The Graham Trading Co. (India) Ltd. Vs.
Its Workmen  INSC 71 (7 May 1959)
SINHA, BHUVNESHWAR P.
CITATION: 1959 AIR 1151 1960 SCR (1) 107
Industrial Dispute Puja Bonus-Custom any and
traditional Payment of-Test.
The appellant had been paying puja bonus to
its workmen continuously from 1940 to 1952 at the rate of one month's wages.
From 1948 to 1952, the appellant whenever it paid this bonus, made it clear
that it was ex gratia payment and would not constitute any precedent in future
years. The dispute arose regarding the payment of bonus in 1953. The workmen
claimed that the sole object of bonus which had been granted to them upto that
year was to meet puja expenses and that the payment of this bonus had become
customary and a term of employment. The appellant contended that payments in
the past years had been entirely ex gratia and as there was loss in 1953 no ex
gratia payment could be made in that year.
Held, that the workmen were not entitled to
puja bonus as an implied term of employment for an implied agreement could not
be inferred when the appellant had made it clear that the payments from 1948 to
1952 were ex gratia; but they were entitled to puja bonus on the basis that it
was a customary and traditional payment. In determining whether the payment was
customary and traditional the following circumstances have to be established :
(i) that the payment has been made over an
unbroken series of years ;
(ii) that it has been for a sufficiently long
period, the period has to be longer than in the case of an implied term of
(iii) that it has been paid even in years of
loss and did not depend on the earning of profits; and (iv) that the payment
has been made at a uniform rate throughout.
The fact that the employer made the payment
ex gratia made no difference; nor did unilateral declarations of one party
inconsistent with the course of conduct adopted by it matter.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
161 of 1959.
Appeal by special leave from the judgment and
order dated the 31st January 1956 of the Labour Appellate Tribunal at Calcutta
in Appeal No. Cal. 301 108 of 1954, arising out of the Award dated the 20th
October 1954, of the Second Industrial Tribunal, West Bengal.
B. Sen and S. N. Mukherjee, for the
D. N. Mukherjee, for the respondents.
1959. May 7. The Judgment of the Court was
delivered by WANCHOO J.-This is an appeal by special leave in an industrial
matter. The appellant is the Graham Trading Co.
(India) Ltd. (hereinafter called the
company). There was a dispute between the company and its workmen about bonus,
which was referred by the Government of West Bengal by its order of December
17, 1953, to the Second Industrial Tribunal. Though the order of reference did
not specify the year for which the bonus was in dispute, it is common ground
between the -parties that the dispute was for bonus for the year 1953. The case
of the workmen, who are respondents before us, was that the company had been
paying one month's bonus invariably from 1940 to 1950. In 1951, one month's
bonus was paid in October and half a month's further bonus was paid in
December. In 1952 one month's bonus was paid.
The demand that the workmen made in their letter
of August 27, 1953, was for three month's bonus. The company replied that
payments in past years had been entirely ex gratia and as there was loss in
1953 it was not possible to make any ex gratia payment that year. The workmen
then contended in their letter of September 21, 1953 that the sole object of
bonus which had, been granted upto that year was to meet puja expenses and that
the payment of this bonus had become customary and a term of employment. The
matter could not be settled between the parties and that is how the dispute was
referred for adjudication.
The company's case was that payment of bonus
had all along been ex gratia depending upon profits except in a few years.
But in those years it was also made clear
that the payment was ex gratia and without creating any precedent for future.
Therefore, there was neither a term of
employment nor any custom, 109 which put any obligation on the company to pay
any bonus in a year of loss.
The question was considered by the Industrial
Tribunal from three aspects. Firstly, it considered whether any bonus was
payable for this year as profit bonus, on the basis of the Full Bench formula
evolved in The Mill-Owners' Association, Bombay, v. The Rashtriya Mill Mazdoor
Sangh, Bombay (1) and it came to the conclusion that there was no available
surplus of profit to justify such bonus. It then considered the remaining two
aspects, namely, whether puja bonus could be awarded -either as an implied term
of employment according to the decision in Mahalakshmi Cotton Mills Ltd.,
Calcutta v. Mahalakshmi Cotton Mills Workers' Union (2) or on the basis of
custom. It seems to have mixed up the discussion on these aspects and having
come to the conclusion that puja bonus could not be awarded in this case on the
basis of an implied term of employment it proceeded to dismiss the claim on the
basis of custom also.
The workmen then went up in appeal to the
Labour Appellate Tribunal, which allowed the appeal. The decision of the
Appellate Tribunal has also mixed the two aspects of puja bonus, namely,
whether it is based on an implied term of employment or on custom; but it came
to the conclusion that there was sufficient evidence to establish custom and
therefore ordered payment of one month's basic wages as puja bonus. It was also
inclined to the view that the company's accounts showing loss were not reliable
and there might even be a case for profit bonus; but eventually it granted one
month's basic wages as customary puja bonus. Thereupon the company filed an
application for special leave to appeal to this Court, which was allowed; and
that is how the matter has come up before us.
Puja is a special festival of particular
importance in Bengal; and it has become usual with many firms there to pay
their employees bonus to meet special puja expenses.
Disputes have arisen with respect to this
bonus which were adjudicated upon by various tribunals. As (1) 1950 L.L.J.
(2) 1952 L. A. C. 370.
110 for back as 1949, in a dispute between
The Bengal Chamber of Commerce, Calcutta and Its Employees (1), the Industrial
Tribunal, which adjudicated upon the dispute, observed that Durga Puja was a
national festival in Bengal and it was customary to make presents to near and
dear ones and to relatives at that time. As it was difficult for poorly paid
employees to make savings out of the monthly income for this purpose, it,
therefore, had become traditional and customary in Bengal for employers to make
a monetary grant at the time of the pujas. The Bengal Chamber of Commerce had
not been slow in appreciating this and had been granting bonus equivalent to
one month's pay, and the tribunal had been assured that there was no intention
to discontinue it.
Later the matter was considered in Mahalaxmi
Cotton Mills case (2), where certain tests were laid down which would justify
the inference that there was an implied term of employment for payment of bonus
at the time of the annual Durga Puja. That case, however, was concerned with
puja bonus as an implied term of employment and not as a matter of tradition or
custom in Bengal. It is, however, clear that puja bonus which is usually paid
in Bengal is of two kinds; namely, (1) where it is paid as an implied term of
employment as explained in Mahalaxmi Cotton Mills case (2) and (2) where, it is
paid as a customary and traditional payment as stated in the Industrial
Tribunal's award referred to above. We have considered the tests to be applied
where it is a case of payment on an implied term of employment in Messrs.
Ispahani Ltd. v. Ispahani Employees' Union (3) and we need not repeat what we
have said there.
In the present case it has been pointed out
by the company that payments which had been made in the past years from 1940 to
1952 could not be considered as based on an implied term of employment in the
circumstances of this cash. This contention, in our opinion, is correct. An
implied term of employment cannot be inferred in this case, for right from (1)
Publication of Government of West Bengal, I Awards made by the Tribunals for
the quarter ending March 1949', P. 116.
(2) 1952 L.A.C. 370.
(3) (1)1 S.C.R. 24.
111 1948 to 1952, the company whenever it
paid this bonus, made it clear that it was an ex gratia payment and would not
constitute any precedent for future years. In the face of such notice year by
year it would not be possible to imply a term of employment on the basis of an
implied agreement, for agreement postulates a meeting of minds regarding the
subjectmatter of an agreement; and here one party was always making it clear
that the payment was ex gratia and that it would not form a precedent for
future years. In dealing with the question of an implied term of the condition
of service, it would be difficult to ignore the statement expressly made by the
employer while making the payment from year to year.
The question, however, whether the payment in
this case was customary and traditional, still remains to be considered.
In dealing with puja bonus based on an
implied term of employment, it was pointed out by us in Messrs. Ispahani Ltd.
v. Ispahani Employees Union (1) that a term may be implied, even though the
payment may not have been at a uniform rate throughout and the Industrial
Tribunal would be justified in deciding what should be the quantum of payment
in a particular year taking into account the varying payments made in previous
years. But when the question of customary and traditional bonus arises for
adjudication, the considerations may be somewhat different. In such a case, the
Tribunal will have to consider: (i) whether the payment has been over an
unbroken series of years; (ii) whether it has been for a sufficiently long
period, though the length of the period might depend on the circumstances of
each case: even so the period may normally have to be longer to justify an inference
of traditional and customary puja bonus than may be the case with puja bonus
based on an implied term of employment; (iii) the circumstance that the payment
depended upon the earning of profits would have to be excluded and therefore it
must be shown that payment was made in years of loss. In dealing with the
question of custom, the fact that the payment was called ex gratia by the
employer when it (1) [1960(1)] S.C.R. 24.
112 was made, would, however, make no
difference in this regard because the proof of custom depends upon the effect
of the relevant factors enumerated by us; and it would not be materially
affected by unilateral declarations of one party when the said declarations are
inconsistent with the course of conduct adopted by it; and (iv) the payment
must have been at a uniform rate throughout to justify an inference that the
payment at such and such rate had become customary and traditional in the
particular concern. It will be seen that these tests are in substance more
stringent than the tests applied for proof of puja bonus as an implied term of
Let us now see whether these tests are
satisfied in the present case. The practice in the present case began in 1940
and was unbroken upto 1950. In between there was an adjudication in 1948 to
which the company was a party. At that time it was said on behalf of the
company before the industrial tribunal that some bonus was being paid and that
there was no intention to discontinue It and consequently the tribunal did not
adjudicate upon the matter, which shows that the company recognised the
traditional and customary nature of the payment and it assured the tribunal
that there was no intention then to discontinue the payment. The payment was
continued from 1949 to 1951. In 1952, there was some dispute and originally the
company paid one month's wages as advance of pay and not as bonus. Some of the
workmen, however, accepted the payment while others did not, because they were
not satisfied with the amount being paid as advance of pay. The chairman of the
board of directors of the company visited Calcutta in 1952 and then on the
representation of the workmen the advance was converted into one month's bonus
and even those workmen who had not accepted the advance were allowed to draw
the bonus. It cannot therefore be said that there was any break in the payment
of bonus from 1940 to 1952, for if the chairman had not converted what was
advance of pay into bonus in December 1952, the workmen might have raised the
dispute even in that year and then 113 there would have been no break up to
1951. So there has been unbroken payment and the period has been sufficiently
long to justify an inference of customary and traditional bonus. It was pointed
out that in four years during this period the payment was made in November and
December and not about the time of the pujas; and, therefore, it could not be
said that this was traditional and customary puja bonus.
The delay in payment is not in our opinion
material in this case, for one of the directors of the company, who appeared as
a witness, stated as to this one month's bonus that it was paid by the company
to help its staff during pujas.
The condition that the payment should have
been made in years of loss also to exclude the hypothesis that it was paid only
because profits had been made, has also been satisfied, for the evidence is
that payments were made in at least two years of loss. Lastly, the condition
that payment should have been at a uniform rate has also been satisfied because
one month's basic wage is the quantum of bonus from 1940 right up to 1952
without any change. It is true that in December 1951 further bonus for half a
month was paid;
but that year was a year of profit in which
cloth-bonus for half a month was specially paid. Thus the rate so far as the
puja bonus is concerned has always remained uniform at one month's basic wage.
It is true that the workmen pitched their demand too high for three month's
bonus in 1953. But that doe,-, not in our opinion detract from the inference to
be drawn from the facts proved in this case. All the conditions, therefore, of
a customary and traditional bonus are satisfied in this case and there is no
reason to interfere with the order of the Appellate Tribunal, though we should
like to make it clear that we do not agree with the observations of the
Appellate Tribunal in connection with the profit bonus aspect of the matter.
The appeal therefore fails and is hereby dismissed. As this question has arisen
for the first time in this Court as a distinct issue and was not clearly
considered before by the Appellate Tribunal, we order the parties to bear their