THE MAHARASHTRA STATE ELECTRICITY BOARDversusMAHARASHTRA VEEJ MANDAL KAMGAR SANGH AND ANR.

    THE MAHARASHTRA ST ATE ELECTRICITY BOARD                                      A
                       v.
 MAHARASHTRA VEEJ MANDAL KAMGAR SANGH AND ANR.

                           DECEMBER I 0, I 998

            [S.B. MAJMUDAR AND U.C. BANERJEE, JJ.]                                B

     Labour Laws:

      Payment of Bonus Act, 1965-Sections 2(b), 4(b), 5, 6, 8, JO and I I
read with Schedules II and Ill-Accounting years 1965-66 to 1969-70- C
Allocable surplus-Statutory undertaking other than a banking company-
Computation of gross profits of-Interest on bonds and government loans-
Jf deductible under Section 6 or otherwise-Held, not deductible under
Section 6(a) to (c) & (d) read with Schedule Ill-However, Industrial Tribunal
directed to decide whether deductible to determine the net profits as mentioned D
at item 1 of Schedule //-Contention regarding determination of net profits
although raised for the first time before the Division Bench of the High Court
in review petition and rejected by the Division Bench on that very ground-
As the Divison Bench of the High Court had already remanded the case to
the Tribunal disallowing deductions on these two items from gross profits
under Section 6, in the interest ofjustice, Tribunal to examine this contention E
as well-Electricity-Electricity (supply) Act, 1948-Section 5-Constitzition
of India, I 950-Article I 36-Practice and Procedure-Pleadings-New
plea-Jn the peculiar circumstances of the case matter examined and remanded
to Tribunal for decision.

      Words and Phrases-Words "allocable surplus"-Meaning of-In the               F
context of Section 2(b) of the Payment of Bonus Act, 1965.

      Respondents I and 2 on behalf of workmen of the appellant raised an
industrial dispute pertaining to non-payment of appropriate statutory bonus
to their members for the relevant years as the allocable surplus was sufficient
to make available to the workmen more than 4 per cent bonus. This dispute         G
was referred for adjudication to the Tribunal which came to the conclusion
that after effecting relevant deductions on various items which the appellant-
Board sought to get deducted from the gross profits for the relevant years,
no allocable surplus for the relevant years rrsulted and hence the claim of
the workmen was rejected. The respondents then challenged the findings of         H
                                     479
     480                        SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A    the Tribunal before the High Court and a single Judge of the High Court
     confirmed the findings of the Tribunal. On Letter Patents Appeal filed by the
     respondents the Division Bench took the view that the disputed items which
     were deducted by the Tribunal from the gross profits for the relevant years
     were not deductible and hence the Tribunal was required to recompute the
B    allocable surplus for the relevant years for which the matter was remanded
     Hence this appeal.

           It was inter-alia contended by the appellant, that net profits for the
     accounting years as per the accounting practice would entitle the appellant
     to get deducted from the gross profits the two items of interest which were
C    disputed in the present case and then only the net profit as per the accounting
     practice would be worked out. This contention was not raised before the
     Tribunal or Single Judge.

           Remanding the matter to the Tribunal, this Court

·D          HELD: 1. A mere look at Section 6 of Payment of Bonus Act, 1965
     itselfshows that interest on bonds or government loans do not get covered ·
     by any of the clauses from (a) to (c). They are not included in the list of
     deductible sums as mentioned in the Third Schedule. Hence clause (d) also
     does not apply to them. Consequently, no fault can be found with the impugned
     decision of the High Court when it took the view that the interest paid by
E    the Board on bonds or government loans for the relevant accounting years
     were not items deductible under section 6 of the Act. (483-F; 484-A-D)

           2.1. On the contention of the appellant-Board, which does not appear
     to have been placed before the Tribunal or before the learned singie Judge
     of the High Court but was placed before the Division Bench, this Court
F    deems it fit to consider the same on merits as the said contention has a direct
     linkage with the computation of allocable surplus during the relevant
     accounting years for which the proceedings are remanded by the High
     Court. (484-E-F)

G          2.2. Section 11 provided that if allocable surplus exceeds the amount
     of minimum bonus payable to the employees, the employer shall, in lieu of
     such minimum bonus, be bound to.pay bonus in proportion to the salary or
     wage earned by the employee during the accounting year subject to a maximum
     of twenty per cent of such salary or wage. Section 2(b) defined allocable
     surplus. It provides that the available surplus in respect of any accounting
H    year shall be the gross profits for that year after deducting therefrom the
  MAHA. STATE ELE. BD. v. MAHA. V.M. KAM GAR SANGH [S.B. MAJMUDAR, J.]     481

sums referred to in Section 6. Section 6 does not cover the disputed two           A
items of interest. However, it is obvious that the available surplus would
consist of two ingredients i.e. (i) gross profits and (ii) deduction from the
said gross profits permitted under Section 6. Even if the deductions are not
permitted under Section 6 of the Act so far as these two items are concerned,
the further question would survive whether these items will have any nexus         B
to the computation of gross profits. Computation of gross profits is provided
by Section 4 of the Act. As the appellant-Board is not a banking company
it would be covered by Section 4(b). Second Schedule lays down the procedure
for computing gross profits for the accounting year in question. The very
fir:st item of the Second Schedule shows that the accounting year in question,
the net profit as per the profit and loss account of the concern will have to      C
be first ascertained and after that figure is arrived at, certain items are to
be added back as mentioned in item Nos. 2, 3 & 4 of the Schedule and that
is how item No. 5 would consist of the sum total of item Nos. I, 2, 3 & 4.
So far as the deductions permitted from this total figure arrived at item No.
5 are concerned, they are mentioned at item No. 6(a) to (g). It is not the
contention of either side that these two disputed items could be deducted          D
under any of the sub-clauses of item No. 6. The short question highlighted
for consideration was as to what was the correct net profit figure for each
of accounting years in question. (484-G-H; 485-A-B-C-D-E-F-G)

      2.3. The interest of justice would be served if remaud order is maintained   E
subject to the modification that the Tribunal while considering the allocable
surplus for all these relevant five years in question, may also address itself
to the moot question of as to what was the net profit as per Second Schedule
as available to the appellant-Board for all these relevant years.
                                                              [486-H; 487-A-BJ
                                                                                   F
        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2765 of
1987.

      From the Judgment and Order dated 13.4.87 of the Bombay High Court
in A. No. 164 of 1981.
                                                                                   G
        S.K. Dholakia and A.S. Bhasme for the Appellant.

        Mrs. Sheela Goel for A.K. Goel for the Respondents.

        The Judgment of the Court was delivered by

        S.B. MAJMUDAR, J. The Maharashtra State Electricity Board by grant         H
    482                         SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A of special leave has brought in challenge the decision rendered by the Division
    Bench of Bombay High Court by which an order of remand was passed
    directing the Tribunal functioning under the Industrial Tribunal, Maharashtra,
    Bombay to recompute the allocable surplus for deciding whether the workmen
    under the appellant-Board were entitled to more than minimum 4 per cent
B   bonus for the years 1965-66 to 1969-70.

           In order to appreciate the grievance made by learned senior ccunsel for
    the appellant-Board against the remanded proceedings it would be necessary
    to narrate a few introductory facts. The appellant-Board is a statutory
    undertaking as defined in Section 5 of the Electricity (Supply) Act, 1948. It
C   is employing in connection with its statutory functions a number of workmen.
    It is not in dispute that Payment of Bonus Act, 1965 (hereinafter to be referred
    to as the Act) applies to the appellant concern and its workmen. Two trade
    unions i.e. Respondent Nos. I & 2 on behalf of workmen of the appellant
    raised an industrial dispute pertaining to non-payment of appropriate statutory
    bonus to their members for the aforesaid relevant years as according to them,
D   allocable surplus with the Board for these years was sufficient to make
    available to the workmen more than 4 per cent bonus. Their claim was based
    on Section 8 of the Act which lays down that every employee shall be entitled
    to be paid by his employer in an accounting year, bonus, in accordance with
    the provisions of this Act, provided he has worked in the establishment for
E   not less than thirty wCJl"king days in that year.

          They also relied on Section 11 of the said Act. This dispute was referred
    for adjudication to the Tribunal. The Tribunal after hearing the parties came
    to the conclusion that after effecting relevant deductions on various items
    which the appellant-Board sought to get deducted from the gross profits for
F   the relevant years, no allocable surplus for the relevant years resulted.
    Consequently, the workmen were not entitled to any bonus exceeding 4 per
    cent which was minimum statutory bonus payable under Section I 0 as it
    stood during the relevant accounting years, irrespective of the fact whether
    any allocable surplus resulted for the relevant years or not and consequently
G   the reference was decided against the respondents. The respondents carried
    the matter in a writ petition before the Bombay High Court. A learned Single
    Judge after hearing the parties confirmed the decision of the Tribunal and that
    is how the respondents carried the matter under Letters Patent before the
    Division Bench of the High Court. The Division Bench took the view that the
    disputed items which were deducted by the Tribunal from the gross profits
H   for the releva~t years were not deductible. Consequently, the Tribunal was
  MAHA. STATE ELE. BD. v. MAHA. V.M. KAMGAR SANGH [S.B. MAJMUDAR, J.]       483
required to recompute the allocable surplus for all these relevant years and      A
hence the impugned remand order was passed,

       Learned senior counsel, Shri Dholakia appearing for the appellant-Board,
vehemently contended that at least for three items the Division Bench of the
High Court was in error when it held them to be not deductible from gross
profits, The three items for which .the grievance is canvassed are as follows:    B
      (i) Development rebate deductible according to the appellant under
                                                                        -
section 6(b) of the Act.

      (ii) Interest on bonds; and
                                                                                  c
      (iii) Interest on Government loans,

      We shall therefore, deal with these items seriatim,

      So far as the first item is concerned, after mentioning the same and
trying to pursue his contention for some time, learned senior counsel Shri        D
Dholakia ultimately did not press this item for deduction. We therefore confirm
the view of the High Court that development rebate amount was not required
to be deducted from gross profits earned by the appellant-Board during the
relevant years. Now remains the last two items which we will consider together.

      Interest on Bonds & Government loans:                                       E
     So far as these two items are concerned, the High Court in the impugned
judgment has taken the view that none of the provisions of Section 6, would
permit such deductions from the gross profit. Section 6 reads as under:

           "6. Sums deductible from gross profits:-The following sums shall       F
        be deducted from the gross profits as prior charges, namely:-

            (a) any amount by way of depreciation admissible in accordance
        with the provisions of sub-section(!) of Section 32 of the Income-tax
        Act or in accordance with the provisions of the Agricultural Income-
        tax Act, as the case may be:                                              G
            Provided that where an employer has been paying bonus to his
        employees under a settlement or an award or agreement made before
        the 29th May, 1965, and subsisting on that date after deducting from
        the gross profits notional normal depreciation, then, the amount of
        depreciation to be deducted under this clause shall, at the opinion of    H
    484                        SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A           such employer (such opti0n to be exercised once and within one year
            from that date) to be such notional normal depreciation:

                (b) any amount by way of development rebate or investment
            allowance or development allowance which the employer is entitled to
            deduct from his income under the Income-tax Act;
B
                (c) subject to the provisions of Section 7, any direct tax which the
            employer is liable to pay for the accounting year in respect of his
            income, profits and gains during the year;

                (d) such further sums as are specified in respect of the employer
C           in the Third Schedule."

         A mere look at Section 6 itself shows that these two items do not get
    covered by any of the clauses from (a) to (c).

          They are not included in the list of deductible sums as mentioned in the
D Third Schedule. Hence clause (d) also does not apply to them. Consequently,
    no fault can be found with thc;_impugned decision of the High Court when
    it took the view that interest paid by the Board on bonds or government loans
    for the relevant accounting years were not items deductible under section 6
    of the Act. However, this is not the end of the matter.

E          Learned senior counsel, Shri Dholakia placed before us a different
    contention which does not appear to have been placed before the Tribunal
    or before the learned Single Judge of the High Court but was placed before
    the Division Bench and which was repelled by the Division Bench by saying
    that it was faintly submitted and was not canvassed before the Tribunal or
    before the learned Single Judge. However, as the said contention has a direct
F   linkage with the computation of allocable surplus during the relevant
    accou~ting years for which the proceedings are remanded by the High Court,
    we deJm it fit to consider this contention on merits.

        In order to appreciate this contention of learned senior counsel appearing
G for the appellant-Board, Shri Dholakia we may have a look at Sections 11, 5
  & 4 of the Act. Section 11 provides that if allocable surplus exceeds the
  amount of minimum bonus payable to the employees, the employer shall, in
  lieu of such minimum bonus, be bound to pay bonus in proportion to the
  salary or wage earned by the employee during the accounting year subject
  to a maximum of twenty per cent of such salary or wage. Section 2 (b) defines
H allocable surplus. It is this surplus which is relevant for computing payable
  MAHA. STATE ELE. BO. v. MAHA. V.M. KAMGAR SANGH [S.B. MAJMUDAR, J.]        485
bonus as per seC'tion 11. It has in its turn linkage with available surplus.         A
Section 5 deals with available surplus. It provides that the available surplus
in respect of any accounting year shall be the gross profits for that year after
deducting therefrom the sums referred to in Section 6, We have already seen
that Section 6 does not cover the disputed two items of interest. However,
it is obvious that the available surplus will consists of two ingredients i.e. (I)   B
gross profits and (ii) deduction from the said gross profits permitted under
section 6.

      Even if the deductions are not permitted under Section 6 of the Act so
far as these two items are concerned, the further question would survive
whether these items will have any nexus to the computation of gross profits.         C
Computation of gross profits is provided by Section 4 of the Act which reads
as under:

            "4. Computation of gross profits:- The gross profits derived by an
        employer from an establishment in respect of any accounting year
        shall -                                                                      D
            (a) in the case of a banking company, be calculated in the manner
        specified in the First Schedule;

           (b) in any other case, be calculated in the manner specified in the
        Second Schedule."                                                            E
       As the appellant-Board is not a banking company it would be covered
by section 4(b). That will take us to the Second Schedule. Second Schedule
lays down the procedure for computing gross profits for the accounting year
in question. The very first item of the Second Schedule shows that for the
accounting year in question, the net profit as per the profit and loss account       F
of the concern will have to be first ascertained and after that figure is arrived
at certain items are to be added back as mentioned in item Nos. 2,3 and 4 of
the Schedule and that is how item No.5 would consist of the sum total of item
Nos. 1,2,3 & 4. So far as the deductions permitted from this total figure arrived
at item No.5 are concerned, they are mentioned at item No. 6(a) to (g). It is        G
not the contention of either side that these two disputed items could be
deducted under any of the sub-clauses of item No.6. The short question with
which we are concerned and which was highlighted for our consideration by
learned senior counsel for the appellant, Shri Dholakia was as to what was
the correct net profit figure for each of the accounting year in question. His
submission was that net profits for the accounting year as per the accounting        H
    486                        SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A practice would entitle the appellant to get deducted from the gross profits the
  two items of interest which arc disputed in the present case and then only
  the net profit as per the accounting practice would be worked out. Not only
   that but according !o him, the net profit figures were submitted to the Tribunal
  as per Exhibit-C-19. The High Court in the impugned judgment has noted that
   the Tribunal has already computed the net profits for all the accounting years
B in the light ofExhibit-C-19 as found in paragraphs 16 to 25 of the Tribunal's
  judgment. However, Shri Dholakia, learned senior counsel submitted that the
   figures of net profit mentioned by the Tribunal for the relevant accounting        .'
  years are not correctly mentioned and in his submission Exhibit-C-19 is
  misread by the Tribunal while mentioning the figures of net profits for all
C these years. When it was pointed out to him that such a contention was never
  canvassed before the learned single Judge in that form or before the Division
  Bench, he submitted that before the learned Single Judge it was not canvassed
  but as the final decision of the learned Single Judge was in favour of the
  appellant-Board the said mistake did not assume importance and that the
  Division Bench in appeal relying on these figures was persuaded to pass an
D order against the appellant. According to learned senior counsel for the
  appellant, Shri Dholakia, once the High Court in the impugned judgment has
  reversed the decision of the learned Single Judge and the Tribunal it became
  necessary for the appellant to move the High Court in a review petition in this .
  connection and a review petition was moved but unfortunately it was dismissed
E and it is therefore that the said contention is again canvassed for
  reconsideration in this appeal. The submission of Shri Dholakia was to the
  effect that Exhibit-C-19, a copy of which was furnished to us in this proceeding,
  mentioned in the first item for all the relevant years surplus brought forward
  to net revenue account, while below that after mentioning the relevant items
  for deduction from the surplus figure the net profits were worked out for all
F these relevant years to be covered by item No. I being net profits as p~r
  Second Schedule. It was therefore contended that there was an apparent error
  committed by the Tribunal in wrongly mentioning as net profits the figures
  which are really shown as surplus brought forward to net revenue account
  for all these relevant years. Now, it must be noted that this contention though
G raised in the review petition was not raised earlier before the learned Single
  Judge or in this very form before the Division Bench. But as we find that the
  proceedings are already remanded by the High Court by the impugned judgment
  by disallowing the deductions on these two items from the gross profit under
  Section 6 of the Act and which disallowance is being upheld by us, in our
  view, interest of justice will be served if we maintain the remand order subject
H to the modification that the Tribunal while considering the allocable surplus
  MAHA. STA TEELE. BD. v. MAHA. V.M. KAMGAR SANGH [S.B. MAJMUDAR, J.]   487
for all these relevant five years in question, may also address itself to the A
moot question as to what was the net profit as per Second Schedule as
available to the appellant-Board for all these relevant years. This question
may be examined by the Tribunal after hearing the parties concerned and the
Tribunal may thereafter take a final decision in the light of the evidence on
record. It will be open to the appellant to justify the figures mentioned in B
Exhibit-C-19 and it will also be equally open to the respondents to place
relevant materials to justify their claim about conect net profits for all these
years. We make it clear that we express no opinion on the merits of the
controversies between the parties. The appeal is disposed off accordingly
with no order as to costs. As the proceedings are pending since long we
deem it fit to direct the Tribunal to dispose of this remanded proceeding C
within six months from today. The Tribunal shall proceed accordingly after
issuing notice to the parties and fixing an early date of hearing. A copy of
this order shall be sent by the office to the Tribunal concerned for information
and necessary action.

RKS.                                                   Appeal disposed of.    D