Mill Owners' Association, Bombay v. Rashtriya Mill Mazdoor Sangh
Rule established
Origin of the Full Bench Formula for bonus computation. Established the principle that bonus is payable from available surplus after deducting prior charges from gross profits.
Facts
- Textile mill workers in Bombay demanded bonus
- Mill Owners' Association contested the method of computation
- No statutory formula existed at the time
- Full Bench constituted to lay down a uniform formula for bonus computation across industries
- Both parties made detailed submissions on what deductions were legitimate before distributing surplus as bonus
Issue
- What is the correct method for computing the surplus from which bonus is payable?
Held
- Laid down the Full Bench Formula:
- Calculate gross profits
- Deduct prior charges:
- Depreciation
- Income tax
Ratio Decidendi
Bonus is payable from available surplus computed by deducting prior charges (depreciation, tax, return on capital, rehabilitation) from gross profits. This Full Bench Formula is the foundational method for bonus computation in Indian labour law.
How to use it in an exam
- The origin case for the Full Bench Formula
- Essential for Part B on bonus computation
- Always cite as the historical source: "formula originated in Mill Owners' Association (1950), refined in Associated Cement (1959), codified in Payment of Bonus Act, 1965"
- Key line: "The Full Bench Formula for bonus computation was first laid down in Mill Owners' Association v. Rashtriya Mill Mazdoor Sangh (1950), prescribing that bonus is payable from available surplus after deducting prior charges from gross profits."
Source
Source: AIR 1950 LAT 155; verified from chapter content
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.