Court dismisses Forgings' appeal, upholds Industries' appeal, setting aside payment order.

The court dismissed the appeal filed by the Forgings (Appellant) and allowed the appeal filed by the Industries (Respondent), setting aside the order directing the Industries to pay Rs. 23.47 lakhs with interest to the Forgings. Each party was ordered to bear its own costs.

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Issues Involved:
1. Claim of Forgings over General Reserve No. II.
2. Liability of Industries to pay Rs. 23,47,000 to Forgings for compensation paid to workers.
3. Claim of Forgings about die-blocks and machinery transferred from Kanjur Division to Rajkot Division.

Detailed Analysis:

1. Claim of Forgings over General Reserve No. II:
The Forgings claimed that the General Reserve No. II, amounting to Rs. 3,25,54,732, was specifically created to meet the liability towards the workmen terminated from the Kanjur Division and should have been transferred to them. The Industries contested this, stating that the General Reserve No. II was a general reserve in the balance sheet of the main company and not an asset or liability of the Forgings. The learned Single Judge, after considering the evidence and the report by Mr. Dastur, concluded that the General Reserve No. II was not created to meet the liability towards the workmen and was an appropriation of profits, not a provision for anticipated liability. The judgment emphasized that reserves are appropriations of profits represented by equivalent assets, and the General Reserve No. II was not shown in the balance sheet of the Kanjur Division. The court found no valid reason to disagree with these findings and dismissed the claim of the Forgings over the General Reserve No. II.

2. Liability of Industries to Pay Rs. 23,47,000 to Forgings:
The learned Single Judge noted that both parties had shifting stands regarding the liability to pay compensation to the workers terminated in 1973. The judgment highlighted that the payment was made from the accounts of the Forgings, and the Industries failed to prove that the Forgings were compensated for this amount. The court found that the responsibility of payment to the workers was assumed by the Forgings under the sanctioned scheme but was not provided for in the evaluation report of the Kanjur Division. Therefore, the Industries were liable to compensate the Forgings. However, the learned Single Judge's conclusion that the evidence regarding the adjustment of this amount in the differential was unreliable was not upheld. The court found that the payment of Rs. 23.47 lakhs was adjusted by deduction of Rs. 8.68 lakhs net of tax from the differential, and the remaining amount was settled as the Forgings got a rebate in income tax. Consequently, the decree in favor of the Forgings was not sustained.

3. Claim of Forgings about Die-blocks and Machinery:
The claim of the Forgings regarding the die-blocks and machinery allegedly transferred from Kanjur Division to Rajkot Division was found to have no substance by both Mr. Dastur and the learned Single Judge. The judgment noted that this dispute was not seriously pressed by the Forgings and found no reason to take a different view from the findings of the learned Single Judge.

Conclusion:
The court dismissed the appeal filed by the Forgings (Appeal No. 662 of 2001) and allowed the appeal filed by the Industries (Appeal No. 532 of 2001), setting aside the order directing the Industries to pay Rs. 23.47 lakhs with interest to the Forgings. Each party was ordered to bear its own costs.

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