Associated Cement Companies Ltd. v. Their Workmen
Rule established
Bonus is a deferred wage and a share in the prosperity of the enterprise. The Full Bench Formula provides the framework for computing available surplus from which bonus is payable.
Facts
- Dispute over quantum of bonus payable by Associated Cement Companies
- Workers demanded higher bonus
- Company argued limited surplus after meeting prior charges (depreciation, reserves, return on capital)
- Industrial Tribunal applied the Full Bench Formula
- Company appealed against the formula's application
Issue
- Whether the Full Bench Formula correctly computes the available surplus from which bonus is payable, and what constitutes legitimate prior charges.
Held
- Bonus is both:
- A deferred wage (workers' right by virtue of service)
- A share in prosperity (linked to profits)
- The Full Bench Formula is the correct method:
- Start with gross profits
Ratio Decidendi
Bonus is a deferred wage and a share in prosperity. The Full Bench Formula (gross profits minus prior charges equals available surplus) is the standard method for bonus computation. This formula was later codified in the Payment of Bonus Act, 1965.
How to use it in an exam
- Authority for Full Bench Formula and nature of bonus (deferred wage + prosperity sharing)
- Use in Part B on bonus computation
- Key line: "In Associated Cement Companies (1959), the Supreme Court confirmed that bonus is both a deferred wage and a share in prosperity, and that the Full Bench Formula provides the standard computation framework."
Source
Source: AIR 1959 SC 967; verified from chapter content
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.