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Dharmadhikari, J.—The petitioner no. 1 Co-operative Banks and Societies Employees'' Federation, Maharashtra, is a Trade Union registered under the Indian Trade Unions Act, 1926 representing the workmen employed at the head office of the 2nd Respondent-Jackson Co-operative Credit Society Ltd. On a dispute being raised by the petitioners, a reference was made by the State Government u/s 19(1)(d) read with Section 12(5) of the Industrial Disputes Act, 1947 in respect of two demands. The demands included bonus at the rate of 20% for the years 1975-76, 1976-77 and 1977-78. The second demand was in respect of the provision of armed escorts, with which we are not concerned in this petition. The parties produced documentary evidence before the Tribunal. The Respondent-Society also raised certain preliminary objections. After appreciating all the evidence on record, the learned Member of the Industrial Tribunal, Bombay, rejected the claim for bonus, though granted demand no. 2 in relation to the provision of armed escorts. It is this part of the award rejecting payment of bonus, which is challenged in this writ petition.
For properly appreciating the controversy raised in this petition, it is worthwhile to note that the Petitioner-Union have a membership restricted to the Maharashtra Region only. The dispute was raised on behalf of its members. It also appears from the record that the society carries on its activities in the States of Maharashtra. Gujarat, Rajasthan, Madhya Pradesh, Haryana and Uttar Pradesh. Therefore a contention was raised before the Tribunal that the appropriate Government to make a Reference was not the State Government. Hence the Reference itself was not maintainable. The Tribunal upheld this preliminary objection and held that the Reference itself was not maintainable. Miss Buch, learned Counsel appearing for the petitioner contended before us that the Tribunal committed an error apparent on the face of record in coming to the conclusion that the State Government had no jurisdiction to make the Reference. For properly appreciating the said contention it will be worthwhile if a reference is made to the relevant provisions of the Payment of Bonus Act, 1965 (hereinafter referred to as ''the Bonus Act'') and the Industrial Disputes Act, 1947. By Section 2(5) of the Bonus Act the expression ''appropriate Government'' has been defined. Similarly the said expression has also been defined in the Industrial Disputes Act by Section 2(a). Some debate was raised before us about the distinction between these two definitions. Then comes Section 22 of the Bonus Act, which reads as under :
"22. Where any dispute arises between an employer and his employees with respect to the bonus payable under this Act or with respect to the application of this Act to an establishment in public sector, then such dispute shall be deemed to be an industrial dispute within the meaning of the Industrial Disputes Act, 1947 or of any corresponding law relating to investigation and settlement of industrial disputes in force in a State and the provisions of that Act, or, as the case may be, such law shall, save as otherwise expressly provided, apply accordingly".
From the bare reading of this Section, it is quite clear that Reference of a dispute is contemplated under the Industrial Dispute Act, 1947 since no independent machinery has been provided by the Bonus Act. Therefore, in our view, it is the definition given in the Industrial Disputes Act, which is relevant for deciding the controversy as to which will be appropriate Government for making the Reference. Section 2(a) of the Industrial Disputes Act defines ''appropriate Government'' in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government etc ..... and in relation to any other industrial dispute, the State Government. Admittedly the disputes raised in the present writ petition did not relate to the sub-clause (i) of Section 2(a) of the Industrial Disputes Act. According to Shri Damania, learned Counsel appearing for the Respondent-Society, it is also not covered by sub-clause (ii) of the said definition. According to him since the activities of the Respondent-Society are spread over in the various States dispute raised is likely to affect employees working in other States. The demand of bonus is, therefore, not restricted to a particular area or a State. Since several States are involved in the controversy, the State of Maharashtra is not the appropriate Government for making the Reference. For adjudication of this dispute, the only remedy provided is by Section 10(1A) of the Industrial Disputes Act, which reads as under :
"(1A) Where the Central Government is of opinion that any industrial dispute exists or is apprehended and the dispute involves any question of national importance or is of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by, such dispute and that the dispute should be adjudicated by a National Tribunal, then, the Central Government may, whether or not it is the appropriate Government in relation to that dispute, at any time, by order in writing, refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, whether it relates to any matter specified in the second schedule or the third schedule, to a National Tribunal for adjudication."
Therefore it is contended by Shri Damania that it is rightly held by the Tribunal that the reference itself was not maintainable. It is not possible for us to accept this contention of Shri Damania. From the material placed on record, as observed earlier, it is quite clear that the dispute raised by the petitioners is restricted to its members within the State of Maharashtra. Once it is held that the machinery for resolving the dispute is via the provisions of the Industrial Disputes Act in view of Section 22 of the Bonus Act, then obviously it is the said Act (Industrial Disputes Act) which should govern as to which will be the appropriate Government for making the Reference. If the contention of Shri Damania is accepted that so far as the Respondent-Society is concerned, even on the basis of the definition in the Bonus Act, none of the Governments i.e. Central Government or the State Government, could be termed as appropriate Government, then the provisions of the Payment of Bonus Act, would become unworkable. The expression ''appropriate Government'' is used in various sections of the Bonus Act, such as Sections 16, 19, 21, 27, 30 and 36. If the contention of Shri Damania is tested in the context of Section 30 of the Bonus Act, then no cognizance could be taken under the Bonus Act under the authority of any Government. Therefore, in our view these various provisions of the Bonus Act will have to be construed reasonably and harmoniously. The provisions cannot be construed in a way so as to result in absurdities. It cannot be construed in a way which will result that though rights are conferred upon the employee to get bonus, no remedy is provided for its adjudication or recovery. The machinery provided by Section 10(A) of the Industrial Disputes Act is not the only machinery contemplated by Section 22 of the Bonus Act. Further a power u/s 10(A) of the Industrial Disputes Act is conferred upon the Central Government if it is of the opinion that any industrial dispute exists or is apprehended and the dispute involves any question of national importance or is of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by such dispute and therefore, the dispute should be adjudicated by a National Tribunal. It is no doubt true that the parties can approach the Central Government for taking recourse to the said machinery but does not mean that the substantive right conferred upon the employees is impliedly taken away or the rights could be worked out only via Section 10(1A) of the Industrial Disputes Act. It was not disputed by Shri Damania that, in view of the well settled position in law, the question as to which could be an appropriate Government for making Reference, will have to be decided on the basis of the existence of an industrial dispute, and the area and field covered by it. However, it was contended by Shri Damania that in case of an industry, which covers more than one State, a possibility of conflicting decisions by different Tribunals is not ruled out, and therefore, the only way to resolve the dispute is via the machinery provided u/s 10(1A) of the Industrial Disputes Act and not otherwise. In our view this will not be the correct approach. The criteria to decide the question should be as to where the dispute substantially arose, and the nexus between the disputes raised and the territory of the State. If in a given case the employers feel that for properly resolving the dispute recourse should be taken to the procedure prescribed by Section 10(1A) of the Industrial Disputes Act it is open to them to approach the Central Government, but on that basis it cannot be held that the State Government had no authority to make a reference. In this context Miss Buch has rightly placed reliance upon the decision of the Mysore High Court reported in Workmen of Remington Rand of India Ltd. v. The Presiding Officer, Industrial Tribunal, Bangalore and others 1973. L. I.C. 832. After making a detailed reference to various decisions in the field and the provisions of the Act, in paras 23, 31 and 43 of the said judgment, this is what the Mysore High Court held :
"23. The Tribunal was not wholly correct in saying that the Bonus Act is a self-contained and exhaustive enactment relating to bonus. In Delhi Cloth and General Mills Co. Ltd. Vs. Workmen, the Supreme Court observed at page 546 that the Bonus Act is a self-contained and self-sufficient Act, except in so far as it refers to the other enactments mentioned therein. The Industrial Disputes Act is one of the enactments mentioned in Bonus Act. In Sanghvi Jivraj v. M.C.G. and K.M.W. Union 1968 (17) F.L.R. 218 the Supreme Court has pointed that Section 22 of the Bonus Act creates a statutory fiction that a dispute between an employer and his employees with respect to the bonus payable under the Act, is an industrial dispute and applies the provisions of the Industrial Disputes Act or other corresponding law in force for investigation and settlement of such dispute. Thus once a dispute between an employer and his employees relating to bonus, by the statutory fiction u/s 22 of the Bonus Act, is deemed to be an Industrial Dispute, then, investigation and settlement of such dispute is governed by the provisions of the Industrial Disputes Act including Section 2(a) which defines ''appropriate Government''. There is no reason why the definition in Section 2(a) of the Industrial Disputes Act should not be applied for determining the appropriate Government for referring such dispute for adjudication.
x x x x x
The dispute regarding bonus between the employees of the Bangalore Branch and the Management of Remington Company arose, in our opinion, substantially at Bangalore. Hence it follows, the Government of Mysore, and not the Government of West Bengal, is the appropriate Government to refer said dispute for adjudication. Likewise, the dispute regarding bonus, between the employees of the textile mill at Gokak Falls and the Management of Gokak Falls Ltd., arose, in our opinion, substantially at Gokak Falls. Hence it follows that it is the Government of Mysore, which is the appropriate Government to refer such dispute for adjudication.
x x x x x x
As pointed out by the Supreme Court in Lipton Limited and Another Vs. Their Employees, the Tribunal of each State has jurisdiction to make an award in respect of the employees of establishments in that State and it (the Tribunal) has no jurisdiction to make an all-India Award. If the Management of a company apprehends that the decisions of Tribunals of different States in regard to bonus payable to its employees in different branches or factories situate in different States, may not be uniform, it is up to the Management to approach the Central Government and to persuade it to refer such dispute relating to bonus to a National Tribunal under sub-section (1A) of Section 10 of the Industrial Disputes Act. But the mere possibility or even probability of the decisions of Tribunals in different States not being uniform would not be sufficient to hold that the Government of the respective State in which a branch office or a factory of a company is situate, is not the appropriate Government to refer for adjudication the dispute between the Management of that company and its employees in such branch office or factory".
We are in respectful agreement with the view taken by the Mysore High Court in the aforesaid decision. As already observed if the contention of the respondents is accepted, then the Bonus Act itself will become unworkable and, therefore, in our view, since in the present case the dispute substantially arose within the State of Maharashtra, the State Government of Maharashtra was the appropriate Government to make the Reference and hence the Industrial Tribunal had jurisdiction to entertain and decide the Reference.
Second preliminary objection raised by the Respondents, which is accepted by the Tribunal, was based on the interpretation of Section 32(v)(c) of the Payment of Bonus Act. According to the respondents the Payment of Bonus Act will not apply to them since it is an Institution established not for the purposes of profit and, therefore, exempted from the provisions of the Bonus Act in view of Section 32(v)(c). Relevant provision reads as under :
"Nothing in this Act shall apply to institutions (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit."
As to whether a particular institution is established not for the purpose of profit or not, will have to be decided on the basis of the facts and circumstances of each case and no general rule can be laid down in that behalf. In the present case we are dealing with a credit society. The objects for establishing it are disclosed in the bye-law no. 3 which reads as under :-
"3. The objects of the Credit Society are (1) to encourage thrift, self-held and cooperation amongst the members (2) to create funds for the purpose of making advances to members of the Credit Society at moderate rates of interest (3) to receive sums on deposits at such rate or rates of interest and on such terms as may be decided by the Committee of Management and (4) generally to carry on the business of a co-operative credit society, but subject always to the provisions of the Maharashtra Co-operative Societies Act, and Rules framed thereunder."
Bye-law 33 deals with the deposits, and Bye-law 35 provides for charge of loan. Then comes bye-law 36, which deals with the application of profit. It reads as under :
"36. After the close of each working year, the net profit shall be calculated by deducting the following from the gross profit for the year :
(i) Interest paid and payable.
(ii) Establishment charges including contribution to staff Provident Fund as per rates fixed by the State Government from time to time and 50% of the amount so contributed to the Gratuity Fund payable to the staff of the Society.
(iii) Working expenses.
(iv) Bonus payable to staff of the society as per provisions of the Bonus Act.
(v) After providing, as may be considered by the Committee of Management for the following :-
(a) Depreciation in the value of Securities.
(b) Depreciation on fixed Assets.
(c) Bad and doubtful debts (to be utilised subject to provision of Rule 49 of the M.C.S. Act).
The net profit thus arrived at together with the balance brought forward from the previous year shall be appropriated as under :
(i) To Reserve Fund : 25% of the net profit of the year vide Section 66 of the M.C.S. Act, 1960.
(ii) To Dividend Account : Not exceeding 9% vide Section 67 of the M.C.S. Act, 1960.
(iii) To Dividend Equalisation Fund : A sum not exceeding 2% of the paid-up share capital until it amounts to 9%.
(iv) To Contribution to Charitable purpose : Upto a limit of 20% of the net profit vide Section 69 of the M.C.S. Act, 1960 on subjects such as :-
(a) Staff benefit fund for the society''s employees.
(b) Staff Welfare fund of the Western Railway to be administered by the General Manager.
(c) To any other objects approved by the General Body."
These bye-laws will have to be read with the substantive provisions of the Maharashtra Co-operative Societies Act. Chapter VI of the said Act deals with the property and fund of the Society. Sections 65 and 66, which are relevant for our purposes read as under :-
"65. (1) A society shall construct its relevant annual financial statements and arrive at its consequent net profit or loss in the manner prescribed.
(2) A society may appropriate (its net profits) to the reserve fund or any other fund to payment of dividends to members on their shares ..... to the payment of bonus on the basis of support received from members and persons who are not members to its business, to payment of honoraria and towards any other purpose which may be specified in the rules or bye-laws :
Provided that no part of the profits shall be appropriated except with the approval of the annual general meeting and in conformity with the Act, rules and bye-laws.
(1) Every society which does, or can derive a profit from its transactions shall maintain a reserve fund.
(2) Every society shall carry atleast one fourth of the net profits each year to the reserve fund and such reserve fund may, subject to the rules made in this behalf, if any, be used in the business of the society or may, subject to the provisions of Section 70, be invested, as the State Government may by general or a special order direct, or may, with the previous sanction of the State Government, be used in part for some public purpose likely to promote the objects of this Act, or for some such purpose of the State, or of local interest.
(Provided that the Registrar may, having regard to the financial position of any society or class of societies, fix the contribution to be made to the reserve fund under this sub-section at a lower rate, but not lower than one tenth of the net profits of the society or societies concerned)."
It is further clear from the balance sheet produced on record that the Respondent-Credit Society has been making profits. Profits made are intentional and not accidental. If the Society was not established for the purpose of profit, then, these various provisions in the bye-laws were wholly redundant.
Shri Damania relied upon the provision of Section 4 of the Cooperative Societies Act as well as bye-law No. 3 of the Bye-laws and contended that the object of the society was merely to encourage thrift, self-help and co-operation amongst the members. The funds etc. were created for the said purpose and there was no profit motive behind it. He also contended that whether a society made profit or not, is not relevant for decising the question, but what is relevant is to find out as to whether it is established for profit. However, it cannot be forgotten that whether an Institution is established for profit or not, will have to be decided after taking into consideration its activities, object as well as business carried on by it. In this context, attention of this Court was drawn to the decision of this Court in Maharashtra State Electricity Board Vs. M.C. Chitale and others, , wherein the Division Bench of this Court held that the activities carried on by the Maharashtra State Electricity Board, even when undertaken by the State or its creatures like the autonomous Boards are required to be run on commercial basis to prevent strain on the meagre revenue and resources of the State and profit making is contemplated. As already observed by us, if various provisions of the bye-laws of the Respondent-society are read with Sections 65 and 66 of the Cooperative Societies Act, then a profit-making motive is inherent in the very establishment of the Credit Society. This is reflected in the business carried out by it as well as its balance sheet. In Bye-laws a specific provision is made for the payment of bonus under the Payment of Bonus Act. According to Miss Buch this by necessary implication shows that the Respondent-Society accepted the position that it will be making profit and the Payment of Bonus Act was applicable to it. Now the society is estopped from contending otherwise. In support of this contention the learned counsel has placed strong reliance upon the decision of the Madras High Court in Sabanayagam K. Vs. The Secretary to Government of Tamilnadu, Housing Department and Others, . Having regard to the object of the Society, the enactment under which it is established and particularly Sections 65 and 66 of the Maharashtra Co-operative Societies Act, 1960, the fact that the society has been consistently making profits and is a credit society meant for advancing loans on interest and accepting deposits, an inference could be drawn that it was established for the purposes of making profit. If this is so, then, obviously it is not covered by Section 32(v)(c) of the Payment of Bonus Act. Therefore the Tribunal committed an error in holding that the provisions of the Payment of Bonus Act are not applicable to the Respondent-Society. Thus for the reasons given hereinbefore, none of the preliminary objections had any substance and it will have to be held that the Industrial Tribunal had jurisdiction to entertain and decide the Reference on merits.
So far as the merits of the controversy are concerned, the petitioners have challenged certain findings recorded by the Tribunal allowing deductions from the gross profit, while arriving at the allocable surplus for payment of bonus. In Para 21 of the Award the Tribunal has allowed deductions to the society towards direct taxes, notwithstanding the exemption under the said Act. It is an admitted position that the society is not liable to pay any income tax in view of Section 80-P of the income Tax Act, which allows deductions in respect of the income of the co-operative societies. The Respondent-Society is providing credit facilities to its members, and, therefore, under the said provisions, whole of the amount of profit and gain of business attributed to its activity, is exempted from the payment of income tax. Section 6 of the Payment of Bonus Act provides for the sums which are deductible from the gross profit. Section 6(c) lays down that 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 gain during the year shall be deducted from the gross profit on prior charges. The words and expressions used in this section are ''direct tax which the employer is liable to pay''. By Section 2(12) of the Bonus Act, term ''direct tax'' is defined to mean any tax chargeable under the Income Tax Act and other laws. If the tax is not chargeable under the Income Tax Act in view of the exemption, then obviously there is no liability to pay tax. Therefore if the provisions of Sections 6 and 2(12) of the Bonus Act are read with Section 80-P of the Income Tax Act, it can safely be held that the Respondent-Society had no liability to pay Income Tax. The contention of Shri Damania that it is the notional amount of tax which is relevant for deciding the question and not the actual liability cannot be accepted. The liability of chargeability of tax depends upon the relevant provisions of the Act and in this case the Income Tax Act. When the Income Tax Act in terms declares that no income tax is chargeable in view of Section 80-P of the Income Tax Act, then in our view Section 6(c) is not applicable to such a case. Obviously Section 7 does not come into picture However, Shri Damania tries to draw assistance from Section 7(b) of the Bonus Act for interpreting Section 6 itself. In our view no assistance could be drawn from the said provisions as it deals with the religious or charitable institutions. Similar view was taken by this Court in Air Corporation Employees'' Cooperative Bank Ltd. Vs. Cooperative Bank Employees'' Union and others, , wherein it was held that if u/s 80-P of the Income Tax Act a banking company is not liable to income tax upon its profits and gains of business, then a bank is not liable to pay income tax and cannot claim a deduction therefor. Similar view seems to have been taken by the Punjab and Haryana High Court in State of Haryana and others v. Workmen of Haryana Roadways 1971 (22) F.L.R. 205. Therefore, the Tribunal committed obvious error in permitting deduction towards the direct tax.
Second item on which deduction is permitted by the Tribunal relates to depreciation u/s 6(a) which lays down that any amount by way of depreciation admissible in accordance with the provisions of sub-section (1) of Section 32 of the Income Tax Act, could be deducted from the gross profit as prior charge. However, it is contended by Miss Buch, the learned counsel appearing for the petitioners, that in this case depreciation is claimed at a higher rate than the one permissible under the Income Tax Act. It is observed by that Tribunal in para 22 of its Award that the Union had not challenged the correctness of the entries in the annual report of the year 1973 74 Exh. 12 . It also appears that the respondent-society did file a statement of depreciation for the earlier years as well as relevant years. The respondent-society had also notified that the Union was at liberty to take inspection of the records of the society for the purpose of ascertaining the correctness of the entries appearing in the annual reports. The Union did not take any inspection and no reasons were pointed out for not taking such an inspection. Therefore the Tribunal ultimately recorded a finding accepting the entries made in the balance sheets. It is no doubt true that it is contended by Miss Buch that but for filing balance sheets, no other independent evidence is adduced by the employer to show the correctness of the entries made therein and the burden was wholly on the employer. In support of this contention she has placed strong reliance upon the decision of the Supreme Court in Workmen of National and Grindlays Bank Ltd. Vs. The National and Grindlays Bank Ltd., and the decision of this Court in M/s. Rajaram Rokde and Brothers v. Shriram Chintaman Warker and others 1977 (2) L.I.C. 1954. In our view, in view of the peculiar facts of this case where though inspection was offered the Union did not avail of the said opportunity and the fact that the entries relating to the depreciation for the earlier year i.e. 1973-74 was accepted as correct by the Union, it is difficult to hold that the depreciation claimed was at a higher rate than the one permissible under the Income Tax Act. Therefore, we uphold the finding of the Tribunal on that count.
The next finding of the Tribunal, which is, challenged before us, relates to the interest over due loans. It is challenged solely on the ground that there is nothing on record to show that for the relevant period, loans were written off. By an application Exh. U-5 the petitioners had called upon the Respondent-Society to give reason for non-recovery of the loans and as to why it came to be written off. In reply, the Respondent-Society stated that this amount was written off as per the advice of its Auditors. The Union did not pursue the matter any further. The statement made by employers that the amount was written off as per the advice of its Auditors, is reflected in the Audited Balance Sheet. In this view of the matter we do not find any reason to take a different view than the one taken by the Industrial Tribunal, and confirm the finding recorded by the Tribunal in that behalf.
Another item in dispute relates to the provision for interim relief and contingencies shown in the annual reports. It is contended by Miss Buch that when no liability was fastened upon the employers a provision in that behalf is wholly uncalled for. We do not find any substance in this contention also for the obvious reason that in fact this liability was crystalised and, as prudent management, a provision in that behalf was made in advance so as to spread over the liability. Similar is the position qua the question of carrying forward liability for set on and set off. Section 15 of the Bonus Act deals with the question of set on and set off of allocable surplus. The set off was claimed for the amount of bonus paid during the accounting years, to the employees, though there was no allocable surplus. Sub-section (1) of Section 15 of the Bonus Act provides that where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment u/s 11, then, the excess shall, subject to a limit of twenty per cent. of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and go on up to and inclusive of the fourth accounting year to be utilised for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule. Sub-section (2) of Section 15 further provides that where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment u/s 10, and there is no amount or sufficient amount carried forward and set on under sub-section (1) which could be utilised for the purpose of payment of the minimum bonus, then such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule. Section 10(1) of the Bonus Act provides for payment of minimum bonus. It shall be not less than 8.33 per cent. of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. It was contended by Miss Buch that the Respondent-Society was not entitled to set off of amount of bonus paid by it to the employees in as much as the bonus has not been paid in accordance with the provisions of the Bonus Act. In our view this will be taking too narrow a view of the provisions. In fact bonus was paid to the employees. Since we have held that the Bonus Act applies to the Respondent-Society, then whatever amount was paid towards bonus must be referable to the Bonus Act and, therefore, the employer was entitled to claim set off on the amount of bonus paid to its employees during the relevant years.
Last item about which a dispute is raised before us is in respect of the return on the capital invested at the commencement of each of the accounting year. Section 6(d) of the Bonus Act refers to the deduction of further sums as are specified, in respect of the employer in the third schedule. The third schedule provides for deduction of further sums for the purpose of determining allocable surplus. Item no. 4 of this schedule deals with the co-operative societies. Clause 1 of this item provides that 8.5 per cent., of the capital invested by such society in its establishment as is evident from its books of accounts at the commencement of the accounting year and clause (2) further provides that such sum as has been carried forward in respect of the accounting year to a reserve fund under any law relating to co-operative societies for the time in force, could be deducted. The main dispute between the parties centres around the question as to what amount could be regarded as capital invested by the society, as evidenced from its books of accounts. In the accounts books, there are entries relating to the share capital and subscribed capital. There is also an entry which refers to reserve fund and other funds. It is contended by Miss Buch that he society is entitled to the return of the amount of subscribed capital excluding the amount of reserve fund and other funds. u/s 66 of the Co-operative Societies Act every society is entitled to carry atleast one fourth of the net profits each year to the reserve fund and such reserve fund may, subject to the rules made in that behalf, if any, be used in the business of the society or may, subject to the provisions of Section 70, be invested as the State Government may by general or special order direct, or may, with the previous sanction of the State Government, be used in part for some public purpose, likely to promote the objects of the Act or for some such purpose of the State, or of local interest. Section 70 deals with the investment of fund. Rules 54 of the Maharashtra Co-operative Societies Rules, 1951 deals with the utilisation and investment of reserve fund. The proviso to the said rule lays down that in the case of a society whose reserve fund is equal to or more than its paid up share capital, the Registrar may, by general or special order, permit fund which is in excess of its paid up share capital, or a portion thereof, in its business. Bye-law 36(2) of the Bye-laws, provides that the net profit thus arrived at together with the balance brought forward from the previous year shall be appropriated to the reserve fund. Bye-law 37 of the By-laws then lays down that the reserve fund shall be available by resolution of the General Meeting to cover deficiencies, which may arise from unforeseen losses and serve as security for any loans which the Credit Society may find that it has to contract in the event of dissolution. It further provides that the reserve fund may, with the approval of the Registrar appointed under the Act by the local Government, be applied to such purpose as may be determined by the majority of members. On the basis of these provisions it is contended by Miss Buch that the reserve fund is not capital invested, therefore, deduction on that count is not permissible. According to the learned counsel reserve is an amount which is in the nature of saving from the profit and, therefore, not a part of the capital and this is clearly reflected in the balance sheets. On the other hand it is contended by Shri Damania that the Third Schedule to the Payment of Bonus Act, should be read as a whole. If so read, then it is the total of item nos 1 and 2 in clause 4, which will have to be taken into account. So construed, reserve is also capital invested for a particular purpose. It is no doubt true that the Third Schedule should be read as a whole. In the items which deal with Companies, other than Banking Companies, or Corporations, a specific provision is made for the reserve fund. Such a provision is not made for the Co-operative Societies. By an explanation to the said schedule, it is made clear that the expression ''reserve'' occurring in column 3 against item nos. 1 (iii), 2 (iii) and 3 (ii) shall not include any amount set apart for the purposes enumerated therein. Therefore the amount which is set apart for the said purposes is not treated as capital. From the provisions of the Co-operative Societies Act, to which a reference has already been made, as well as the bye-laws, it is quite clear that the reserve fund remains in reserve and is not to be used for the business of the society, as capital, unless it is equal to or more than its paid-up share capital. If this is so, then in our view this reserve fund cannot be treated as capital of the society for the purpose of deduction under the Payment of Bonus Act. Therefore, it is not possible for us to accept the view taken by the Industrial Tribunal in that behalf.
It is really surprising that a Credit Co-operative Society of employees is trying to avoid its responsibility to pay bonus to its employees. The members of this credit society who are employees of Western Railway agitate for more wages, bonus etc. for themselves, but refuse to pay bonus to its employees. As a matter of fact they should act as model employers, and should not try to defeat the just claims of its employees by raising technical objections. It cannot also be forgotten that where a sanction made as a beneficient legislation, is meant for sharing profits by the employees, if there is any doubt about the meaning of some provision, that doubt should be resolved in favour of the employees for whose benefit Payment of Bonus Act was passed. Therefore in our view the Tribunal committed an error in rejecting the demand for the bonus.
Without prejudice to the contentions raised, the respondents have filed before us statements regarding computation of gross profit and allocable surplus for the accounting years 1975-76, 1976-77 and 1977-78. The Petitioners admit these statements. From these statements we find that there is available surplus of 60% which is allocable for Bonus exceeds 20% of the wages/salaries paid to the employees in the respective years. As such the employees will be entitled to 20% Bonus, in each of the three years, of their annual total earning. In the view which we have taken it is not necessary to deal with the other contentions raised in the petition.
In the result, therefore, Rule is made absolute and respondents are directed to pay bonus to the employees at the rate of twenty percent of the total annual earnings for the years 1975-76, 1976-77 and 1977-78. However, in the circumstances of the case there will be no order as to costs. It is needless to say that the bonus at this rate will be payable after adjusting the amount of bonus already paid. The amount of bonus to be paid on or before 31st of March 1988.
At this stage respondents have prayed for leave to file appeal to the Supreme Court. Since our findings are based on the well established principles of law, we do not feel that this is a fit case for grant of such a certificate. Hence leave refused.