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Murphy Radio of India Ltd. Vs. Its Workmen - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtMumbai High Court
Decided On
Case NumberIn Ref. (I.T.) No. 197 of 1958
Judge
Reported in(1959)ILLJ297Bom
ActsIndustrial Disputes Act, 1947 - Sections 12(5)
AppellantMurphy Radio of India Ltd.
Respondentits Workmen
Excerpt:
- - that the wages and dearness allowance of the workmen in this company are better than those of the workmen in other units of the industry; that simply because the company made good profits in 1956 that should be no ground for awarding unduly high bonus; that over and above good wages and dearness allowance, the company has prescribed the following facilities for the workmen :(1) 48 hours per week pay for 45-3/4 hours work; 8. before making my calculations, i should like to refer to a point which was raised by, sri dudhia......is as follows :- 'all the employees who have served the company during the year 1958 shall be paid bonus for the year 1956 equivalent to 50 per cent (fifty per cent) of their total earnings during the said year unconditionally. the bonus should be paid to all employees irrespective of whether they are at present in the service of the company or not. bonus already declared and paid may be deducted from the above bonus demand.' 2. in the statement of claim filed by the secretary of the union it is stated that ever since the commencement of this concern it has been enjoying continued prosperity, that huge profits are made year after year, that dividend at a very high rate is paid to the shareholders; that the wages and dearness allowance of the daily rated and monthly rated staff are.....
Judgment:
Acts/Rules/Orders:

Industrial Disputes Act, 1947 - Section 12(5)

AWARD

1. This industrial dispute between the Murphy Radio of India, Ltd., Bombay, and the workmen employed under it, was referred to me for adjudication under Sub-section (5) of S. 12 of the Industrial Disputes Act, 1947, by Government of Bombay, Labour and Social Welfare Department, Order No. AJM. 7558, dated 16 May 1958. The demand of the workmen is as follows :-

'All the employees who have served the company during the year 1958 shall be paid bonus for the year 1956 equivalent to 50 per cent (fifty per cent) of their total earnings during the said year unconditionally. The bonus should be paid to all employees irrespective of whether they are at present in the service of the company or not. Bonus already declared and paid may be deducted from the above bonus demand.'

2. In the statement of claim filed by the secretary of the union it is stated that ever since the commencement of this concern it has been enjoying continued prosperity, that huge profits are made year after year, that dividend at a very high rate is paid to the shareholders; that the wages and dearness allowance of the daily rated and monthly rated staff are very low; that there is a wide gap between the living wage and the actual wage and that therefore bonus equivalent to 50 per cent of the total earnings of the workmen for the year 1956 may be awarded.

3. In the written statement it is contended that the financial resources of this company are very limited as compared to those of other units in the radio industry, such as Philips India (Private), Ltd., General Electric Company, National Ekco, Indian Plastics and so on; that on account of restrictions on imports the future of the industry is none too bright; that only about 10 per cent of the manufacture is done by the workmen in India, the rest 90 per cent is nothing but assembling of ready-made parts sent to India by the Murphy Radio Company of England; that the wages and dearness allowance of the workmen in this company are better than those of the workmen in other units of the industry; that simply because the company made good profits in 1956 that should be no ground for awarding unduly high bonus; that the company has voluntarily paid bonus equivalent to 2 1/2 months' total earnings and that nothing more should be awarded; that in the award in Reference (I.T.) No. 115 of 1957 for bonus for the year 1955 it was observed that an unduly large bonus should not be awarded merely on the ground that the company has made large profits; that over and above good wages and dearness allowance, the company has prescribed the following facilities for the workmen :-

(1) 48 hours per week pay for 45-3/4 hours work; (2) overtime at double the rate for work done beyond 45-3/4 hours a week; (3) 8-1/3 per cent of the basic wages and dearness allowance as contribution towards provident fund; (4) seven paid holidays; (5) a gift bonus scheme under which a workman can earn as much as 12 per cent of his total earnings according to his skill, ability, punctuality and discipline.

4. Sri K. S. Mehta for the company argued that the question whether the workmen can get bonus equivalent to more than three months' total earnings is barred by the principle of res judicata because all the arguments for and against a higher bonus which are now being advanced by the parties were advanced in Reference (I.T.) No. 115 of 1957 and were dealt with in the award in that case and that it was held that bonus equivalent to three months' total earnings which came to nearly five months' basic earnings should only be awarded. In my opinion, the principle of res judicata does not apply. It is true that although there is no ceiling for the granting of bonus, certain principles have been formulated by industrial tribunals and by the Labour Appellate Tribunal on these matters. Bonus is not deferred wage. It is an attempt to shorten the gap between the living wage and the actual wage paid to the workmen. It must therefore bear some relation to wages and to the effort that the workmen make in producing the profits. At the same time it is to be borne in mind that bonus should not be so excessive as to create fresh problems in the vicinity. [Vide Parle Products . : 1955 9 F.J.R. 358 But simply because a bonus equivalent to three months' total earnings was granted when the net profits of the company were Rs. 4,53,909, bonus for a succeeding year need not be restricted to the same amount when the net profits of the company have gone up to Rs. 6,62,860. It is not the company's case that by the grant of bonus equivalent to three months' total earnings the gap was filled for all times. It is therefore my opinion that the awarding of bonus equivalent to three months' total earnings for the year 1955 or the observation that merely because the available surplus is large, an unduly large bonus should not be awarded does not act as a bar to the fixation of a higher quantum of bonus for the succeeding year when the profit also is larger than in the previous year.

5. Sri C. L. Dudhia for the workmen stated that even without comparing the wages and other allowances of the workmen of this company with those of the workmen in other concerns, it could be noticed that there is quite a wide gap between the living wage and the actual wage. No doubt, 'living wage' is an elusive concept as observed in the case of Standard Vacuum Refining Company of India, Ltd. 1958 I L.L.J. 615. But Sri Dudhia stated that the pre-war cost of living for an unskilled worker was taken at Rs. 55 by the Textile Labour Enquiry Committee; that in 1956 that cost had gone up by 3 1/2 times and that therefore an unskilled worker needed very roughly Rs. 192 per month whereas he was actually getting Rs. 30 as basic wage and Rs. 52 as dearness allowance, a total of Rs. 82. Sri Dudhia went on to make further calculations and pointed out that even if it was assumed that every workman got the highest gift bonus of 12 per cent of his total earnings and a bonus equivalent to three months' basic wage and dearness allowance, his total earnings would be nearly Rs. 1,000 less than what he would have earned ware he to be paid a living wage. In my opinion, all these calculations were not really necessary because Sri K. S. Mehta never disputed the existence of the gap.

6. Sri Dudhia has produced his calculations according to the bonus formula at Ex. U. 1. The only two items which were not accepted by Sri K. S. Mehta were; (1) incometax, and (2) return on reserves used as working capital.

As regards tax the company has produced the assessment order at Ex. C. 2 which shows that an incometax of Rs. 3,87,614.71 was demanded for the year 1956. Sri K. S. Mehta stated that although this was a public limited company, for incometax purposes it was treated as a private limited company because it had only seven directors and fifteen shareholders. He therefore referred me to the case of Recondo (Private), Ltd. 1958 I.C.R. Bom. 298 where it was held that the rate of seven annas in a rupee (now 51 per cent) which would be the correct rate of tax for a public limited company would be unduly low for a private limited company to which S. 23A of the Incometax Act applied. In that case tax on dividend claimed by the company was allowed. In the present case the company was called upon to pay income-tax of Rs. 3,87,614.71. That must have been on the basis of a bonus equivalent to 5/24 of the annual earnings (basic wage and dearness allowance) which the company had voluntarily paid. If I allow some additional bonus, the company will get a rebate of incometax on the addition. I agree with Sri K. S. Mehta that incometax demanded by the Incometax authorities should be allowed.

7. As regards reserves used as working capital Sri Dudhia has taken the following items from the balance sheet as working capital :-

Rs. Share premium ... 48,000 Building reserves ... 1,50,000 Machinery replacement ... 50,000 Dividend equalization ... 25,000 Contingency ... 25,000 --------- 2,98,000 ---------

He has calculated a return of 4 per cent on this amount. Beyond merely stating that the working capital was higher Sri Mehta did not point out any figure which should have been taken into account but which Sri Dudhia had not taken into account. I shall therefore take Rs. 2,98,000 as reserves used as working capital.

8. Before making my calculations, I should like to refer to a point which was raised by, Sri Dudhia. In Reference (I.T.) No. 304 of 1958 which has been made to me recently one of the demands is in the following terms :-

'Demand No. 2 - Calculation of wages for the purpose of bonus, gratuity, etc. - while calculating the earned wages of the employees for the purposes of bonus, gratuity. provident fund and leave with pay, etc., all payments made by the employer and Employees' State Insurance Corporation shall be taken into account.'

There is some typographical error in the wording of the demand, but Sri Dudhia said that the prayer was that contribution made by the employer and the workmen under the Employees' State Insurance Act should be taken as wages for purposes of bonus, gratuity, etc. Some argument was advanced by Sri Dudhia on this demand and he submitted that while awarding bonus in the present dispute I should direct that Employees' State Insurance Corporation contributions should be treated as wages. I am not, however, prepared to take one demand from another reference, consider it and make it applicable in a case where it is not made. Moreover, the demand in Reference (I.T.) No. 304 of 1958 is referred for adjudication only a few days ago. To make it applicable to the demand for bonus for the year 1956 does not seem to me to be equitable. I therefore reject this part of Sri Dudhia's argument.

9. The calculations which I have made below show that the company can easily afford to pay bonus equivalent to three and a quarter months' total wages (basic wage plus dearness allowance). When the company voluntarily paid bonus equivalent to 2 1/2 months' total earnings, it also took into account the overtime wages paid to some of the workmen. As a rule, overtime wages are not taken into account while awarding bonus. Therefore, although the company took into account the overtime wages paid to some of its workmen, I do not allow it. While paying the additional bonus, the company will be at liberty to make suitable adjustment.

Calculations

Rs.

6,62,347 ... Net profit. Add 47,068 ... Bonus already paid. --------- 7,09,415

Less 67,866 ... Basic wages plus dearness allowance for 3 1/4 months. --------- 6,41,549

Less 3,87,614 ... Tax demanded from the company by Income-tax department. --------- 2,53,935

Less 28,659 ... 6 per cent return on Rs. 4,77,662. --------- 2,25,276

Less 11,920 ... 4 per cent return on Rs. 2,98,000. --------- 2,13,356 ... Surplus in company's hand. ---------

I direct the company to pay to the workmen concerned in this reference bonus equivalent to thirteen-forty-eighth of the total earnings (basic wages plus dearness allowance) for the year 1956 (less bonus already paid) within a period of two months from the date of the publication of this award, subject to the following conditions :-

(a) Any employee who has been dismissed for misconduct resulting in financial loss to the company shall not be entitled to bonus to the extent of the loss caused. (b) Persons who are eligible for bonus but who are no longer in the service of the company on the date of payment shall be paid the same provided they make a written application for the same within three months of publication of this award. Such bonus shall be paid within one month of receipt of application provided that no claim shall be enforceable before two months from the date of the publication of this award.

10. This award is directed to be submitted to Government. No order as to costs.


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