The Management of Marina Hotel v. The Workmen

Industrial Dispute-Bonus-Hotel workmen getting service charges and tips-If disentitled to get bonus-Casual-cum-sickness leave-Amount of leave-Delhi Shops and Establishments Act, 1.954 (Delhi 7 of 19-54 ), s. 22.

The award made by the Industrial Tribunal, to which the dispute between the appellant, a hotel in new Delhi, and its workmen was referred, was challenged by the appellant on the grounds inter alia (1) that the workmen got a share in the service charges and aha some amount by way of tips from the customers and so no bonus could be awarped to them, and (2) that the Tribunal was not justified in awarding 15 days casual-cum-sickness leave in view of the fact that s. 22 of the Delhi Shops and Establishments Act, 1954, provided only for a maximum of 12 days for such leave. It was not disputed that the workmen in the present case had contributed to the earning of profits for the years in question, that on a considera-tion of the wages paid to the workmen by the appellant there was a wide gap between their existing v.·ages; and the living wages, and that the amounts received through the distribution of service charges and tips were quite inadequate to bring the wages to the level of a living wage.

Held, that it is well-settled that bonus is paid to workmen out of the available surplus of profits in order to fill in the gap between the existing wage and the living wage, provided that the workmen have contributed to the earning of profits, and that, in the present ca~e, if there was an available surplus of profits in accordance with the Full Bench formula, the workmen would be entitled to bonus.

Voltas Limited v. Its Workmen, (1961) 3 S. C.R. 167, distinguished.

Held, further, that the Tribunal was in error in awarding 15 days' casual-cum-sickness leave contrary to the provisions of s. 22 of the Delhi Shops and Establishments Act 1954 and that the amount of leave must be reduced to 12 d~ys as piovi- <;led in the Ac(. ·

2 SUPREME OOURT REPORTS [1962]

1981 MeMTs Dalmia Cement (Bharat) LimitR,d, New Delhi v.

Their Workmen, A. I. R. 1960 S. C. 413, followed.

Tht Mana,,ment of

.Varina Hotll CIYIL APPELLATE ,JURISDICTION : Civil Appeal

v.

Th. ll'orkmm ~o. 393 of 1960.

Appeal by special leave from the Award dated July 1, 1958, of the Industrial Tribunal, Delhi, in I.D. No. 9!l of 1958.

S. I'. Varma, for the appellant.

Jcm<1rdrm Shar111<1, for the respondent.

1961. August 4. Tlw .J1Hlgment of the Court was delivered by WA:xcnoo, J.-This is an appeal by special "'""",,.. J. leave in an industrial matter. There was a clisputc

between the appellant, namely, the l\Iarina Hotel, New Delhi, and its workmen, which was referred for adjudication to the Industrial Tribunal, Delhi. The matters in dispute comprised a number of items ; but in the present appeal we arc concerned only with the following :- 1. Bonus for the years 1953-54 and 1954-55.

2. Leave.

3. Provident Fund.

4. Scales of Pay.

5. Dearness Allowance.

We shall <lea I with these pointB one by one.

Bonus.

The first contention of the appellant in this regard is that as the workmen get a share in the service-c·harges and also some amount by way of tips from the customers, no bonus can be awarded to them. Reliance in this connection jg placrnl on the obsen·11tio11s of thi:i Court in l'olta .. ~ Limil/!d v. 11.8 Workme11 ('),where in dealing with salesmen it was said that salesmen being paid commission on 1il/;1 sales had already taken a share in the profits of The .Management of the appellant on a fair basis and therefore there Marina Hotel was no justification for granting them further v. The Workmen bonus out of the available surplus of profits. The contention is that the workmen of the appellant TVanchOo J. also get a share in the profits on the distribution of service charges among them and therefore they are not entitled to any further bonus. Now it is well-settled that bonus is paid to workmen out of the available surplus of profits in order to fill in the gap between the existing wage and the living wage provided the workmen have contributed to the earning of profits. It is not disputed that the workmen in the present case have contributed to the earning of the profits ; nor can it be disputed on a consideration of the wages paid to the work-men by the appellant that there is a wide gap bet-ween their existing wage and the living wage. In the circumstances, if there is an available surplus of profits in accordance with the Full Bench for-mula, the workmen would be normally entitled to bonus.

The appellant, as we have already mentioned, relies on the obsen·ations of this Comt in the case of Valtas Limited (1). However, we are of opinion that those observations cannot help the appellant.

It cannot be disputed that even taking into account the amount received by the workmen through distri-bution of service charges and tips, there is still a gap between their existing income and the living wage.

The observations on which reliance is being placed on behalf of the appellant were made in a different context altogether. When dealing with salesmen of Valtas Limited (1) this Court pointed out that the commission of salesmen on an a,·erage worked out to about Rs. 1,000 per month and -therefore their total emoluments wore quite ade-

quate. It was in that context that the observ:Je· 1981 tions in question on which reliance has been placc<l Th•M-mlof were made. Besicks, salesmen in that case were

M orina Hot.I a small part of the total number of workmen of

v.

Tho Work...,. Voltas Limit.eel and that was the ren.son why this

Court o bscrvcrl that as the salesmen had al~en,dy Wan<lmJ.

taken a slrnre in the profits of the n,ppcllant on a fair basis as contrasted with the majority of the other workmen there was no justification for granting them further bonus out of the ava.ilablo surplus. The observations therefore on which reliance has Leen placed were conditioned by two circumstances, namely, (i) that salesmen in that case were getting adequate wn,ges after taking into account the commission rpccived bv them, and (ii) that salesmen were only a small part of the work· men in that case ancl as they liacl already partaken of a share in the profits they were not entitlecl to any further share from the available surplus to tho detriment of the other workmen who formed the large majority. Neither of these two conditions apply in tho present case. The e1•idcnce shows that the amounts received through the <listri· bution of s.,n·ice chargcg and tips arl' quite inade· quate to bring the wages to the Jc,·el of a living wage. Besides, all the workmen of the appellant share in the distribution of service charges un<l thus stand on tho same footing so far as the distri· bution of bonus from the available surplus, if any, is concorncd. The app<'llant cannot th.crefore take advantage of the observations made in the case of J'oltas Limited (1) torn out of their context.

Coming now to the available surplus for the year I 953-f>4, the Tribunal found that the net profits were Rs. 98,'.~43 and was of opinion that t.aking into account the prior charges three months' bonus would he justified a8 the month))· wage-bill was about Hs. !i,500 per month. The Tribunal, how-ever, did not mako a chart in accordance with the - Full Bench formula to work out the available surplus. It said that QVCTI making allowance for the prior charges there was a substantial surplus to allow payment of three months' bonus. The main The Management oj Marina Hotel attack of the appellant is directed to this infirmity v. in the Tribunal's judgment. It appears, however, The 1¥ orkmtn that the appellant also did not submit a chart Wanchoo J. showing the available surplus, according to its calculations as is usually done in all such cases by an employer. The reason for this apparently was that the balance.sheet and the profit and loss account of the appellant are maintained in a rather peculiar way from which it was not easy to work out the figures according to the Full Bench formula. There is no doubt, however, that the net profits were above Rs. 98,000 in 1953-54.

Depreciation was already provided for in the profit and loss account and as the Tribunal had taken into account net profits it was not necessary to aUow any further depreciation, for the net profits had been arrived at after charging depreciation.

As for rehabilitation it seems to us that there is hardly any scope for rehabilitation in the present case, for we find from the profit and loss account that repairs and replacements which would include what is understood as rehabilitation are charged as expenses. As for income-tax, it appears that the rate was 45 per centum in the relevant year.

The income-tax would thus work out to about Rs. 44,000 leaving a balance of about Rs. 54,000. Then comes 6 per centum return on paid-up capital. The balance-sheet shows Rs. 6,000 as paid-up capital on which the appellant would be entitled to Rs. 360. But, it has been urged before us that the business was purchased for Rs. 60,000 and that should also be treated as capital.

It is enough to say that even if this is a fact there was no evidence of it before the Tribunal and the balance- ~ sheet did not show this figure as eapital. In the cir-

cumstances the appellant cannot in the absence of proof claim that the capital on which 6 per centum interest should be allowed is Rs. 60,000. It will, StJPHEMl<~ COURT REPORTS [1962) 1961

•f howC\·er, be opeu tu the appellant. to pron' this in The .l\lana1tnu:nt s11hse<j11cnt years if it can. The last of the prior

,\/<rri11ri Hotrl

\', d1argcs is return on working capital. On that also Tht Jrorkmtt~ there was "'·i<lcncc the name as to what llo worth lfanchoo .!. amount was used as working capital. fn the circum-

stances the award of three mouths' bonus cannot posRibly be challenged before us.

'\\'" asked the appellant to furnish a chart before us showing what was the surplus according to tlH~ appellant's l'ase. That chart has becu fur-nished and shows an a\'ail:tbl" surplus of Rs. :.?8,550. The rcspondl'nt5 (lispulc a nnrn her of items in that "1iart-and Jl<'rhaps rightly. But e\·cn if we were to :wcept the figure of available surplus for this year at Rs. :.?8,550 the award of three months' bonus which would come to Rs. 16,500 would not be un-jtrntified, particularly as Hs. 8, JOO won Id come back to the appc.llant out of that as rebate on incomo-tax. In the circumst<mccs we arc of opinion that tho orde< of the Tribunal in respect of bonus for the year i95a · fi4 is correct.

Then we come to the year 1954-55. For that yoar the appellant did not cv<'ll produce the balance-sheet antl the profit and loss account. It was, how-ever, conceded before the Tribunal that there were profit;; in Hlli-l-55. The Tribunal therefore held that there was enough profit to warrant the payment of throe months' wages as bonus. This Yiew of the Tri-l.mnal is being attacked and it is mged that in the absence of figures it was not correct for the Tribunal to award anv bonus for this \"car. We consider that the figures ai·e not available because of the fault of tho appellant. "'e find that the balance-sheet and the profit and loss account for the year 1951l-57 were produce<! in anol her cunnec:tion. It is obvious that the account;; for the ,-car 1954-55 were available. The fault for their n01i-production obviously there-fore lies on the appellant. We find, however, from an affidaYit filed on behalf of the respondent.a in this court in connection with the stay application 19~1 that the profits for the year 1954-55 were over The .llanagen~ent of Rs. 85,000. W c asked the appellant to produce the Marina Hotel accounts for the year l!l54-G5 and the original v. The TVorkmen accounts were brought all([ 8hown to us. These accounts confirm the figure of profit mentioned in JVanchoo J. the affidavit filed on behalf of the respondents. We further find tl:>at in the profit and loss account for the year 1953-54, there is an item of over Rs. 13,000 for refund of water charges which has been claimed as extraneous income unrelated to the efforts of labour. If this amount is deducted from the profit of 1953-54 the profit in that year would also come to Rs. 85,000 or so. Thus the profits in the year 1954-55 appear to be more or less the same as in the year 1953-54. In the circumstances there is no reason to interfere with the award of three months' wages as bonus for the year 1954-55.

Leave.

The contention of the appellant in this connec-tion is that the Tribunal was not justified in award-ing 15 days' casual-cum-sickness leave in view of the provisions of s.22 of the Delhi Shops and Establishments Act, (No. VII of 1954), as that provides for a maximum of 12 days for sickness-cum-casual leave. This matter was considered by this Court in Messrs DaJ,mia Cement (Bharat) Limited New Delhi v. Their Workmen and another (1) and it was pointed out that the position with regard to sickness-cum-casual leave was that s.22 fixed a maximum of 12 days total leave for' sickness or casual leave with full wages, and it was not open to the Tribunal to disregard this peremptory direction of the Legislature. In this case the Tribunal was aware of the provisions of s. 22 of the Delhi Shops and Establishments Act; but in spite of that it decided to grant 15 days' sickness-cum-casual leave instead of 12 days, which was the maximum

(I) A;I.R. [1960] S.C. 413.

SUPREME COURT REi>OW1'S (1962]

1961 pro,·icled under the Act. This in our opinion was Th• Ma'l<lge"""' of illegal and the amount of !'asua].cum·sirkncss leave

!if arina llot(l must 'be re<l11cccl to 12 days a.5 pro\'ided in the Aet.

v.

Tlrt Worlcrmn It was urged on behalf of the respondents that