Bihar State Electricity Board, Patna v. Their Workmen

ALAGIRISWAMI, J.-This appeal is by special leave granted by this 1Court against th~ award of the Industrial Tribunal, Bihar at Patna in reference No. 54 of 1966 made by the Government of Bihar on 25th November, 1966. The special leave granted is limited only to the question wheth~r there should be a contributory provident fund scheme ·on the basis of basic wages or total wages. It was noted at the time of granting the special leav~ that the appellant Board is willing fo extend ·that scheme to all the workers except the Government servants who are ,on deputation and those to whom the Employees' Provident Fund Act .j applies. Therefore the only item in reference No. 54 of 1966 which

'is r·~levant for the purpose of this appeal is the following :

"Whether the benefit of the Employees' Provident Fund Act, 1952 should be extended to any additional categories of workmen? If so, what should be the terms and conditions and from what date ?"

The Employees'. Provident Fund Act applies only to establishments ' which are factories. It could be applied to establishments which are 11ot factories if the Central Government by notification in the Official ~azett.e specifies tn t~is behalf. The _industry in question,, electricity-mcludmg the generation, transmission and distribution thereof is one t_o which the Act applies. But as_ is well-known only a small 'propor-t1<'.n of employ~es connected _with the generation of electricity is in esta-blishments which are factones. The transmission and distribution is all over the Sta_te and the employees concerned with transmission and distribution and the_ maintenance of those lines of transmission and dis-tribution are spread all over the State and probably far outnumber those work_ing in establishments which are factories. To them the Employees' Provident Fund Act does not ap2Iy. The Board maintains a Contribu-tory Provident Fund where the contribution is on the basis of basic wage, the Board and the employees contributing equally.

The workmen claimed that all workmen of the Board should have the same and similar benefits-and that therefore there should be no dis-tinction between the Board's Contributory Provident Fund scheme and the scheme under the Employees Provident Fund Act. Moreover, the conti·ibution under the Act is 8 per cent whereas under the Board's-schcme it is 6t p·er cent. The employees also contended that the ser-vices of the workmen of the Board are liable to be transferred from one establishment to another both which may not be covered by the same scheme under the Act and therefore it will bring about serious injustice if rhey are: deprived of their benefits-under the Act, and such anomalies will be removed by making the benefits. under both the schemes similar. The Board's contention was that this would impose additional financial liabilities which the Board would not be abk to bear. Therefore, the main question which the Tribunal had to consider was the Board's financial capacity tq implement the Provident Fund scheme as demand,- cd by the workmen. It seems to have been argued on behalf of the workmen that the State Government is the financier of the Board which charges interest now at the rate of 6t per cent a& against the previous 4 per cent per annum. It was also contended that no scheme run by the Board was running at a loss. Exhibit 17, purported to contain trad-ing results of the Board,. was shown to the Tribunal and it was argued that in the year ending March 1969 Board's gross profits amounted to Rs. 305.12 lakhs and it had been continuously rising from Rs. 59.39 lakhs in 1961. Exhibit 18 shows the loans which have been received from the Government by the Board and the balance sheet shows a very large amount in the shape of interest payable to the Government. It was argued on behalf of the Union that this amount should be taken as dividend to be paid to the Government by the Board and should not be taken into consideration whifo deciding matters regarding bene-fits to be made available to its employees. The validity of none of these contentions was consider·ed by the Tribunal. It referred to an award made by it in 1964 in reference No. 19 of 1960 in which it had held that if the interests realised by the Stat~ were excluded from consid-er~­ tion, there would be surplus in favour of the Board. In that award it had been pointed out that it had not been explained by the management how the depreciation had been calculated. That award also pointed out that one of the main reasons for the deficits shown was heavy inter-est on the capital investment. that in an electrical establishment capital investments are heavy in the initial stages, that the Board expected that after the load developed fully the scheme would start giving adequate profits. Th_e Tribunal thought that the position at present was not worse than what it was ·earlier and that therefore the Board should ex-tend the benefits of the Contributory Provident Fund to all workmen other than thosei who are covered by the Act. It therefore ordered that the contribution should be 6t per cent but not on the basic wages but on the total wages.

The Tribunal has treated the whole matter in a very perfunctory manner. The main question for consideration by the Tribunal was the financial capacity of the Board. It has made no effort at all to analyse the balance sheet of the Board to show the actual results of its working. It has made no effort to work out the financial implications of its order. It has not made it clear what exactly are the total wages. In Gramo-phone Co. v. Its Workmen( I) it was held by this Court that :

"Before the real profit for each of the relevant years is ascertained amounts to be provided for taxation and for deve-lopment rebate reserve could not be deducted in order to ascertain the financial capacity of the employer. In consider-ing the question of provident fund and gratuity which stands more or less on the same footing the industrial tribunal has to look at the profits made without considering provision for taxation in the shape of income-tax and for reserves. The provision for income-tax and for reserves must take second place as compared to provision for wage-structure and gratui-ty, which stands on the same footing as provident fund which is also a retiral benefit. Payment towards provident fund and gratuity is expense to be met by an employer like any other expense including wages and if the financial position shows that the burden of payment of gratuity and provident fund can b~ met without undue strain on the financial position of the employer, that burden must be borne by the employer. It will certainly result in some reduction in profits; but if the industry is in a stable condition and the burden of provident fund and gratuity does not result in loss to the employer. that burden will have to be borne by the employer like the burden of wage-structure in the interest of social justice. While on tlre one hand casting of this burden reduces the margin of profit, on the other' hand it will result in the reduction of taxa-tion in the shape of income-tax."

That case was a case of an ordinary commercial concern. Even so it was noticed that the stability of the industry as well as the fact that the burden of provident fund and gratuity does not result in loss to the employer are to be taken into CQ!lSideration. The actual burden was i calculated and it was pointed out that 63 per cent of it would be met

by reduction In taxation. Nothing of the sort has been done by the Tribunal in this case. It is true that in that case it was said that the amounts to be provided for taxation and for development rebate reserve could not be deducted in order to ascertain the financial capacity of the employer. Nothing was said there .about the depreciation reserve -------··-

(1) [1964] IIL. L. J. 131.

which is obligatory under s. 68 of the Electricity (Supply) Act. The Electricity Board js not an ordinary commercial concern. It is a pub-lic service institution. It is not expected to make any profit. It is expected to extend th~ supply of e1ectricity to unserved areas withouE reference Lo considerations of loss that might be incurred as a result of such extension. The Government makes subventions to the Board for the purposes of the Act. Section 59 of the Electricity (.Supply) Act, 1948 provides that as far as practicable and after taking credit for any subventions from the State Government the Board shall carry on its operations so as not to incur a loss. Under s. 64 the State Govern-ment may advance loans to the Board and under s. 65 the Board itself has the power to borrow. Under s. 6(J the State Govanment may guarantee the payment of principal and interest of any loan proposed to be raised by the Board. Under s. 67 after meeting its op~rating, maintenance and management expenses and after provision has been made for the paym~nt of taxes on its income and profits the revenues of the Board have to be distributed as far as they are available in the following order, namely :-

(i) interest on bonds not guaranteed under section 66;

(ii) interest on stock not so guaranteed;

(iii) credits to depreciation reserve under section 68;

(iv) interest on bonds guaranteed under section 66;

(v) interest on stock so guaranteed;

(vi) interest on sums paid by the State Government under gua-

rantees under section 66;

(vii) the write-down of amounts paid from capital under the pro-

vi so to section 5 9;

(viii) tlie write-down of amounts in respect of intangible assets to

the extent to which they are actually appropriated in any year for the purpose in the books of the Board;

(ix) contribution to general reserve of an ainount not exceeding "r"

one-half of one per centum per annum of the original cost j of fixed assets employed by the Board so however that the total standing to the credit of such reserve shall not exceed fifteen per centwrz of the original cost of such fixed assets; (x) interest an loans advanced or deemed to be advanced to

the Board under section 64, including arrears of such in-. terest;

(xi) the balance to be appropriated to a fund to be called the

Development Fund to be utilised for- (a) purposes beneficial, in the opinion of the Board, to electrical development in the State;

(b) repayment of loans advanced to the Board under sec-tion 64 and required to be repaid :

Provided that where no such loan is outstanding, one-half of the balance aforesaid shalt be credited to the Consolidated Fund of the :State.

Section 68 lays an obligation on the Board to make a credit to the .depreciation reserve in the prescribed manner.

The facile assumption by the Tribunal that the interest should not be taken into account in working orit the profits is not born~ out by the provisions of the statute. Indeed the Tribunal did not look into the Act at all. Whether in view of the statutory obligations laid on it under the various sections just now referred to in analysing the capa- .I city of the Board to bear any additional burden in the matter of provi-

dent fund or other amenities the same considerations that applied in the case of private commercial concerns could be applied is a rather di:ftl-cult question. In_ fact the decision might very often depend on a close' analysis of the financial condition of the Board. We do not want at present to express one view or the other. One thing at least is obvious, that the variou~ sums payable under the provisions of s. 67 have to be deducted b~fore the profits could be ascertain~d. Even with regard to the depreciation reserve the provisions of s. 68 may have. to be taken into account. H it is not it would have to be met by loans on which interest will have to be paid and deduction of interest so paid will have to be taken into account in calculating the profits. The contribution to the depreciation reserve is a statutory obligation and is a definite pro-portion whereas it is open· to an ordinary commercial concern to credit any amount to the depreciation reserve. These and other matters cannot be properly decided in the absence of a detailed examination of the finances of the Board. That is why we said that the Tribunal has dealt with the matter in a perfunctory way. It should be directed to dispose of the matter afresh in the light of the observations made in this judgment.

The appeal is accordingly allowed. There will be no order as to costs.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2104 of 1969. Appeal by Special Leave from the Judgment and Order dated the 27th February, 1969 of the Industrial Tribunal, Bihar, Patna in refe- .rence No. 54 of 1966.

S. V. (lupte and U. P. Singh for the Appella,nt.

A. K. Nag and D. P. Mukherjee for Respondents.