Management of Fertilizer Corporation of
India V. The Workmen  INSC 278 (15 November 1968)
15/11/1968 VAIDYIALINGAM, C.A.
CITATION: 1970 AIR 867 1969 SCR (2) 706
RF 1974 SC1967 (11)
Bonus--Ex-gratia payments made in the
past--Production bonus scheme introduced eliminating ex-gratia payment-Option
given to workmen to accept either previous or later--Claim for ex-gratia
payment-Strike during conciliation proceedings, if justified.
For the first year of production by a unit of
the appellant Corporation (a Central Government Undertaking), it granted ad hoc
bonus for good performance to the unit's employees. For the next year, the
appellant granted bonus as recommended by the Bonus. Commission and also made
ex- gratia payment for good performance. The appellant decided to pay bonus for
the third year, strictly in accordance with the Payment of Bonus Ordinance and
the Act, which had come into force then. The Central Minister announced in the
Lok Sabha that with the specific approval of the Central Cabinet ex-gratia
payments had been allowed in the past by way of bonus to the employees and this
was communicated by the Government of India by a letter. In the fourth year the
production did not exceed the target, and the appellant offered to pay only the
statutory bonus under the Bonus Ordinance and Act 'and stated that a production
scheme had been introduced, that with the introduction of the production bonus
scheme all ex-gratia payments were eliminated and that this scheme was approved
by the Government of India. The workmen demanded that the bonus should be paid
for the third and fourth years at the same rate as it had been paid in previous
years and the appellant was bound to act according to the decision of the
Central Cabinet and communicated by the letter. The workmen also stated that if
their demands were not met within 15 days, they would be forced to adopt
Conciliation proceedings started. The
appellant offered the workmen the option of either accepting the Cabinet
decision or the production Bonus Scheme as formulated by the management. The
workmen desired that the Cabinet's directions be made applicable to them,
declined the offer to opt for the production bonus, and prepared a draft of a
letter which was intended to be sent by the workmen to the appellant stating
that the offer was also made. The workmen went on strike and the reference to
adjudication was made.
The Tribunal accepted the claim of the workmen,
and held that the strike was justified.
HELD: (i) The appellant failed to establish
that production bonus scheme was introduced with the consent and approval of
the Central Government and that on its introduction the ex-gratia payment of
bonus stood eliminated.
The evidence established that the Cabinet's
decision was made known to the workmen, who were given the option either to
accept the Cabinet decision or the production bonus scheme as formulated by the
'appellant. So long as the Cabinet decision had been communicated and option
was given to the workmen, it did not matter at what stage the communication was
made to the labour. The fact that the communication of the 707 Cabinet decision
after the submission of the charter of demands was of no consequence.
The striking down of s. 34(2) of the Bonus
Act by this Court has no bearing in considering the claim of the.
respondent in this case. When once it was
established, as this case, that the Cabinet decision regarding ex-gratia
payment of bonus had been communicated to the workmen with an option to accept
the said decision or the production bonus scheme and the labour wanted the
Cabinet decision to be implemented, it followed that an agreement, under s.
34(3) of the said' Act had come into effect
and it was valid.  Therefore, the workmen were entitled to ex-gratia
payment of bonus as in the previous years.
(ii) The management was prepared to pay at
all times the bonus as per the Bonus Act. They had also announced the
introduction of the production bonus scheme. They were actively taking part in
the conciliation proceedings.
The appellant also made to the Union certain
proposals at the conference which 'proposals' the representatives of the
workmen promised to discuss with the workmen and give a reply to the appellant.
But, at a meeting of the workmen next day, they were incited to go on strike.
The receipt of the telegram sent by the Labour Commissioner fixing a date for
further discussions and inviting the Union and the management to attend the meeting,
was falsely denied by the Union. The receipt of a telegram from a person
representing the workmen at conciliation meeting, requesting the Union to put
off going on strike by one day was admitted by the President of the Union, but
that request was not complied with by the workmen. All these circumstances
clearly established that the demand of the Union regarding ex-gratia bonus
could not be considered to be of an 'urgent 'and serious nature'. They also
showed that the launching of the strike was unjustified. [725 H] Therefore, the
workmen were not entitled to any wages for the period of strike.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 131 of 1968.
Appeal by special leave from the Award dated
December 8, 1967 of the Industrial Tribunal, Punjab in Reference No. 44 of
H.R. Gokhale, Anand Parkash, J.B. Dadachanji,
K.P. Bhandare and Bhuvnesh Kumari, for the appellant.
A. K. Sen, Rameshwar Nath and Mahinder
Narain, for the respondents.
The Judgment of the Court was delivered by
Vaidialingam, J. This appeal, by special leave, is directed against the award
dated November 24, 1967 of the Industrial Tribunal, Punjab, Chandigarh, in
Reference No. 44 of 1966.
The President of India, by order dated
October 31, 1966 referred the following issues for adjudication under s. 10(1)(d)
of the Industrial Disputes Act, 1947 to the Industrial Tribunal, Punjab,
708 "1. Whether the workmen are
justified in demanding the minimum bonus payable for the years 1964-65, 1965-66
and future years being fixed @ Rs. 110/- and the maximum @ Rs. 360/- per worker
? If so, with what details ?
2. Whether the action of the management in
treating 4 days advance bonus paid for the year 1965-66 as deductible from
bonus payable in future years is justified? If so, are any conditions or
stipulations necessary and if so with what details ?
3. Whether there is any justification for
making any amendments in the production bonus-scheme introduced by the
management in such a way that it enables payment of bonus to the lower paid
workers at higher rates and higher paid workers at lower rates ? If so, with
what details ?
4. Whether the workers are entitled to any
wages or compensation for the period of strike viz., 12th October to 31st
October, 1966." It may be stated at the outset that this Court is not
concerned with issue No. 3. The question of introduction of production bonus
scheme arises only to a limited extent in so far as it has got a bearing on a
contention raised by the appellant that the production bonus scheme has been
introduced in substitution of ex-gratia payment of bonus which was being made
by the management. Even as regards the strike period mentioned in issue no. 4,
parties were agreed before the Tribunal that the period of strike in respect of
which wages or compensation were claimed by the workmen was from 17th October
to 31st October 1966 and not from 12th October as stated in the issue.
The circumstances under which the Reference
came to be made by the President of India may be stated. The appellant
Fertiliser Corporation of India is a limited company incorporated under the Companies
Act, 1956 and it is also a Government company, as defined in s. 617 of that
Act. The Nangal unit of the appellant went into production for the first time
during the financial year 1962-63. On October 29, 1963, the appellant issued a
Circular regarding the grant of ad hoc bonus for the year 1962-63. The General
Manager states, in this Circular that the management has sanctioned payment of
ad hoc bonus to employees of Nangal unit for good performance during the year
1962-63 and that bonus will be payable to all employees who are on the rolls of
the Corporation on October 30, 1963 and had completed 1 year's service on March
31, 1963 and whose basic salary on that date did not exceed Rs. 500/- per
mensem, The 709 Circular proceeds to state that the amount of bonus payable
will be 1 month's basic salary plus dearness allowance, subject to the
condition that no employee will get less than Rs. 100/- or more than Rs. 300/-.
On December 17, 1964, the appellant issued a
circular regarding the gram of bonus and ex gratia payment for the year
1963-64. This circular states that the management has decided to sanction bonus
and ex gratia payment to the employees of the Nangal unit on the basis
The principles laid down in this circular
regarding payment of bonus and ex gratia payment are: (1) Bonus is being paid
to all eligible employees strictly in conformity with the Bonus Commission's
recommendations, as accepted by the Central Government, and the said bonus is
the minimum bonus payable as per the Bonus Commission's recommendations, equivalent
to 4% of the total basic wage and dearness allowance (excluding all other
allowances etc.) paid during the year 1963-64. The employees eligible for these
payments are those who draw a total basic pay and dearness allowance up to Rs.
1,600 per mensem and the quantum payable to employees drawing over Rs. 750/- of
basic pay and dearness allowance will be limited to what they would get if
their pay and dearness allowance were only Rs. 750/- per month.
(2) An additional ex gratia payment to be
made to all workers drawing basic pay up to Rs. 500/- per month, to the extent
that such payment, together with the bonus indicated earlier, is equivalent to
at least one month's full salary (basic pay plus dearness allowance); and the
total payment, i.e., bonus and ex gratia, in the case of workers drawing basic
pay up to Rs. 500/- per month would be subject to a minimum of Rs. 100/- and
maximum of Rs. 300/-. (3) The minimum qualifying service .for ex gratia payment
will be 3 months and the minimum qualifying service for payment of bonus as per
Bonus Commission's recommendation is 30 days.
On December 30, 1964 the appellant issued
another circular stating that the minimum limit of Rs. 100/- in respect of
bonus and ex gratia payment for the year 1963-64, as per its circular dated
December 17, 1964 is raised to Rs.
110/- and that the enhanced amount will be
paid along with the salary for the month of December 1964.
Regarding the grant of bonus for the year
1964-65, another circular was issued by the appellant on September 27, 1965.
this circular it is stated that bonus for the year 1964-65 has been decided to
be paid strictly in accordance with legal obligations arising out of the
payment of bonus under the Payment of Bonus Ordinance, 1965 (Ordinance No. 3 of
1965) (hereinafter referred to as the Ordinance).
According to that Ordinance, bonus 710 that
is payable is the minimum bonus which will be equivalent to 4% of the total
basic pay and dearness allowance (excluding all other allowances) paid during
the year 1964-65, or Rs. 40/-, whichever is higher. The employees eligible for
the bonus will be those who draw a total basic pay and dearness allowance up to
Rs. 1,600/- per month, but the quantum of bonus payable to employees drawing
total pay and dearness allowance over Rs. 750/- per month will be limited to
what it would be if their pay and dearness allowance are only Rs. 750/- per
mensem. It may be stated at this stage that the Ordinance was promulgated on
May 29, 1965 and the Payment of Bonus Act, 1965 (Act XXI of 1965) (hereinafter
called the Bonus Act) came into force on September 25, 1965.
On December 9, 1965 the Minister of Labour
and Employment made a statement in the Lok Sabha regarding a decision having
been taken by the Central Cabinet on December 2, 1965. In this statement the
Minister has referred to the fact that with the specific approval of the
Cabinet ex gratia payments had been allowed in the past by way of bonus to
employees drawing upto Rs. 500/- per mensem in some undertakings in the public
sector. After referring to the recommendations of the Bonus Commission, the
Minister announced the decision of the Cabinet dated December 2, 1965. As the
said decision of the Cabinet has been circulated to the appellant, the matters
referred to in the said decision will be adverted to by us when we refer to the
letter of the Government addressed to the appellant.' On December 21, 1965 the
Government of India addressed a communication to the Chairman and Managing
Director of the appellant company on the subject of bonus payable to employees
in the public sector undertakings. As the claim of the labour in the case, for
bonus being paid for 1964-65 and 1965-66 is substantially based upon the
decision of the Central Cabinet dated December 2, 1965 and as according to the
appellant this communication cannot be considered to be a direction or an
order, it is desirable to quote, in extenso, the said communication:
No. CH/COORD/64/65 GOVERNMENT OF/INDIA
MINISTRY OF PETROLEUM & CHEMICALS (Department of Chemicals) New Delhi, the
21st December 1965 To Shri Satish Chandra, Chairman & Managing Director,
711 Fertilizer Corporation of India Ltd., F-43, New Delhi South Extension, Pt.
I, New Delhi.
Subject :--Bonus-payable to employees in the
Public Sector undertakings.
sir I am directed to refer to the payment of
Bonus Act, 1965 (No. 21 of 1965) which provides for the payment of bonus to
persons employed in certain establishments and for matter connected therewith.
"Establishment in public sector" is defined in section 2(16) of the
Act. Further, sub-section (1) of section 20 lays down that if in any accounting
year an establishment in public sector sells any goods produced or manufactured
by it or renders any services, in competition with an establishment in private
sector, and the income from such sale or services or both is not less than
twenty per cent of the gross income of the establishment in public sector for
that year, than the provisions of this Act shall apply in relation to such
employment in public sector as they apply in relation to a like establishment
in private sector. It follows that the provisions of the Act do not apply to
such of the establishments in private sector.
Notwithstanding the provisions 'of the Act,
it has been decided by Government as a matter of policy that noncompetitive
public sector undertaking should also make ex gratia payments to their
employees of the minimum of 4 (four) per cent of annual gross earnings of the
employees on the same lines as bonus will be payable by public sector
undertakings falling within the provisions of the aforesaid Act. The benefit of
six-year bonus holiday (vide section 10 of the Act) should be available to
noncompetitive public sector undertakings.
2. Government have further decided that the
following should be the guiding principles for determining the quantum of ex
gratia payments to employees of noncompeting public sector undertakings:
(i) all non-competing public sector
undertakings should pay ex gratia to their employees amounts which they would
be liable to pay as bonus if they were to fall within the purview of the Payment
of Bonus Act;
(ii) where such an undertaking has made ex
gratia payment in the past, the amount of such payment should be treated as
absorbed in the amount determined as 712 in (i) above. In other words, any
claim of employees to payment determined on the lines of the Bonus Law as an
addition to payment on the scale of ex gratia payments in the past, should not
be accepted. If the past ex gratia payment had been higher than the amount as
worked out as in (1 ) above, the level of past ex gratia payment should be
(iii) the principle in (ii), above, shall
also be followed in the case of competing public sector undertakings; and (iv)
the applicability of (ii) and (iii) above should be conditional upon the
maintenance of the level of performance of the undertaking in individual cases.
It is requested that the decisions of
Government referred to, may be noted for guidance and necessary action.
Secretary to Govt.
of India." Again, on September 9, 1966
the appellant issued a circular regarding payment of bonus for the year
It is stated therein that the management has
decided to pay bonus to the employees of the Nangal unit for the year 1965- 66
and that statutory bonus equivalent to 4% of basic pay and dearness allowance
would be paid strictly in accordance with the provisions of the Bonus Act,
1965. It is further mentioned that in addition to this bonus it has been
decided to pay production bonus at 3% of wages to employees whose maximum scale
of pay does not exceed Rs. 1,400/- per mensem.
Then the letter proceeds to state as to how
exactly the production bonus is to be calculated and paid. The circular further
states that in addition to the statutory bonus and production bonus the
employees will also be paid 4 days' wages in the form of advance production
bonus to be adjusted as and when total bonus payable to the workers exceeds 30
days' wages in future. There was a note appended to this circular on the
subject of bonus payments, for the information of workers. That note proceeds
to state that as production for the year 1962-63 exceeded the target the
management has decided to pay ad hoc bonus equivalent to a month's salary for
employees drawing up to Rs. 580/- per month.
For the year 1963-64 the employees were
entitled to the minimum bonus of 4%, according to the recommendations of the
Bonus Commission and that amount of bonus was paid. Though legally the workmen
were not entitled to anything more, nevertheless, as the Nangal unit again
exceeded the production 713 target for the year 1963-64, the management decided
to give an ex gratia payment for good performance so that the bonus as per the
Bonus Commissions Report plus the ex gratia payment worked out to a month's
wage. But during the year 1964-65 the production exceeded the target and the
management decided to pay, in addition to the bonus payable under the Ordinance
a performance reward equivalent to half a month's wages. The management was
considering to introduce a production bonus scheme to provide an incentive for
increased production. This became necessary in view of the advice given by the
Labour Law Officer of the company that ex gratia payments should be avoided.
The management further states that production bonus scheme has been approved by
the Government of India and under that scheme employees are entitled to sums
varying from 3% to 3.5% of their wages.
In the year 1965-66 the production had not
exceeded the target and the employees of Nangal unit became entitled only to
the statutory bonus of 4% of their wages, under the Bonus Act and production
bonus was not admissible. Ex gratia payment also was ruled out in view of the
advice of the Labour Officer and because of the fact that with the introduction
of production bonus scheme all ex gratia payments stood eliminated. But,
inasmuch as the workers in the Nangal unit have maintained peace and good
industrial relations, the management decided, as a special case, to award
production bonus of 3% under the production bonus scheme. The note summed up
the position by stating that for the year 1965-66 the Nangal workers were
eligible to (a) statutory bonus at 4% of the annual wages under the Bonus Act;
(b) production bonus at 3% of the annual wages and (c) 4 clays' wages in the
form of advance production bonus to give the workmen a month's wages in all,
which was to be adjusted as and when the total bonus payable to the workers
exceeds 30 days' wages in future.
From the circular letters dated September 27,
1965 and September 9, 1966 it will be seen that the management offered to pay
only the statutory bonus under the Ordinance and the Bonus Act and that ex
gratia payment of bonus has been discontinued. In particular, in the note
annexed to the circular of September 9, 1966 the management has taken the
specific stand that a production bonus scheme has been introduced and that the
said scheme has been approved by the Government of India. They also maintained
that with the introduction of the production bonus scheme all ex gratia
payments are eliminated.
As the appellant did not pay bonus for the
years 1964- 65 and 1965-66 at the rate at which it was paid for the year
1963-64, 714 the Union submitted a charter of demands to the appellant on
August 19, 1966. The Union demanded that bonus should be paid for the years
1964-65 and 1965-66 at the same rate as it had been paid in previous years and
that the appellant was bound to act according to the decision of the Central
Cabinet dated December 2, 1965 and communicated to it by the circular letter of
the Government of India dated December 21, 1965. That is, according to the
Union the minimum bonus that a worker was entitled to get was Rs. 110/-. There
were certain other demands which are not necessary to consider in this appeal.
By this letter the Union also indicated that if the demands were not met within
15 days, it would be forced to adopt agitational approaches to seek compliance
with its demands. The management did not comply with this demand regarding
payment of bonus and attempts at mediation failed and the workmen went on
strike from October 17, 1966 and the reference to adjudication was made on
November 2, 1966.
Before the Tribunal the workmen pressed their
claim for bonus on the basis contained in their charter of demands.
They also raised the plea that the
introduction of production bonus scheme had no effect regarding the ex gratia
payment of bonus made by the appellant. As the management had not complied with
the reasonable demands of the labour and as it was acting in violation of the
Cabinet decision, the workmen were justified in going on strike from October
17, 1966 and they were entitled to full wages for the strike period.
The appellant resisted the claims of the
Union. They raised certain objections regarding the jurisdiction of the
Industrial Tribunal to entertain the suit, but that again is not the subject.
of the present appeal. The management pleaded that the claim for bonus for the
years 1964-65 and 1965-66 had to be considered and adjudication made only
according to the provisions of the Bonus Act and that the workmen were not
entitled to claim anything beyond what was provided in the said Act. No legal
claim could be based on ex gratia payments of bonus in the previous years. They
accepted the position that under article 110 of the Articles of Association of
the company the President of India could issue direction which become binding
on the company, but pleaded that no such directive had been issued by the
President. Even assuming that such direction had been issued by the President
to the company, the workmen, who were third parties, could not seek to enforce
any rights based upon such directives. The appellant Corporation is a public
limited company and as such an autonomous statutory body.
They further pleaded that the rate of bonus
mentioned in the Cabinet decision would become payable only if the level of
performance or production was properly 715 maintained and in the case of the
Nangal unit the level had not been kept up.
The management further averred that in
consultation and with the approval of the Central Government the appellant
introduced the production bonus scheme with effect from 1965-66 and the said
scheme replaced the previous system of ex gratia payments, made on ad hoc basis
for the initial two years of the Nangal Unit's operation. The production bonus
is payable in addition to the statutory bonus which the workmen are entitled to
under the Bonus Act. As the Central Government had approved the scheme of
payment of statutory bonus and production bonus, in lieu of the past system of
making ex gratia and ad hoc payments, the management pleaded that the Cabinet
decision of December 2, 1965 stood modified to that extent.
Regarding the treating of the 4 days' advance
bonus paid for the year 1965-66 as deductible from bonus payable in future
years and management pleaded that in order to keep industrial peace and as the
new production bonus scheme substituting the old ex gratia payment had come
into force the appellant decided to pay advance bonus of 4 days wages.
This advance bonus was specifically stated as
being deductible when the total bonus payable to workers in future years
exceeded 30 days. Therefore the management averted that they were entitled to
adjust this advance payment in future years.
The management further pleaded that there was
absolutely no justification for the workmen starting agitation from August 27,
1966 nor for going on strike from October 17,' 1966. The conciliation
proceedings started under the Act had not terminated and the appellant also was
participating in the conciliation proceedings and was anxious to meet the
demands of the workmen if it was otherwise possible. The production bonus
scheme for the year 1965-66 had been announced on September 9, 1966. The strike
was both illegal and unjustified and hence the workmen were not entitled to any
wages during the strike period.
The Industrial Tribunal in its award has held
that the appellant was bound to comply with the Cabinet decision dated December
2, 1965 and communicated to it by the Government by its Circular letter dated
December 21, 1965.
The decision of the Central Cabinet had been
publicly announced by the Minister concerned in the Lok Sabha on December 9,
1965. The principles laid down for ex gratia payments by non-competitive public
sector undertakings had been made applicable to competitive public sector
undertakings also. The Tribunal held that as the appellant was a competitive
public sector undertaking and the directions regarding ex gratia payments of
bonus as well as the prin- 716 ciples for determining the quantum of such
payments had all been laid down in the Circular letter of December 21, 1965 and
the appellant was bound to implement those directions, the claim of the labour
for such payments for the years in question was perfectly justified. The ex
gratia payment to be made under the Cabinet decision was to be in accordance
with the level of past ex gratia payments. No doubt such payments were to be
made provided the level of performance was maintained.
On the materials placed before it, the
Tribunal held that the said condition was satisfied. The Tribunal rejected the
claim of the appellant that production bonus scheme was introduced in
consultation and with the approval of the Central Government and it further
held that the introduction of that scheme was not in lieu of the ex gratia
payments made on an ad hoc basis in the previous years. The Tribunal has further
held that as the decision of the Central Cabinet, dated December 2, 1965 stands
and has not been modified in any way by the Government, the management was
bound to continue the ex gratia payments. It further held that the striking
down, by this Court, of sub-s. (2) of s. 34 of the Bonus Act had no effect on
the claim made by the Union because the claim of the Union was sufficiently
safeguarded by sub-s. (3) of s. 34. Ultimately the Tribunal accepted the claim
of the workmen for payment of minimum bonus for the years 1964-(35 and 1965-66
being fixed at Rs.
110/- and regarding the maximum the Tribunal
held that was a matter of calculation, having regard to the wages of an
employee; but it restricted its direction in this regard to the two years in
question and declined to express any opinion regarding future years. The
Tribunal also negatived the claim of the appellant to treat the 4 days' bonus
paid in advance for the year 1965-66 as deductible from the bonus payable in
future years. Regarding the wages claimed by the workmen for the period October
17 to October 31, 1966, the Tribunal held that the strike was both legal and
justified and it directed the management to pay the workmen half their wages
for that period.
The same stand that has been taken before the
Tribunal by the parties has been urged before us by Mr. Gokhale, the learned
counsel for the appellant-management and Mr. A.K. Sen, the learned counsel for
We shall first consider the correctness of
the decision of the Industrial Tribunal regarding the claim of the workmen for
ex gratia payment of bonus. We are not inclined to accept the contention of Mr.
Gokhale that the appellant was not bound to implement the directions contained
in the Circular letter of the Government dated December 21, 1965, containing
the Cabinet deci- 717 sion of December 2, 1965, nor his further contention that
the claim of the workmen for bonus should have been adjudicated upon
exclusively as per the provisions of the Bonus Act without reference to the Cabinet
The appellant company, registered under the Companies
Act, is no doubt an autonomous unit; but there are several articles in the
Articles of Association of the appellant- Corporation which give power to the
President of India and the Central Government to give directions in the working
of the appellant. In fact, it may not be necessary to deal elaborately with
this matter as the, appellant itself, in sub-paragraph (1) of paragraph 8 of
its reply dated January 25, 1967 filed before the Industrial Tribunal, has
categorically admitted the position that trader article 110 of the Articles of
Association of the company the President of India can issue directives which
become binding on the company; but the stand taken therein is that no such
directive was ever issued by the President. The further stand taken by the
appellant is that the production bonus scheme was introduced with the consent
and approval of the Central Government and that, on its introduction, the ex
gratia payments of bonus were eliminated and, to that event, the decision of
the Central Cabinet, dated December 2, 19.65 stood modified. Even in respect of
the Central Cabinet decision, relied on by the Union, the stand taken by the
appellant, in its letter dated September 21, 1966 to the Chief Conciliation
Officer, Punjab was that the Nangal unit had not 30 far received any
instructions from the controlling Ministry regarding the Cabinet decision and
that the position with regard to the Cabinet decision would be checked up by
the management with their Head Office and the Ministry. Therefore, it will be
seen that it was not the case of the appellant that it will not be bound by the
Cabinet decision, if the decision was there as a fact. We will only refer to
articles 67 and 110 of the Articles of Association of the appellant. Under
article 67 the Board of Directors of the company are entitled to exercise all
such powers and to do all such acts and things as the company is authorised to
exercise and do, but subject to the provisions of the Act and the directives,
if any, the President may issue from time to time as contained in article 110.
Article 110 is as follows:
"110. Notwithstanding anything contained
in any of these articles, the President may, from time to time, issue such
directives as he may consider necessary in regard to the conduct of the
business of the Company or Directors thereof and in like manner may vary and
annul any such directive.
The Directors shall give immediate effect to
directives so issued." Reading the two articles together, the position is
very clear that the exercise of the powers of the Board of Directors of the com
4 Sup. C1/69-13 718 pany are, apart from other restrictions, subject to the
directives, if any, issued by the President from time to time, with regard to
the conduct of the business of the company or Directors. Any direction given by
the President may, in like manner, be varied and annulled. The Directors are
bound to give immediate effect to the directives so issued.
As we are of opinion that the draft letter of
October 14, 1966 (which is discussed later on by us) constitutes an offer made
by the appellant to the workmen to opt for payment of bonus either according to
the Cabinet decision or according to the production bonus scheme, it becomes
unnecessary for us to investigate the nature of the power that is exercised
either by the President or the Central Government when giving directions to the
appellant company, under the Articles of Association. For the same reason the
question as to whether the circular letter of the Central Government, dated
December 21, 1965 is a direction or order, as envisaged by the Articles of
Association, does not also arise for consideration.
The decision of the Central Cabinet dated
December 2, 1965 has been announced by the Minister in the Lok Sabha on
December 9, 1965 and this decision has been communicated to the appellant by
the concerned Ministry by Circular letter dated December 21, 1965. There is no
controversy that if the Cabinet decision is given effect to, the claim of the
workmen for ex gratia payment of bonus as in previous years will have to be
accepted, unless the appellant is able to establish its plea that the
production bonus scheme was introduced with the consent and approval of the
Central Government in lieu of ex gratia payments of bonus. As to whether the
appellant has succeeded in establishing this plea is an aspect which will be
adverted to by us at a later stage.
In this case it is not necessary to consider
the wider question as to how far, without anything else, the workmen would be
able to lay any claim on the basis of any decision communicated by the
Government to the appellant alone. As pointed out by Mr. Sen, it is clear that the
Central Cabinet's decision was made known to the workmen who were given the
option either to accept the Cabinet decision, as conveyed to the appellant by
the Circular letter of December 21, 1965 or the production bonus scheme as
formulated by the appellant Corporation.
Mr. Sen, the learned counsel for the Union,
has invited our attention to the draft of a letter, dated October 14, 1966,
which was intended to be sent by the workmen to the appellant. That letter,
which is addressed to the appellant Corporation, states:
719 "You have given us the option of
accepting either the Cabinet decision conveyed to you vide Department of
Chemical's letter No. CH/COORD/64/65 dated 21st December 1965, the terms of
which are annexed to this letter, or the Production Bonus Scheme as formulated
by the FCI Board .... " That the Circular letter of December 21, 1965 of
the Government was made known to the workmen is clear from the evidence of the
appellant's witness R.W. 7 Shri Wadehra. He has categorically stated that he
joined the discussions between the representatives of the workmen and the
Managing Director of the appellant corporation which took place at Delhi on
October 15, 1966. He further states that he came to know at that time that on
October 14, 1966, during the discussions between the labour and the management
at which he was not present, the workmen's representatives had desired that the
Cabinet's directions may be made applicable to them with regard to bonus. This
witness further states that the Managing Director made an offer during the
discussions and that offer is contained in the draft letter dated October 14,
1966, to which we have already referred.
The witness further states that the workmen
declined to accept the offer of the management to opt for the production bonus
scheme. His evidence clearly shows that the management has communicated to the
workmen the Cabinet decision, as conveyed by the Circular letter of the
Government dated December 21, 1965. This evidence further makes it clear that
the workmen declined to opt for the production bonus scheme, but, on the other
hand, insisted that bonus must be paid to them according to the Cabinet's
Mr. Gokhale attempted to explain away the
effect of the draft letter of October 14, 1966 by urging that the Cabinet
decision has been communicated only after the Union had submitted its charter
of demands as early as August 19, 1966. So long as the Cabinet decision has
been communicated and option was given to the workmen, it does not in our
opinion matter at what stage the communication was made to the labour. Under
the circumstances, it is idle for the management to contend either that the
appellant is not bound to comply with the Cabinet decision or that the workmen
are not entitled to make any claim on the basis of that decision.
That leaves us with the alternative
contention, raised by the management, that production bonus scheme was
introduced with the consent and approval of the Central Government and that on
its introduction the ex gratia payment of bonus stood eliminated. No doubt this
is the stand that has been taken in the note attached by the appellant in its
Circular letter dated September 9, 1966.
720 we have already adverted to that note in
the earlier part of our judgment. No materials, whatsoever, have been placed by
the appellant in support of this contention. The production bonus scheme itself
does not state that it is in lieu of all other ex gratia payments. There is no
order of Government on record to show that the Circular letter of December 21,
1965 has been modified by the Government in any manner whatsoever. The only
evidence relied on by the appellant in this connection was the statement of
R.W. 7, Shri Wadehra.
He says that after a full consideration of
all the relevant factors and in consultation and with the approval of the
Central Government, a production bonus scheme was introduced by the appellant
with effect from the year 1965- 66 and that he was himself present at a meeting
in the Ministry when a decision was taken that the Corporation might introduce
the production bonus scheme and that the workmen should be paid production
bonus in addition to the bonus payable under the Bonus Act. He further speaks
to the fact that production bonus scheme replaced the ad hoc ex gratia bonus made
in the past years. Excepting this bare statement in the oral evidence, no order
of the Central Government to this effect, or modifying its previous decision,
has been placed before the Tribunal. Under those circumstances, the Tribunal
was perfectly justified in holding that the appellant has not established that
on the introduction of the production bonus scheme, all payments of ex gratia
The striking down of sub-s. (2) of s. 34 of
the Bonus Act, by this Court, has no effect, as rightly held by the Tribunal,
in recognising the claim of the workmen. When once it is established, as in
this case. that the Cabinet decision regarding ex gratia payment of bonus has
been communicated to the workmen with an option to accept the said decision or
the production bonus scheme and the labour wanted the Cabinet decision to be
implemented. it follows that an agreement, under s. 34(3) of the said Act has
come into effect and it is valid. Hence we are in agreement with the views
expressed by the Tribunal that the ex gratia payments, claimed by the workmen,
are saved by sub-s. (3) of s. 34 of the Bonus Act.
There was a feeble argument, attempted to be
raised by Mr. Gokhale, that the application of the Cabinet decision is
conditional upon the maintenance of the level of performance of the undertaking
in individual cases. The Tribunal has held that the level of performance of
workmen, in the years in question, has been maintained. In this connection,
among other matters, it has referred to a statement made in the April-May 1966
issue of the "FCI News", a journal published by the appellant. This
journal is issued after the year has come to an end and there is a state- 721
ment to the effect that the Nangal Fertilizer factory has exceeded the revised
production targets fixed for Calcium Ammonium Nitrate (CAN) and Heavy Water and
the said performance, despite the serious handicap suffered because of the
severe power cuts enforced since November 1965, was commendable. We are
satisfied that the finding recorded by the Tribunal, on this point, is
Once it is held, as we do, in agreement with
the Tribunal, that the appellant was bound to implement the Circular of the
Central Government, dated December 21, 1965, it follows that the appellant was
bound to pay the ex gratig, payment of bonus, as claimed by the workmen for the
years in question and that the appellant is further not entitled to deduct the
advance wages of 4 days paid for the year 1965-66. The decision of the
Tribunal, on this aspect is correct and is affirmed.
Before we take up the question regarding the
wages for the strike period, it is necessary to give a clarification regarding
an observation made by the Tribunal regarding the production bonus scheme.
While discussing the claim of the Union regarding ex gratia payment of bonus as
per the Cabinet decision, the Tribunal has observed .that the production bonus
scheme introduced by the appellant is in addition to the ex gratia payment
which the workmen are entitled to We do not express any opinion regarding the
correctness or otherwise of this view of the Tribunal, excepting to state that
the opinion expressed by the Tribunal was uncalled for and outside the scope of
This leaves us with the question of the claim
of labour for wages for the strike period from October 17 to October 31, 1966.
The Tribunal has held that the strike was both legal and justified and it has
awarded the workmen half the wages for that period. This finding of the
Tribunal is attacked on behalf of the appellant by Mr. Gokhale. The learned
counsel did not urge that the strike was illegal., but on the other hand he
pressed before us that the strike was thoroughly unjustified and the finding of
the Tribunal was contrary to the evidence on record and also perverse.
The counsel urged that various items of
evidence which have a very vital bearing on a consideration of this question
had not been adverted to at all by the Tribunal. On the other hand Mr. Sen,
learned counsel for the Union, pointed out that the Union made various attempts
,for having its claim regarding bonus amicably settled with. the management.
The management would not even agree to
implement the directions given by the Central Government. It was very evasive
in its replies when pressed to act upon the Cabinet decision. Several mediation
talks were held and conciliation also failed.
Therefore, under those circumstances, the
workmen honestly felt that a responsible body like the appellant was not 722
amenable to reason and hence a sense of frustration set in and in consequence
the workmen went on strike to draw the pointed attention of the management to
the demands made by the Union. Under those circumstances, the counsel urged
that the workmen's going on strike was justified and the Tribunal had also
awarded only half wages for that period. Counsel urged that this finding had
been arrived at on a proper consideration of the materials available before the
We are not satisfied that the Tribunal has
properly considered and adverted to the relevant evidence on record before it
came to a finding in favour of the workmen. The Union submitted a charter of
demands on August 19, 1966.
One of the demands related to the payment of
bonus for the years 1964-65 and 1965-66 at the same rate at which it was paid for
the previous years. The Union has stated that the workmen will resort to
coercive measures if the demands are not complied with within 15 days. The
period of notice given should have expired on September 3, 1966. By that time
the Conciliation Officer had intervened and he sent a letter, dated August 30,
1966 to the management and the Union that he had taken up the dispute for the
purpose of conciliation and requested both' the management-and the Union to
attend the conciliation proceedings on September 14, 1966. In the meanwhile the
Union had started agitation on September 3, 1966 by starting a general hunger
strike and actually on September 5, 1966 a 96-hour hunger strike was also
resorted to This appears to have continued till September 12, 1966.
The appellant announced on September 9, 1966
the introduction of the production bonus scheme with effect from 1965-66 and
also indicating the circumstances under which the ex gratia payment of bonus
was being made on prior occasions and as to why it was being discontinued. The
hunger strike by Shri Ramthirtha, the President of the Union, was commenced
from September 12 and continued till September 17, 1966.
The conciliation proceedings which had been
posted to September 14, 1966 could not be taken up on that day as the Officer
was on tour. On September 17, 1966 the workmen started a one hour strike in
each of the shifts. The Chief Conciliation Officer intervened and he fixed a
meeting for September 20, 1966. The appellant management gave a written
statement to the said officer on September 21, 1966 setting out its stand in
reply to the demand made by the workmen.
They referred,, in this written statement, to
the Circular issued by them on September 9, 1966 regarding the principles
governing the payment of bonus. The management also stated that the Nancy unit
had not received instructions from the Controlling Ministry regarding the
Cabinet 723 decision and that it would check up with the Head Office and the
Ministry about this matter.
Nevertheless, on October 3, 1966, Shri
Ramthirth, the President of the Union and his group started an agitation that
the management had gone behind its commitments. On October 12, 1966 the Chief
Conciliation Officer again visited Nangal and had discussion with the
representatives of the management and the Union and this continued till October
15, 1966. Shri Wadehra, R.W. 7, speaks to these facts and he also states that
Shri Amarnath Vidhyalankar, a Member of Parliament, attended the proceedings on
October 15, 1966 on behalf of the workmen.
Shri Wadehra, in his affidavit dated June 24,
1967 has again stated that the Chief Conciliation Officer invited
representatives of the workmen to come to Delhi to discuss the matter with the
higher authorities of the appellant Corporation. Shri Wadehra further states
that he himself joined the negotiations which took place at Delhi from October
15, 1966 and that the said negotiations were attended by the Managing Director
& Chairman on behalf of the appellant and Mr. Vidhyalankar attended the proceedings
along with certain other representatives of the workmen. Mr.
Wadehra further states that on the evening of
October 15, 1966 the workmen's representatives intimated that they would
discuss the outcome of the negotiations at Delhi with the general body of the
workmen at Nangal, the next day, and then return to Delhi and report the
reaction of the workmen regarding the proposals discussed during the
But, instead of keeping this promise the
representatives of workmen addressed a public meeting on the evening of October
15, 1966 and incited the workmen to strike work from October 17, 1966. The
strike was actually commenced from October 17. Mr. Wadehra also stated that a
telegram from the Secretary of the Labour Ministry inviting all the parties to
attend the conciliation meeting at Chandigarh on October 17, 1966 was received
but the labour did not care to attend that meeting.
We have referred to some of the incidents
which have taken place prior to October 17, 1966 only to show the attitude that
the labour was adopting in respect of their demands. There is a further
circumstance that a telegram, dated October 13, 1966 had been sent by the
Labour Commissioner fixing conciliation proceedings for October 17, 1966, at
Chandigarh and a telegram was also sent by Shri Vidhyalankar, who was
representing the workmen, to the Union President request his to stay the strike
for a day. So far as the telegram stated to have been sent by Shri
Vidhyalankar, the receipt of the same is admitted, but the Union is not
prepared to accept the receipt of the telegram, dated October 13, 1966 stated
to have been sent by the Labour Commis- 724 sioner. We will presently show that
the plea of the Union in this regard cannot be accepted because there is
sufficient evidence on record to show that the telegram had been sent by the
Labour Commissioner and must have been received by the President of the Union.
We have already referred to the statement of
Shri Wadehra about the receipt, by the management, of the said telegram fixing
conciliation proceedings for October 17, 1966. The telegram is Exhibit RW 3/1
which is dated October 13, 1966 and sent from Chandigarh. The telegram is sent
to the appellant and to the Union. The Labour Commissioner requests the
attendance of the parties to the conciliation meeting on October 17, at 11 a.m.
Exhibit R.W. 14 is a letter dated October 13,
1966 sent' by the Labour Commissioner to the appellant and the unions
concerned, containing a copy of the telegram sent by him on that date regarding
the conciliation proceedings being fixed on October 17, at Chandigarh and
requesting the parties to appear before him. That the said telegram and letter
have been sent is proved by the evidence of R.W. 1 who is an Assistant in the
Labour Commissioner's Office at Chandigarh and who has produced the necessary
file pertaining to the same. That the telegram sent by the Labour Commissioner
has been delivered is also proved by R.W. 3 who has produced the delivery
sheets in respect of the telegram. Relying upon these circumstances, quite
naturally Mr. Gokhale strenuously urged that the receipt of the telegram issued
by the Labour Commissioner is purposely denied by the Union to profess
ignorance about the conciliation proceedings being taken up on October 17,
1966, because the Union was in no mood to participate in those proceedings.
Mr. Sen, no doubt relied upon the evidence of
the workmen's witness No. 3, Shri Ramthirtha, President of the Union, that no
telegram was received from the Labour Commissioner regarding conciliation
proceedings to take place on October 17, 1966, but this witness himself accepts
that the telegram sent by Mr. Vidhyalankar was received by him. We are inclined
to accept the contention of Mr. Gokhale that the denial by the Union of the
receipt of the telegram sent by the Labour Commissioner cannot be accepted.
Mr. Gokhale, learned counsel, referred us to
the decision of this Court in The Managemnt of Chandramalai Estate, Erna Kulam
v. its Workmen (1) and particularly to the following observations at p. 455:
(1)  3 S.C.R. 451. ' 725 "While on
the one hand it has to be remembered that strike is a legitimate and sometimes
unavoidable weapon in the hands of labour it is equally important to remember
that indiscriminate and hasty use of this weapon should not be encouraged. It
will not be right for labour to think that for any kind of demand a strike can
be commenced with impunity without exhausting reasonable avenues for peaceful
achievement of their objects.
There may be cases where the demand is of
such an urgent and serious nature that it would not be reasonable to expect
labour to wait till after asking the Government to make a reference. In such
cases, strike even before such a request has been made may well be justified
." Mr. Gokhale urged that there was absolutely no urgency in the case
before us because the management was prepared to pay the bonus as admitted by
them and the controversy was really regarding the additional ex gratia payment.
Further, counsel pointed out that the Conciliation Officer had not made any
report about conciliation having failed and in fact the telegram sent by the
Labour Commissioner as late as October 13, 1966 clearly showed that he was
still 'continuing the proceedings. Counsel also pointed out that after having
separated from the Delhi meeting on October 15, 1966, promising to consider the
proposals put before it by the management and communicate the same to the
management, the leaders of the workmen incited them to go on strike at the
meeting held the very next day and actually the strike itself commenced from
October 17, 1966. No doubt Mr. Sen, learned counsel, pointed out that there was
nothing for the management to consider in their meeting the demands of the
workmen, because the Cabinet decision was well known. He also urged that the
workmen obviously felt that the management was not adopting a reasonable
attitude and hence they resorted to a strike, which was justified under the
We may also indicate that there is evidence,
let in by the management, to show that during the strike period and even prior
to that, several of the workmen resorted to violence and other acts of
indecency. Evidence has also been let in to show that the workmen continued to
strike even after a notification, dated October 31, 1966 was issued by the
President of India prohibiting the strike and requiring the workers to report
for duty. We do not propose to dwell on these matters, because we have only to
consider the justification or otherwise of the strike from October 17 to
October 31, 1966.
The management was prepared to pay at all
times the bonus as per the Bonus Act. They had also announced on September 726
9, 1966 the introduction of the production bonus scheme.
They were actively taking part in the
conciliation proceedings. The appellant also made to the Union certain
proposals on October 15, 1966 at the conference held at Delhi which 'proposals'
the representatives of the workmen promised to discuss with the workmen and
give a reply to the appellant. But, on October 16, 1966, at a meeting of the
workmen, they were incited to go on strike. The receipt of the telegram of
October 13, 1966 of the Labour Commissioner, fixing October 17, 1966 for
further discussions and inviting the Union and the management to attend the
meeting, is falsely denied by the Union. The receipt of Sri Vidhyalankar's
telegram requesting the Union to put off going on strike by one day is admitted
by the President of the Union, but that request was not complied with by the
workmen. Sri Vidhyalankar, it must be remembered, was representing the workmen
in certain conciliation meetings.
All these circumstances clearly show that the
demand of the Union regarding ex gratia bonus cannot be considered to be of an
'urgent and serious nature'. They also show that the launching of the strike
was unjustified. It therefore follows that the workmen are not entitled to any
wages for the period of the strike viz., from October 17 to October 31, 1966.
To this extent the award of the Industrial Tribunal will have to be set aside.
In the result, we set aside the award of the
Industrial Tribunal in so far as it directs the appellant to pay the workmen
half the wages for the strike period from October 17 to October 31, 1966; and,
to that extent, the appeal is allowed. In other respects the appeal will stand
As the appellant has failed on the
substantial question, it wilt pay the costs of the respondent-workmen.
Y.P. Appeal partly allowed.