THE DELHI CLOTH & GENERAL MILLS CO. LTD.

V
WORKMEN, AIR 1967 SC 469

Bench: Mitter, G.K.

Citation: AIR 1967 SC 469

Facts:

The Delhi Cloth & General Mills Co. Ltd. was a textile manufacturing company in Delhi,
India. The company was facing financial difficulties and losses. In 1959, the company's
management decided not to declare any bonus to its workers for that year due to its financial
losses.

The workers' union, represented by the workmen, raised a dispute with the company
management regarding the non-payment of bonus. The dispute was referred to the Industrial
Tribunal for resolution. The union contended that the company's refusal to pay any bonus was
unjustified, while the company argued that its financial losses provided a reasonable cause for
not paying a bonus.

Issues:

The main issues in the case were related to the payment of bonus and the conditions under
which it should be given to the workers. The central question was whether the financial
difficulties of the company could be considered as reasonable cause to deny or reduce the
bonus to the workers.

Procedural History:

The case initially started as an industrial dispute before the Industrial Tribunal. The workers'
union had sought a direction for the payment of bonus for a particular accounting year. The
tribunal ruled in favor of the workers and directed the company to pay the bonus. The
company then appealed the decision to the High Court of Delhi, which upheld the tribunal's
decision. The company further appealed to the Supreme Court of India.

Party's Arguments:

Company's Arguments: The company argued that due to its financial difficulties, it was not in
a position to pay the bonus as demanded by the workers' union. They contended that the
financial situation of the company should be taken into account when determining the
quantum of bonus.
Workers' Union's Arguments: The workers' union argued that the financial difficulties of the
company should not be considered as a reasonable cause to deny the workers their rightful
bonus. They emphasized that the workers were entitled to their share in the profits of the
company.

Judgment:
In "The Delhi Cloth & General Mills Co. Ltd. v Workmen, AIR 1967 SC 469," the Supreme
Court held that a company's financial difficulties don't absolve it from paying any bonus to
workers. While recognizing the relevance of a company's financial health, the court ruled that
workers still have a right to a share in profits. The judgment emphasized that even in tough
economic times, some bonus must be paid, though the quantum may vary based on financial
conditions. This case set a precedent for striking a balance between workers' entitlement and
employers' financial constraints. It highlighted that while a company's financial challenges
are relevant, they cannot be a blanket reason to deny bonus payments. This landmark case
underscores the principle that workers have a legitimate claim to a portion of profits,
safeguarding their rights even during challenging economic situations.

Comments:

The case of Delhi Cloth & General Mills is often cited as a landmark judgment that balanced
the interests of workers and employers in the context of bonus payments during financial
difficulties. The judgment clarified the principles that should guide the determination of
bonus and established that even in challenging economic circumstances, workers' rights to a
share in profits must be upheld to some extent.

Submitted by: Gurdev Singh Tung