The Prakash Cotton Mills (Private)
Ltd. & Ors Vs. The State of Bombay (Now Maharashtra)  INSC 52 (16
CITATION: 1961 AIR 977 1962 SCR (1) 105
CITATOR INFO :
F 1967 SC1450 (5)
Bonus-Textile Mills in local area-Agreement
for bonus with specified mills-Award thereon-Extension of award to other mills
in the area-Notification by Government-ValidityConstitutional validity of enactment
Bombay Industrial Relations Act, 1946 (Bom. 11 of 1947), ss. 95A, 114(2).
The disputes regarding bonus to be paid to
the' workmen of the appellant mill and other cotton textile mills in Greater
Bombay for the year 1952 and 1953 were referred to the Industrial Court under
the provisions of the Bombay Industrial Relations Act, 1946, and while the
references were pending, an agreement was arrived at between the Millowners'
Association, Bombay, and the Rashtriya Mills Mazdoor Sangh, a Representative
Union of workmen in the cotton textile industry with respect, to payment of
bonus for the years 1952 to 1957, providing inter alia for payment of bonus
even where a mill made actual loss, the minimum bonus being 4.8 per cent., of
the basic wages earned during the year, subject to such mill being entitled to
adjust the amount thus paid by it as the minimum bonus against any available
surplus in any subsequent year or years. This agreement was registered and was
made enforceable as an award (1) L.L.R.  Nag. 95o.
(2) A.I.R. 1937 Mad. 763.
106 against those mills which were parties
thereto. The appellant; however, did not sign, the agreement, and its case
before the Industrial Court was that it had been continuously making losses
from 1950 to 1955. On July 31, 1956, the Government of Bombay issued a
notification under s. 114(2) Of the Act directing that the award made by the Industrial Court aforesaid, for payment of bonus for the years 1952 and 1953 and also for
the years 1954 to 1957 be enforced against the appellant. The appellant
challenged the validity of s. 114 on the grounds (1) that it offended Art. 14
Of the Constitution inasmuch as it gave an unguided and arbitrary power to the
State Government to discriminate between various sets of employers and
employees and make an order on any one set at its pleasure leaving out others,
(2) that it offended Art. 19(i)(g) in that it put an unreasonable restriction
on a person's right to carry on business, and (3) that it prevented a party
from having an industrial dispute decided by an Industrial Court under the Act.
In any event, the appellant contended that the notification was bad, because
(a) it was made while a reference was pending in an Industrial Court and,
therefore, took away the jurisdiction of, that Court to decide the pending
references and (b) the notification went beyond the powers conferred on the
State Government by s. 114 since under that section the Government was bound by
the decisions of the Full Bench in view of s. 95A, but in the present case it
ignored a decision of the Full Bench which provided that no bonus would be
payable by an employer where it had made no profits.
Held (Sarkar, j., dissenting), that the
notification dated July 31, 1956, was beyond the powers conferred on the State
Government under s. 114(2) Of the Bombay Industrial Relations Act, 1946, and
must, therefore, be struck down, There are three limitations on. the power of
the State Government when acting under s. 114(2): (1) that it is limited by the
subject-matter of the agreements, or settlement, submission or award sought to
be extended, (2) that it has to be in conformity with the industrial law laid
down by the Full Bench of the Industrial Court and also by any decision of the
Supreme Court, and (3) that the State Government's power to make a direction
under that section is co-terminus-with the power of an adjudicator and the
State cannot do 'what an 'adjudicator cannot do under the Act.
Action taken by the State Government under s.
114(2) is a proceeding under the Act within the meaning Of s. 95A of the Act.
The New Maneckchowk Spinning Co. Ltd. and
others v. The Textile Labouy Association,  3 S.C.R. I, relied on.
Per Sarkar, J.-(1) Section 114 of the Bombay
Industrial Relations Act, 1946, does not offend Art. 14 Of the Constitution.
The object of the Act is the settlement of industrial disputes and 107
attainment of industrial peace and the section does not confer absolute and
(2) The restrictions imposed by s. 114(2) are
reasonable and have been put in the interest of the general public.
Consequently, the section does not contravene
Bijay Cotton Mills Ltd. v. The State of
Ajmer,  1 S.C.R. 752, referred to.
(3) The provisions of the Act must be read
together and in cases in which power under s. 114(2): has been exercised, the
right to ask for an adjudication by an Industrial Court must be considered
either as taken away or unavailing.
(4) The issue of a notification under s.
114(2) is not a proceeding as contemplated by s. 95A and, therefore, any
question of complying with any Full Bench decision does not arise.
(5) Section 114 directly permits and
contemplates a notification which would produce a result in variance with a
decision of the Supreme Court and, therefore, a notification duly issued under
that section cannot be said to have been issued, mala fide.
Muir Mills Co. Ltd. v. Suti Mills Mazdoor
Union, Kanpur,  1 S.C.R. 991, referred to.
(6) The Act is not invalid and the
notification of July 31, 1956, is unobjectionable and cannot be set aside.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 759 of 1957.
Appeal from the judgment and Order dated June
26, 1957, of the Bombay High Court in Appeal No, 92 of 1956.
J. C. Bhatt, S. N. Andley, J. B. Dadachanji,
Rameshuar Nath and.P. L, Vohra, for the appellants.
R. Ganapathy Iyer and D. Gupta, for
1961. February 16. The Judgment of
Gajendragadkar, Subba Rao, Wanchoo and Mudholkar, JJ., was delivered by
Wanchoo, J. Sarkar, J., delivered a separate Judgment.
WANCHOO, J.-This appeal by certificate
granted by the High Court of Bombay raises the constitutionality, of s. 114(2)
of the Bombay Industrial Relations Act, No. XI of 1947, hereinafter called the
Act). The brief facts necessary for present purposes are these.
108 The appellant is a cotton textile mill
situate in Bombay.
It is said that the appellant had been
continuously making losses from 1950 to 1955. References were however made
under s. 73-A of the Act by the Rashtriya Mill' Mazdoor Sangh, Bombay, in
respect of disputes relating to bonus for the years 1952 and 1953, which are
said to be pending before the Industrial Court, Bombay. The ease of the
appellant before the Industrial Court was that as it had made losses there was
no question of its paying any bonus for the years in dispute. It seems that at
the same time there were cases relating to bonus of other mills pending before
the Industrial Court and the appellant applied that its case should be dealt
with separately, and this prayer was acceded to. It seems that while the
references were pending, an agreement was. arrived at between the Mill-owners'
Association, Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay, with respect
to payment of bonus for the years 1952 to 1957 and the agreement was to come
into force with respect to each mill when it was signed by each member mill of
the Mill-owners' Association. Clause (6) of that agreement provided for payment
of bonus even where the profit made by a mill was not adequate to provide for
all prior charges as per the Full Bench formula evolved by the Labour Appellate
Tribunal in The Mill-owners' Association, Bombay v. The Rashtriya Mill Mazdoor
Sangh (1) or even where a mill made actual loss, the minimum bonus being in
either of these two cases 4-8 per cent. of the basic wages. earned during the
year, subject to such mill being entitled to adjust the amount thus paid by it
as the minimum bonus against any available surplus in any subsequent year or
years under the provisions of the agreement. This agreement was registered and
was made enforceable as an award against those mills which were parties
thereto. The appellant however did not sign the agreement and therefore it was
not enforced as an award by the Industrial Court against the appellant.
Thereafter the Rashtriya Mill Mazdoor Sangh
wrote to the Government of Bombay requesting that the (1)  2 L.L.J. 1247.
109 said award should be enforced against the
appellant in exercise of the powers vested in the Government by s. 114(2) of
the Act. After necessary action under s. 114(2), the Government of Bombay
issued a notification dated July 31, 1956, directing that the award made by the
Industrial Court on March 13, 1956, for payment of bonus for the years 1952 and
1953 and also for the years 1954 to 1957 be enforced against the appellant.
This was followed by a writ petition by the
appellant in the High Court challenging the constitutionality of s. 114(2) and
also challenging the power of the State Government to issue such a notification
under that provision. The petition was however dismissed on October 9, 1956.
There was then an appeal to a Division Bench of the High Court in which also
the appellant failed. The appellant then applied for a certificate to enable it
to file an appeal to this Court, which was granted and that is how the matter
has come up before us.
Two main points have been urged on behalf of
the appellant before us. In the first place, it is urged that s. 114(2) is
unconstitutional as it violates the fundamental rights guaranteed under Art.
19(1)(f) and (g) of the Constitution.
In the second place, it is urged that even if
s. 114(2) is constitutional, the notification has gone beyond the powers
conferred on the State Government by that section and therefore the notification
We do not think it necessary for purposes of
the present appeal to consider the constitutionality of s. 114(2), for we have
come to the conclusion that the notification is bad because it goes beyond the
powers conferred on the State Government by that section. This brings us
immediately to the second point that has been urged before us and in that
connection we have to consider the ambit of the power of the State Government
under s. 114(2). Section. 114(2) reads as follows."In cases in which a
Representative Union is a party to a, registered agreement, or a settlement,
submission or award, the State Government may, 110 after giving the parties
affected an opportunity of being heard, by notification in the Official
Gazette, direct that such agreement, settlement, submission or. award shall be
binding upon such other employers and employees in such industry or occupation
in that local area as may be specified in the notification:
Provided that before giving a direction under
this section the State Government may, in such cases as it deems fit, make a
reference to the Industrial Court for its opinion." The words of s. 114(2)
are very general and may at first blush be open to the interpretation that any
agreement, settlement, submission or award may be extended there under provided
it fulfills its terms. But further consideration shows that there are two
obvious limitations on the power of the State. Government in that behalf. The
first limitation arises out of the subject-matter of the agreement etc., to be
extended. Suppose the agreement etc. deal with (lot us say) the wages of a
certain type of workmen in a certain mill. Suppose that the agreement etc., are
extended to another mill where that type of workmen does not exist.
Obviously the agreement cannot be extended in
these circumstances and the power of the State Government is thus limited by
the subject matter of the agreement etc.
The second limitation which again, is obvious
arises from the provisions of law. The proviso to s. 114(2) shows that before
exercising its power under the said section the Government can refer the matter
to an Industrial Court and there can be no doubt that an Industrial Court
cannot and will not, advise anything against the law. Section 95-A makes the
determination of any question of law in any order, decision, award or
declaration passed or made, by the Full Bench of the Industrial Court under the
regulations made under s. 92 binding in all proceedings under the Act. What is
done under s. 114(2) is also a proceeding under the Act after notice to the
parties affected. The State Government is thus bound by any decision on a
question of law while proceeding under a. 114(2). The 111 policy of the Act
underlying s. 95-A therefore lead,,; to the conclusion that the exercise of
power conferred by s. 114(2) has to be in conformity with the industrial law
laid down by the Full Bench of the Industrial Court and also by any decision of
this Court. The State Government therefore when it passes an order under s.
114(2) must have full regard to the law as laid down by the legislature and by
the decisions of this Court and cannot pass an order under s. 114(2) which is
against such law. Besides, s. 114(2) places a registered agreement, a
settlement, a submission and an award on the same footing and so if an award
has to conform to s. 95-A as it must so must the other three mentioned therein.
Therefore, when the State Government acts under s. 114(2) it can only do as
between the parties before it what a labour court, an Industrial Court or a
wage board can in law do under the Act. We do not think that s. 114(2)
authorises the State Government to act against the law as laid down by the
legislature or by this Court. Section 114(2) therefore appears to be speedy
remedy (dispensing with all appeals provided under the Act) by which the State
Government may direct that the terms and conditions of employment in the matter
of wages, hours of work and so on may be the same in a particular industry or
occupation in a particular area as may have been settled between a
representative union and other employers in that area and as could if necessary
be enforced through an award in a case to which the representative union was a
party. There can be no doubt however that the State Government cannot do under
s. 114(2) what an adjudicator has 'no power to award under the provisions of
the Act. Therefore, as we read a, 114(2) we cannot escape the conclusion that
the State Government's power to make a direction under that section is
co-terminus with the power of an adjudicator (be it a labour court, an
Industrial Court or a wage board under the Act) to make an award there under,
and the State Government cannot under s.
114(2) do what an adjudicator cannot do under
the Act. This being the ambit of the State Government's power in respect of
giving a direction under a. 114(2), 112 let us now proceed to see whether the
impugned notification is within the ambit of these powers.
By this notification the State Government has
directed that the award dated March 13, 1956, made by the Industrial Court
shall be binding on the appellant and its employees in the matter of payment of
bonus for the years 1952 to 1957 (both inclusive). It is not in dispute that
the said award was based, on an agreement between the Mill-owners' Association,
Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay. The said agreement
provided that it would have to be signed by each member mill of the
Mill-owners' Association before it would be binding on it and again it is not
in dispute that the appellant-mill though it is a member of the Mill-owners'
Association never signed it. Farther, cl. (6) of the agreement provided for
payment of minimum bonus even in cases where there was no adequate profit to
provide for all prior charges as per the Full-Bench formula and also in cases
where a mill had made actual loss on the year's working, subject to a proviso
as to adjustment. Thus by the direction given in the impugned notification the
appellant is subjected to payment of bonus even where it has not made adequate
profit to provide for all prior charges or has in fact made a loss. The
contention on behalf of the appellant is that it would not be open to an
Industrial Court to grant bonus when profit was not adequate to meet all prior
charges or where there was an actual loss and therefore when the impugned
notification made it possible for grant of bonus even in these cases (for prima
facie the appellant had made losses upto 1955), it directed something which
even an Industrial Court could not do.' In consequence, it is urged that the
notification inasmuch as it makes this possible is beyond the powers conferred
on the State Government under s. 114(2) because it allows something to be done
which even an Industrial Court could not allow. Reliance in this connection is
placed on the decision of this Court in The New Manekchowk Spinning. Co. Ltd.
and Others v. The Textile Labour Association (1). In that case this Court was
considering (1)  3 S.C.R.
113 a similar agreement relating to
Ahmedabad. The Industrial Court had imposed that agreement after its expiry for
one year on the mills in spite of their contention that they were not bound to
pay any bonus for the years in dispute in view of the law laid down by this
Court in The Associated Cement Companies, Limited v. The Workmen (1). After
examining the terms of the agreement then in dispute this Court came to the
conclusion that in view of the law laid down in The Associated Cement
Companies' case, the Industrial Court had no jurisdiction to impose that
agreement on the mills. It further held that an agreement of that kind could
only continue by consent of parties. and could not be enforced by industrial
adjudication against the will of any of the parties. The agreement in the
present case directed to be enforced by the impugned notification is similar in
terms and as held New Manekchowk's case (2) it could not be enforced by
industrial adjudication against the will of any of the parties. The power of
the State Government under s. 114(2) being co-terminus with the power of an
adjudicator under the Act, such an agreement cannot therefore be directed to be
enforced against the will of the appellant even under s. 114(2) inasmuch as by
doing so the State Government would be going beyond the powers conferred on it
by that section. The impugned notification therefore must be held to be bad
inasmuch as it goes beyond the powers conferred on the State Government under
s. 114(2) and must therefore be struggle down.
We therefore allow the appeal with costs and
setting aside the order of the High Court hold that the notification dated July
31, 1956, is beyond the powers of the State Government under s. 114(2) and
direct that it will not be enforced.
We should however like to make it clear that
this decision will not prejudice the trial of any references with respect to
bonus which may be pending or which may hereafter be made between the appellant
and its employees with respect to years 1952 to 1957 (both (1)  S.C.R.
(2)  3 S.C.R. 1.
114 inclusive). If such references are
pending or are hereafter made they will be decided in accordance with the
decision of this Court in The Associated Cement Companies' Case SARKAR, J.-This
appeal arises but of an application made by the appellants to the High Court at
Bombay under Art. 226 of the Constitution for a writ directing the respondent,
the State' of Bombay, to forbear from acting upon or enforcing a certain
notification issued by it under a. 114(2) of the Bombay Industrial Relations
Act, 1946. This order was;
sought on two grounds. The first ground was
that s. ll4(2) was ultra vires, illegal and void. The second ground was that if
it was not so, the notification had been issued in improper exercise of the
powers conferred by that provision.
The appellants are a cotton textile mill in
Greater Bombay, a local area under the Act, and its directors and shareholders.
Their application was dismissed by the High Court and hence the present appeal.
It appears that certain references were
pending since 1953 and 1954 under the Act in the Industrial Court between
various cotton textile mills in Greater Bombay and their employees, in respect
of disputes concerning bonus for the years 1952 and 1953. In these references
the employees were represented by the Rashtriya Mill Mazdoor Sangh, a
Representative Union of workmen in the cotton textile industry as defined in
the Act and a union registered under it. The appellant mill was a party to
these references. On March 1, 1956, while these references were pending, the
Rashtriya Mill Mazdoor Singh entered into an agreement with the Mill Owners
Association, Bombay, of which forty-seven cotton textile mills including the
appellant mill, were members, regarding the bonus to be paid to the employees
of these mills for the years 1952 to 1957. This agreement was subsequently
accepted individually by about forty-two of the mills who were members of the
Association and parties to the references, and became binding on these mills.
This agreement was later registered under the Act and filed in the pending
references and an award was (1)  S.C.R. 925.
115 made by the Industrial Court on March 13,
1956, in terms of it, as between the mills who had individually accepted the
agreement and their employees. The appellant mill did not accept the agreement
and no award was made in the references concerning it and so far as it was
concerned, the references remained pending.
On July 31, 1956, the respondent made the
order which is challenged in these proceedings. That order was in these terms:
"Whereas the...Rashtriya Mill Mazdoor
Sangh, Bombay.....is a party to an award dated the 13th March 1956 And whereas
the Government of Bombay, considers that the award should be made binding upon
the employers specified in column 1 of the schedule hereto annexed and their
employees And whereas the said employers and the Rashtriya Mill Mazdoor Sangh,
Bombay, representing the said employees being the parties affected were heard
Now, therefore, in exercise of the powers conferred by sub-section (2) of section
114 of the said Act, the Government of Bombay hereby directs that the said
award shall be binding on the employers specified in column 1 of the schedule
hereto annexed and their employees in the matter of payment of bonus for the
years specified against the employers in column 2 of the said schedule."
The appellant mill was one of the employers men. tioned in the schedule to the
notification and the schedule further provided that the award would be binding
on the appellant mill and its employees for the years 1952 to 1957, both
inclusive. As a result of this notification the appellant mill became liable to
pay bonus to its employees for the. years mentioned, in terms of the award
based on the agreement, to neither of which it was a party. The appellants
contend that the appellant mill is not liable to pay bonus in law as laid down
by this Courtin Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union (1) and by the
Full Bench (1)  1 S.C.R. 99r. 116 of the Labour Appellate Tribunal, in
Mill Owners' Association, Bombay v. Rashtreeya Mills Mazdoor Sangh (1) as it
has not made any profit for the period commencing from June 30, 1950, and
ending on June 30,1955.
The agreement on which the award was based,
adopted a formula for ascertaining the available surplus of the profits of an
employer and provided for payment of certain bonus out of it. This bonus, I
gather, would have been of a smaller amount than that payable under the formula
laid down in the cases mentioned earlier. The appellants have no complaint against
this Part of the agreement for, presumably, under it, they would not be liable
to pay any bonus at all. What they object to is el. 6 of the' agreement. This
clause in substance provided that when no avai. lable surplus was found to
exist according to the formula or even when a mill had incurred loss in a
particular year, it would have to pay its employees "a minimum bonus
equivalent to 4.8 per cent of the basic wages earned by them during the
year", with a right to recoup the bonus so paid, out of the bonus that
would be payable under the agreement in subsequent years and out of the residue
of the surplus profits then remaining, it would have to pay bonus in terms of
the agreement. The substance of the appellants' grievance against the
notification is that under it the appellant mill has to pay bonus in terms of
cl. 6 of the agreement even though it has been working at a loss.
The first question is whether s. 114(2) is
invalid and illegal. That section so far as is material is in these terms:
"S. 114 (1). A registered agreement or a
settlement, submission or award shall be binding upon all per. sons who are
(2) In cases in which a Representative Union
is a party to a registered agreement, or a settlement, submission or award, the
State Government may, after giving the parties affected an opportunity of (1)
 2 L.L.J. 1247.
117 being heard, by notification in the
Official Gazette, direct that such agreement, settlement, submission or award
shall be binding on such other employers or employees in such industry or
occupation in that local area as may be specified in the notification."
The appellants first challenge the validity of the .section on the ground that
it offends Art. 14 of the Constitution.
It is said that it gives an unguided and
arbitrary power to the State Government to discriminate between various sets of
employers and employees and make an order on any one set at its pleasure
leaving out others. It seems to me that this contention is not well-founded.
The power given by the provision is not, in my view, uncontrolled. The object
of the Act clearly is the settlement of industrial disputes and attainment of
industrial peace. Furthermore, under the section the order can be made on
employers and employees in a local area which again is a limitation of the
Now, a local area is an area notified as such
for the purposes of the Act see s. 2(23). The object of this provision as to
local areas is to divide the State into several areas for better maintenance of
industrial peace and to group together for that purpose, the industries in a
If conditions of labour in any area where a
large number of workmen is collected, are uniform, then there is less likely to
be disaffection among them whereas if such conditions are not the same, the
workmen are likely to become restive. It is well-known that regional
considerations are closely connected with industrial disputes and are of
importance for their settlement.
The local area contemplated by s. 114(2) is
obviously the area in respect of which the Representative Union mentioned in it
has been registered. No reference can be found in the section to any other
local area. Under s. 2(33) a Representative Union means a union registered as
such under the Act and under s. 13(1) a Representative Union is a union which
has a membership of not less than fifteen per cent. of the employees in any
industry in any local area and registered for that industry in the area.
118 The agreement, settlement, submission or
award mentioned in the section has to be one to which a Representative Union is
a party. It follows from this that a substantial body of workmen in an area has
come to a decision or become bound by an award as to a question or questions
Therefore, the power under the section can be
exercised only for achieving industrial peace in that area. It is not unlikely
when a substantial section of workmen congregated in an area have secured
certain rights that the other employees in that area may claim similar rights
and this may disturb industrial peace in that area. The power can be exercised
only for meeting such disturbance and only in the local area where it occurs.
There are therefore two guiding principles.
First, the power can be exercised only to prevent breach of industrial peace.
Secondly, it can be exercised only in a specified area if there is a threat to
industrial peace there. An exercise of the power outside the area and for
purposes other than maintenance of industrial peace, would be beyond the scope
of the section. Again, once there is occasion for legitimate exercise of the
power and it is exercised, it must be exercised in all units of the industry in
that local area in which units the threat to the industrial peace exists if
that would restore the peace. It would be open to the Courts to correct a
discriminatory use of the power or its use outside the scope of the section.
Therefore it does not seem to me that the section confers unguided and
It. is of some interest to state that in the
present case there has been no such discriminatory use of the power or any use
outside the section. The respondent has made the award binding on all the
remaining mills who had not accepted the agreement and there is evidence that
threat of breach of industrial peace in these
Then also, I find that the section has
conferred the power on the highest authority, namely, the Government itself.
That would be some guarantee that it would be
duly exercised. This is a further reason for 119 holding that the section does
not confer absolute and arbitrary Power.
The next objection to the section is that it
19(1)(g) in that it puts an unreasonable
restriction on a person's right to carry on business. This contention also is
unacceptable to me. There is no doubt that the section puts certain
restrictions on a person's right to carry (in an occupation or business. The
real question is whether the restrictions have been put in the interest of the
general public and are reasonable. That the restrictions have been put in the
interest of the general public seems to me to be unquestionable. The reason why
the restrictions have been put is that otherwise, industrial peace would be
The entire country is interested in industries
and, therefore, in industrial peace. This point requires no elaboration., Then,
are the restrictions put, reasonable? It seems to me that they are. The
restrictions are that an agreement;
settlement, award or submission-all of ,Which
of course must be concerning industrial disputes to which a person is not a
party is made binding on him. By an "agreement", the parties to an
industrial dispute settle it themselves. A "settlement" means a
settlement of an industrial dispute arrived at with the assistance of a
conciliator in the course of conciliation proceedings under the provisions of
the Act. A "submission" is a reference of an industrial dispute to
arbitration. An "award" is an adjudication on an industrial dispute
by the court constituted under the Act.
An agreement, a settlement or a submission is
the result of the free consent of the parties to the dispute. As earlier
stated, the section only applies to an agreement, settlement or submission to
which a Representative Union, which is a union representing a substantial
number of workmen, is a party. Therefore, the section can apply to an
agreement, settlement or submission which a substantial number of workmen and
an employer has, of their free choice, accepted.
It would follow that such an agreement,
settlement or submission has been considered reasonable by parties 120
interested and in the case of a settlement by the conciliator appointed under
the Act also. The restrictions imposed by any of these must therefore be
reasonable. An award, on the other hand, is a decision of a court and can,
therefore, always be expected to be reasonable.
If certain restrictions are reasonable for an
employer and his employees, I suppose it would follow that those restrictions
would be equally reasonable for other employers and employees and more so, when
they are all in the same neighborhood where the conditions are likely to be
more or less the same. Therefore, it seems to me that the restrictions imposed
by s. 114(2) cannot be said to be unreasonable.
I have earlier summarised the offending part
of the agreement. I do not think that there is anything unreasonable there. The
employer pays only 4.8 per cent of the basic wage in the year when he makes no
profit with a right to recoup it in a subsequent and more prosperous year.
The maximum that he has to pay as bonus in
the best year is, I gather, less than what he would have to pay under. the
formula regarding bonus laid down by this Court. The agreement extends over 6
years and it would not be unreasonable to suppose that during_ these years
profits might be made to wipe off the minimum bonus paid in a lean year. The
restrictions put by the present agreement are, therefore,, in my view quite
It may be that in individual cases, which are
not likely to be many, the restrictions may work hardship. But that would not
justify a conclusion that s. 114(2) itself imposes unreasonable restrictions on
a man's right to carry on his business or occupation. This view was taken by
this Court in Bijay Cotton Mills v. The, State, of Ajmer (1), where it was said
in respect of the Minimum Wages Act, 1948;
"Individual employers might find it
difficult to carry on the business on the basis of the minimum wages fixed
under the Act but this must be due entirely to the economic conditions of these
That cannot be a reason for the striking down
the law itself as unreasonable." (1)... 1 S.C.R. 752, 755-6.
121 Another ground on which the validity of
the section was challenged was that it prevented a party from having an
industrial dispute decided by an Industrial Court under the Act. But I do not
see that there is an inherent right in a party to an industrial dispute to have
it decided by an Industrial, Court under the Act. The right to ask for an
adjudication by an Industrial Court is itself created by the Act. What the Act
has given, it can clearly restrict or take away in any manner it thinks fit.
The provisions of the Act must be read together and in cases in which power
under s. 114(2) has. been exercised, the right to ask for an adjudication by an
Industrial Court must be considered either as taken away or unavailing.
I thus come to the conclusion that the
section is not invalid for any of the reasons mentioned. I also feel no doubt
that the section was quite within the legislative competence of the legislature
which passed it. I did not understand the learned counsel for the appellants to
contend to the contrary. I have mentioned the legislative competence only to
dispose of another argument which also, I think, was aimed at the validity of
the section. It was said that there is no power anywhere to provide for payment
of bonus where in law such bonus is not payable. This argument is founded on
the decision of this Court in the Muir Mills case (1) where it had been said
that no bonus is payable where no profit has been made. Therefore it is said
that the section authorises payment of bonus where none is payable in law. This
argument seems to me to be misconceived. If the section is legislatively
competent and otherwise valid, as I think it is, then it cannot be invalid for
the simple reason that it directs payment of bonus where, as held by this
Court, as a matter of adjudication, none would be payable in law. The law laid
down by this Court is only for application when the question comes up for
adjudication by a court bound by that law. It has no relevance, in deciding the
validity of an otherwise competent law. The law laid down by any Court cannot
take away legislative competence. The (1)  1 S.C.R. 991 122 enactment in
question has left the law laid down by this Court quite unaffected; it will
still apply in all cases where it is applicable.
Now I proceed to consider the validity of the
As I understood the learned counsel for the
appellants, he put his case on two grounds. He first said that the notification
was invalid as it was made while a reference was pending in an Industrial
Court. The reasoning is that it is invalid as it takes away the jurisdiction of
that Court to decide the pending reference. I think what I have earlier said is
a sufficient answer to this contention. The right to have the pending reference
proceeded with was given by the Act. There is nothing to prevent that Act or
any other, from providing that the pending reference shall be discontinued or
become infructuous. If a notification could be made under the section, as the
present argument assumes it could be, then as to when it could be made, would
certainly depend on the terms of the statute. I find nothing in the Act to show
that a notification could not be made while a reference was pending and so as
to render it 'abortive. Therefore I think that no exception can be taken to the
notification in the present case for the reason that it was issued while the
reference was pending.
The other challenge to the notification does
not appear to have been raised in the High Court. It was based on s. 95A of the
Act which is in these terms:
S.....95A. The determination of any question
of law in any order, decision, award or declaration passed or made, by the Full
Bench of the Industrial Court, constituted under the regulations made under s.
92, shall be recognised as binding and shall be followed.
in all proceedings under this Act.
It is said that the Government in issuing a
notification under s. 114(2) was, in view of s. 95A, bound by the decisions of
the Full Bench but in issuing the present notification, it ignored a decision
of the Full Bench which provided that no bonus would be payable by an employer
where he had made no profits. Therefore it is contended that the notification
I am unable to accept this argument. I will
assume 123 that there is Full Bench decision of the kind mentioned. It is also
true that the effect of the notification is to make the appellant mill pay
bonus for a year when it had made no profit. All this, however, to my mind
makes no difference for, though in issuing a notification under s. 114(2) the
respondent has to give the parties sought to be affected by it a hearing, there
is really no proceeding held within the meaning of s. 95 A in connection with
the issue of the notification.
All that s. 95A does is to make "the
determination of any question of law" by the Full Bench binding in certain
proceedings. In order that determination of a question of law may be binding in
another proceeding, that proceeding must raise the same question for, a
determination of one question of law cannot be binding on another question. Now
what is the question when a notification is intended to be issued under is.
114(2)? The only question is whether it is necessary for preserving industrial
peace in a locality that a certain agreement, settlement, submission or award
should be made binding on persons who are not parties to it. Such a question
would not be a question of law at all; it would not be a question which could
ever have arisen before the Full Bench. It would follow that no occasion of
being bound by a determination of a question of law by the Full Bench can ever
arise when the Government is considering whether a notification under s. 114(2)
should be issued.
It may be that the result of a notification
made under s. 114(2) is to create a liability, for example, to pay bonus.
The question of law as to the liability to
pay bonus may have been decided by the Full Bench.
That however cannot make the question arising
under s. 114(2) a question whether in law bonus is payable. The questions
remain essentially different. Therefore, it seems to me, that s. 114(2) does
not contemplate a proceeding of the nature conceived by s. 95A.
Then I find that s. 95A occurs in Chapter
XIII of the Act which is concerned with Industrial Courts. It appears from the
provisions of this chapter that the Industrial Court is the highest Court
contemplated by 124 the Act. Under s. 92 it has power to provide by regulations
made by it that it will sit in Benches consisting of more than one person.
Obviously it is intended that when a question of importance and difficulty
arises, the Court will sit in a larger Bench. Section 95A appears, therefore,
to have been enacted for the purpose that other courts acting under the Act
should follow the decisions of the Full Bench so that there might be uniformity
of law. It was not intended to have any application to the issue of a
notification under is. 114(2).
It also seems to me that if in issuing a
notification under s. 114(2) the Government were to be bound by the decisions
of the Full Bench, then that section would be rendered almost completely
infructuous. The question whether in view of s. 95A, in issuing a notification
under s. 114(2) the Government is bound to follow the decisions of the Full
Bench can arise only if s. 114(2) is valid. If s. 114(2) is valid, an
interpretation of a. 95A which renders it infructuous cannot be correct. The
sections of a statute must be so interpreted as not to affect the operation of
Let me take the case of an agreement
concerning bonus between employer A and his employees. Now there is nothing in
law to prevent an employer and his employees from making any agreement they
like as to bonus. They may agree that bonus would he paid at a certain rate
even when the employer has not made any profit. That would be a perfectly valid
agreement. The agreement that was made in this case was of that kind. It has
not been suggested that the agreement was invalid. Indeed, the fact that it was
filed in the pending references and an award was made in terms of it would put
it beyond doubt that it was unexceptionable for, the award was made in terms of
the agreement as required by s. 115A and it could not have been so made unless
the agreement was in all respects valid. The Act therefore contemplates an
agreement of this kind.
If the argument of the learned counsel for
the appellants is right, this agreement cannot be made 125 binding between B
and his employees. Now, first, s. 114(2) does not say that the agreement
contemplated by it must comply with all decisions of the Full Bench. I find no
justification for adding to the word "agreement" in s. 114(2) the
words "provided it is in compliance with decisions of the Full
Bench". Secondly, common experience would show that when; disputants
settle their disputes themselves by an agreement, they rarely, if ever, make
the agreement strictly in terms of their legal 'rights; they, as it is said,
give and take and adjust matters in their own way. So cases would be rare where
the parties make' the agreement strictly in terms of the law laid down' by the
Full Bench. Thus if the contention of the appellants is right, there would
practically be no agreement to which s. 114(2) would apply.
Now, what is the law that can be laid down by
the Full Bench regarding right to bonus? It can Only be general principles as
to when it is to be payable and if payable, how the amount of it is to be
calculated. This is what this Court did in the Muir Mills Case (1) and the
subsequent cases regarding bonus. The actual award of bonus by the Full Bench
on the facts of the case before it, would of course not be a determination of a
question of law. Suppose now that the agreement between A and his employees was
in compliance with the Full Bench decision. That agreement must therefore only
provide that bonus of a certain amount would be paid in certain years. I do not
find it possible to conceive of an agreement concerning bonus made after the
Full Bench decision, which does not provide for the amount of the bonus to be
paid but ,only lays down the formula for calculating what is to be paid, for,
the formula is in the Full Bench decision and does not require to be laid down
afresh. That agreement would be an agreement in compliance with the-Full Bench
decision. Suppose such an agreement provides for payment of a month's wage,% as
bonus. Now this agreement is to be made binding on B and his employees. If the
argument that it can be made so binding only if as a result, B is not made to
pay (1).. 1 S.C.R. 991.
126 anything more than what he would have to
pay under he Full Bench decision itself, is right then, it seems to be that the
only case in which the agreement can be made so binding will be that in which
the figures for example, of income, expenses, rehabilitation and a host of
other things on which according to the Full Bench decision the bonus is to be
calculated, are in the case of B absolutely identical with those in the case of
A. If the figures were not so identical, then in the case of B, a month's wages
may be too large a bonus according to the Full Bench decision, though it La
just right in the case of A. I do not think that such identity would ever
exist. I think it right to point out here that under S. 114(2) only the
agreement as made can be extended to become binding on others. There is no
power under it to alter the agreement in any way and then make it binding. What
I have said so far concerning agreements would apply equally to settlements.
Therefore, again almost all agreements made in terms of the Full Bench decision
would also be taken out of the operation of s. 114(2).
Then I take the case of an award. An award is
a decision of a court adjudicating upon an industrial dispute under the Act. I
do not consider now an award based on an agreement for such an award would in
substance be an agreement and with agreements, I have already dealt. I will,
therefore, take an award passed as a matter of adjudication. I should suppose
that such an award would be in accordance with the law as decided by the Full
Bench for the decision of the Full Bench would be binding on the court passing
the award in view of a. 95A. As stated in connection with agreements such an
award would only decide how much bonus, assuming the dispute to be concerning
bonus, would have to be paid; it would not be laying down any general principle
for calculating bonus for, ex hypothesis those principles have already been
laid down by the Full Bench. Here again, as in the case of agreements and for
the same reason, if the argument for the appellants is right, the award can be
made binding on employers not parties to it only when the relevant figures in
the case if both the employers, 127 namely, the one who is a party to the award
and also the other on whom the award is sought to be made binding, are
identical. I conceive, such identity would never exist.
As regards submissions, I am unable to see
how s. 95A can have any application at all. Submissions are defined in s. 66 of
the Act which, so far as material, provides, that "Any employer and a
Representative Union may, by a written agreement, agree to submit any present
or future industrial dispute to ......... arbitration Such agreement shall be
called a submission." It does not appear to me to be conceivable that the
Full Bench could ever have decided whether such a submission shall be made or
not. The making of a submission involves no question of law. It can be made
only in respect of industrial disputes. Section 66 gives the parties concerned
the right to make it. Clearly, when a submission by A and his employees is
sought to be made binding on B and his employees, there can be no question of
compliance with any Full Bench decision.
It would, therefore, appear that s. 114(2)
would become almost wholly infructuous if a notification under it could be
issued only where the effect of that would not be to produce a result which is
not in compliance with Full Bench decisions. It also strikes me that if in
issuing the notification, the Government had to follow the Full Bench
decisions, then the issue of that notification would really become an adjudication,
the Government taking the place of the Industrial Court. The very same
questions would then arise as would have arisen if the matter had to be decided
by an Industrial Court. I am unable to hold that the intention was to make the
Government itself an Industrial Court.
If an adjudication by a court was necessary
then the Industrial Court was already there and there was no need to put the
duty of adjudication on the Government.
For all these reasons I do not think that in
issuing a notification under s. 114(2) any question of complying with any Full
Bench decision arises. In my view, 128 the issue of the notification is not a
proceeding as contemplated by s. 95A.
Lastly, it was contended that the
notification under the section had been issued mala fide. The only reason for
this contention was that the object of such issue was to get round the decision
of this Court in Muir Mills case (1). It is true that one of the reasons why
the Rashtriya Mill Mazdoor Sangh wanted the notification to be issued was that
it wanted to find a "way out of the situation arising as a result of the
decision of the Supreme Court in Muir Mills case (1)". But I am not able
to agree that makes the notification mala fide. Apart from the fact that the
Sangh felt that the decision had not helped the industry or the workmen, which
feeling I have no reason to doubt was perfectly honest, I am unable to see bow,
if it is legally permissible under the statute to do a thing the result of
which would be to get round a decision of this Court, the doing of it can be
said to be mala fide. The Act directly permits and contemplates a notification
which would produce a result in variance with a decision of this Court. There
has been no misuse of the Act at all. As I have earlier stated, in the case of
bonus the effect of a notification under s. 114(2) would almost always be to
permit something which is not permitted under the rule laid down in the Muir
Mills case (1). That being so, a notification duly issued under the section
cannot be said to have been issued mala fide.
For all these reasons, in my view, the Act is
not invalid and the notification of July 31, 1956, is unobjectionable and cannot be set aside. I would, therefore, dismiss the appeal with costs.
By COURT: In accordance with the majority
judgment, the order of the High Court is set aside and the appeal is allowed
(1)  1 S.C.R. 991.