of this argument Mr. Sastri has relied on the decision of this Court in The Central Bank of India v. Their Workmen (1).

In that case, section lO(i) of the Banking Companies Act prior to its amendmPnt in 1956 fell to be construed. Section (I) (b) ;ii) provides, inter alia that: "No banking company shall employ any person whose remuneration or part of whose remuneration ta.kes the form of a share in the profits of the company". It was held that this provision prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in thf' profits of the banking company. We do not see how this decision can assist the appellant a.t all. What we are called upon to construe in the present case is the expression "for distribution by way of dividends or profits" and, as we have pointed out, the context makes it perfectly c!ear that the distribution by way of profits which is prohibited is the distribution by way of profits amongst the partners. Therefore, the decision in the case of (I) [1960] I s.c.R. 200. ~il1 ll"1trO.r:1 B1cr11a,, 6•utla Indi• .Mitl.rorurs'

Asstci•tiM Tlte Stcrelo1,J, Cfttnllallf'1 Distric T1Xtil1 W trklf's' UniMJ t1.;entra1U/i.,. J. Th. HMorary 81crtklry, South India Al illownn1" Associ4tion· Tiit Sut'etary, Coimbale11 District T "'tit. W .,l:ns' u.,;.., Central Bank of India is of no assist&nce to the a.pp· ellant in the present case. Thor<· is one more point which needs to be considered in this appeal and that is in regard to the claim for interest made by one of the appell· an ta, the Coimbatore Cotton ~fills Ltd., in respect of the amount of depreciation used by it by way of workin-' capita.I. The interest claimed a.mounts to Rs. 33.42!1. The Tribunal has held that the appellant is not entitled to claim any retum on depreciation and in that connection, it has referred to its earlier d<·cieion in the case of Deccan Sugar Abkhari Co. Ltd.(1 ), and ha.s observed that it ha.d nothing to add tn the reasoning adopted in that caee. Mr. Sai;tri contends that this view is clearly inoon· sistcnt with the decisions of this Court a.nd this contention id well founded.

In Petlad Turkey Red Dye Works Ltd. v. Dye;J Chemical, Workers' Union, Pet/ad ('J, this Court has held tha.t if a.ny portion of the reserve fund is found to have been actually utilised as working ca.pita.I in the y£-ar under consideration, it should be treated as entitled to a. reasonable rate of return a.nd the a.mount thus ascertained deducted a.a a. prior charge in ascertaining the a.va.ilable sur· plus. To the sa.mo effect is the decision of this Court in Mysore KirWJ/aJr LUl. v. Its Workmen (3). In that case, thi.1! Court has held th.it the a.mount in the depreciation reserve proved to have been utili· scd a.s working capita.I during the year in question should he taken into consideration for tho purpose of making provision for return on working ca.pita.I. It is thud clear that if a.n employer shows that the a.mount of depreciation wa.s actually available a.nd has, in fact, been uied a.a working capital during tho relevant year, ho would be entitled to claim a reasonable return on tho said amount.

The contrary (I) [1958] I L.L.J.653. (21 [19fi0] 2 S.f'.R. 906. (3) [ 1961] 2 L.L.J. 657. I 2 S.C.H. view expressed by the tribunal in the present case must, therefore, be reversed. In the two Civil Appeals No. 419/60 and 159/61, we have dealt with the general points rnised before us not beaause the appellants wanted any relief in rrspect of their contentions which we h 1ve upheld but because they wanted that the points in question should be decided for the> guidance of the Tribunal when it may have to deal with similar disputes between the parties fo future. Therefore, these two appeals are, in substance dismissed. Parties will bear their own costs. That leaves Civil Appeal No. 302/59. In this appeal, as we have already noticed, the Tribunal has found the available surplus to be Rs.1,60,000 and it has directed that out of it Rs. 1.25 lakhs should bA distributed as bonus for the relevant year.

One of the points which the Tribunal had to consider in dealing with the respondents' claim for bonus in this case was in regard to the life of the machinery and it held that the normal economic life of the printing machinery can be easily fixed at 20 year8. Then it proceeded to consider what should be the period of spread over after the total rehabilitation requirement is ascertained, and following its decision in the award from which Appeal No. 419/60 arises, it purported to divide th" machiner.v into three categories and proceeded to make ad hoc additions to the normal life of 20 years already determined by it. We have already held that this ad hoc addition to the normal life of the machinery as determined by the Tribunal is not justified. It is conceded before us by the respondents that if the addition thus made by the Tribunal is set aside, then there would be no available surplus in the hands of the appellant for the relevant year.

In that view of the matter, it is unnecf'ssary to consider the other points which the appellant wa.nteGI to raise before us in the present appeal. On the ba~is He n-"'"1 becrdaty, Soulh lt1dit1 M UllWfllfs' A1.roeiafion The Secrett:ry, Coimbator1 Distrit;t 1'extilt Wtffklrs' u.w. Gt1jenir'1Mk•r J. ~H..,,...., S«retttrJ, S.U. /"""' Jli/1...-,' il•10ri4Ji011 'l'A1 S«:r•""'· ~'"" Dislri&t 7 ,.,;i, IF"'"'' um. lllfl Fdnoar;J I, that the normal lifo of the printing machinery is 20 years, a divisor will have to be adopted and by the adoption of the proper divisor it would follow that there is no available surplus for the relavant year. That is why the award passed by tho Tribunal directing the appellant to distribute Ra. 1.25 lakhs byway of bonus amongst its employees for the year I !156-57 has to be set aside. The appeal is accordingly allowed; but there would be no order as to costs. BIPAT GOPE STATE 0.1!' BIHAR (.M. Hm..i.YA.TULLAH and J.C. S.ILUI, JJ.)

Criminal Prowlure-CommiUmml proettding-Ortlu of di4cltatr;e l>y M agi4trate, First Ola&, after trying tlae wlwk caae -Procedure under s. 207A(6), Criminal Procedure Code Jol/Dwt4-l/ in ezcuo of jurisdktio-Code of CrimiMl P..-. dure, 1898 (Act V of 1898), s, 207..4(6). In procccdinl!.' under s. 207A(6) of the Code of Criminal Proccdwe the Magistrate discharged the accused after recording the evidenc~ in the case. The High Court on rev.illon set aside the order and directed the Magfatrate to commit the accused to stand trial before the court of scssbn. The Magiatrate examined witnesses, held spot inspection. He did not stop to find out if there was evidence which, if believed, would establish, at least, a prima facie case, but went on further to disbelieve that evidence, by an elaborate and paimtaldng process of examination, in aid of which he brought to bear his own appraisal of inconsistencies, improbabilities etc. In •hort, he tried the whole case from one and to the other and established his point in a fairly elaborate order.

Held, that the jumdiction conferred by sub-s. (6) of s. 207 A, does not entitle the Magistrate to try the case on his own, and forestall the drcision of the court of session. The order of discharge passed by him in the present case, therefore, wu in cxccas of jurladic:tion, and muat he set aside. I