Hukam Chand Jute Mills Ltd. Vs. Second
Industrial Tribunal, West Bengal & Ors  INSC 79 (11 April 1979)
CITATION: 1979 AIR 876 1979 SCR (3) 644 1979
SCC (3) 261
Payment of Bonus Act, 1965-Customary and
contractual bonus-If excluded by the Act-Amending Act 23 of 1976-Effect of.
The appellant mills had been paying customary
bonus to its employees for a number of years. Consequent to the amendment of
the Bonus Act, 1965 in 1976 by Act 23 of 1976 the management denied the
customary bonus claimed by the workmen, whereupon the dispute regarding
"customary bonus for the year 1976" was referred by the State
Government to the Industrial Tribunal. The Management's plea that customary
bonus was no longer payable, in view of the provisions of the 1976 Amendment,
was negatived by the Tribunal.
In the appeal to this Court it was contended
on behalf of the appellant that the Bonus Act as amended by Act 23 of 1976,
annihilates all species of bonus including customary and contractual bonus.
Dismissing the appeal,
HELD: 1. The Bonus Act (1965) though a
complete code was confined to profit-oriented bonus only. The other kinds of
bonus that have flourished in Indian industrial law have been left uncovered by
the Bonus Act. The legislative universe spanned by the said statute cannot
therefore, affect the rights and obligations belonging to a different world or
claims and conditions. [647-E]
2. The amending Act, 23 of 1976 amended the
long title of the Bonus Act to provide for the payment of bonus "on the
basis of profits or on the basis of production or productivity, and for matters
connected therewith." The inference that flows there from is that
customary or contractual bonus goes beyond the pale of the amending Act which
modifies the previous one by bringing within its range bonus on the basis of
production or productivity also.
3. Section 17 of the Bonus Act in express
terms refers to puja bonus and other customary bonus as available for deduction
from the bonus payable under the Act, thus making a clear distinction between
the bonus payable under the Act and "puja bonus or other customary
bonus". This section has been left intact. So long as this section remains
without amendment the inference is clear that the categories covered by the
Act, as amended, do not deal with customary bonus.
4. Section 31A relates to bonus linked with
production or productivity in lieu of bonus based on profits. It speaks nothing
of the other kinds of bonus. [649-G]
5. The Bonus Act (1965) does not deal with
customary bonus and is confined to profit-based or productivity-based bonus.
The provisions of the Act have no say, on customary bonus and cannot,
therefore, be inconsistent therewith.
645 Conceptually, statutory bonus and
customary bonus operate in two fields and do not cash with each other.
[649H-650A] In the instant case, both parties have agreed that throughout they
have been dealing with customary bonus only and whenever there has been a
settlement or agreement it has been not the source of the right but the
quantification thereof. The claim was rooted in custom but quantified by
contract. It did not originate in any agreement, but was organised by it. The
customary bonus as claimed is neither impaired nor eliminated by the 1976
Amendment Act. [650 C, B] Mumbai Kamgar Sabha, Bombay v. M/S. Abdulbhai
Faizullabhai & Ors.  3 SCR 591 at 608-609 & 612;
Sanghi Jeevaraj Ghewar Chand & Ors. v.
Secetary Madras Chillies, Grains Kirana Merchants Workers' Union and Anr. 
1 SCR 366; referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1118 of 1978.
Appeal by Special Leave from the Order dated
12-5-1978 of the Second Industrial Tribunal, West Bengal in Case No.
VIII-169/77 G.O. No. 3000 IR dated 26-7-77.
G. B. Pai, R. C. Shah, S. R. Agarwal, O. P.
Khaitan and Praveen Kumar for the appellant.
M. K. Ramamurthi, D. T. Sen Gupta, S. R.
Gupta and P. K. Chakravorti for Respondent No. 3.
M. K. Ramamurthi, and Ramesh C. Pathak for
the Intervener (The Bank of Tokyo Staff Association).
The Judgment of the Court was delivered by
KRISHNA IYER, J.-Industrial jurisprudence, based on the values of social
justice which is integral to our Constitution, has been built around several
legislations enacted by Parliament, one of which is the Payment of Bonus Act,
1965, (the Bonus Act, for short). The bonus branch of labour law, however, is
not exhausted by this enactment and has been replenished by judge-made law,
drawing sustenance from practice and precedent, custom and contract. Against
this backdrop, we have to state and assess the single issue strenuously
canvassed before us by the appellant-management challenging the award of the
Industrial Tribunal and urging that the Bonus Act, as amended by Act 23 of
1976, annihilates all species of bonus including customary and contractual
bonus. The claim of the Union of Workmen is for customary bonus, the reference
to industrial adjudication relates to customary bonus, and the special leave to
appeal granted by this Court is confined to customary bonus as the common basis
and focuses on the sole legal issue of negation of that kind of bonus by virtue
of the provisions of the amending Act 23 of 1976.
646 The matrix of minimal facts necessary to
highlight the limited controversy may lay bare the crucial issue we have to
decide. The appellant is a jute mill in Bengal employing several thousand
workers but we are directly concerned here with a dispute between the
Management and the employees in its head office. Certain indisputable facts,
fundamental to the case, make a useful beginning. Customary bonus has been
claimed, conceded and settled between the parties for long years since the
early sixties at least. From time to time, this demand has been the subject of
dispute and, fortunately, of agreed solution right down to 1975. But in
1976-the year in which Art. 43A making participation of workers in Management
of industries was made a Directive Principle in our Constitution-the Bonus Act
was, paradoxically, amended restricting workers claim to Bonus by Act 23 of
1976 although much of the curtailment has been cancelled by the next Amending
Act, 1977. Anyway, the changes wrought by the 1976 amendment emboldened the
Management to deny the legality of Customary bonus claimed by the workmen. This
conflict led to a reference by the State Government to the Industrial Tribunal
of the following dispute:
"CUSTOMARY BONUS FOR THE YEAR,
1976" What is material to notice is that the demand and the denial, the reference
and the adjudication and, finally, the special leave itself revolved round
customary bonus. The specific case of the Management was that customary bonus
could no longer be payable, in view of the provisions of the 1976 amendment. A
statutory fatality was sought to be spelt out of its provisions before the
Tribunal and before us. We emphasize this to exclude a hazy, though
half-hearted plea mentioned by Shri G. B. Pai for the appellant that here the
bonus was based on agreement and no agreement as such could avail in view of s.
34, read with s. 31A, (as amended by the 1976 Act). Apart from the law relied
on, it is somewhat starting that bonus paid by settlement between the parties
qua customary bonus at least since 1962-63 (see page 4 of the Paper Book)
should be anathematized as untenable in 1976, suggesting that labour law,
viewed from the social justice angle, is making headway steadily backwards.
Even so, we will examine the law as the statute speaks.
The payments over the years have been of customary
bonus. The demand for 1976, which alone directly concerns us, is also for
customary bonus. The dispute referred is of customary bonus. The legal
objection urged is to customary bonus. The award has upheld the tenability of
customary bonus. The special leave petition complained about the legality of
customary bonus and 647 the order granting leave clinched the issue by treating
the dispute as one for customary bonus. Likewise, throughout, the only defence
of the management was the lethal impact on customary or other bonus, save
profit or productivity-based bonus of Act 23 of 1976. So the sole question is
the soundness of the legicidal impact of the 1976 amendment on the customary
bonus claim which otherwise was valid and, indeed, was honoured by the appellant
by progressively escalating rates by agreement. This part of the narration may
be concluded by excerpting the order granting leave:
"Mr. Pai states on behalf of the
petitioner- Management that if they fail on the legal issue, namely, because of
the amendment in the Bonus Act customary bonus is not payable, then they will
not ask for the trial of that issue on merits and straightway they will pay the
customary bonus they have been paying as per the agreement dated 20-3-1975. In
view of this undertaking we grant special leave to appeal and even if the
appellants succeed in this appeal, they will not ask for costs against the
workmen concerned." The Bonus Act (1965) was a complete code but was
confined to profit-oriented bonus only. Other kinds of bonus have flourished in
Indian Industrial law and have been left uncovered by the Bonus Act. The
legislative universe spanned by the said statute cannot therefore affect the
rights and obligations belonging to a different world or claims and conditions.
This has, in the Mumbai Kamgar's case(1) exhaustively dealt with the anatomy of
the Bonus Act, its functional scope its modalities and its operational
frontiers to reach the following conclusion:
"It is clear further from the long title
of the Bonus Act of 1965 that it seeks to provide for bonus to persons employed
'in certain establishments'-not in all establishments. Moreover, customary
bonus does not require calculation of profits, allocable surplus, because it is
a payment founded on long usage and justified often by spending on festivals
and the Act gives no guidance to fix the quantum of festival bonus;
nor does it expressly wish away such a usage.
The conclusion seems to be fairly clear, unless we strain judicial sympathy
country wise, that the Bonus Act dealt with only profit bonus and matters
connected therewith and did not govern customary, traditional or contractual
648 The end product of our study of the
anatomy and other related factors is that the Bonus Act spreads the canvas wide
to exhaust profit-based bonus but beyond its frontiers is not void other cousin
claims bearing the caste name 'bonus' flourish-miniatures of other colours !
The Act is neither proscriptive nor predicative of other existences."
After dealing with Ghewar Chand's case(1), the Court arrived at the final view
that "A discerning and concrete analysis of the scheme of the Act and the
reasoning of the Court leaves us in no doubt that it leaves untouched customary
bonus."(2) This ruling has our concurrence and, indeed, the principal plea
of Shri Pai, counsel for the appellant, is that the effect of the 1976 amending
Act has been left open in that decision and that is precisely the justification
for his submission that the new provisions nullify all kinds of claims of bonus
except profit-or-productivity-based bonuses, having regard to ss. 31A and 34A
brought into the statute Act.
Counsel made his goal-oriented submissions by
taking us through the new provisions. As we have stated earlier many of the
statutory modifications brought about in 1976 in the then wisdom of Parliament
have been repealed and the original position restored in 1977 by the later
wisdom of the new Parliament. However, we are concerned only with the import
and effect of the few provisions incorporated by Act 23 of 1976. The
fundamental fact which we must reiterate is that the Bonus Act before the 1976
amendment had nothing to say on bonus not oriented on profit. What then was the
departure made ? Did it travel beyond the broad territory of the original statute
and invade other forms of bonus ? Apart from the clauses which we will
presently deal with, a key to the understanding of the changes is the long
title. The long title of the Bonus Act was also amended in 1976 and the
substituted one runs thus:
"An Act to provide for the payment of
bonus to persons employed in certain establishments on the basis of profits or
on the basis of production or productivity and for matters connected
therewith." The clear light that we glean from the new long title is contrary
to the intent of Shri Pai's argument.
Specifically, the new 649 long title purports
to provide for the payment of bonus "on the basis of profits or on the
basis of production or productivity and for matters connected therewith".
The emphatic inference flows therefrom that customary or contractual bonus goes
beyond the pale of the amending Act which modifies the previous one by bringing
within its range bonus on the basis of production or productivity also.
Nothing more-unless the text expressly states
to the contrary. It is important to remember that s. 17 of the Bonus Act has
been left intact. That Section in express terms refers to puja bonus and other
customary bonus as available for deduction from the bonus payable under the
Act, thus making a clear distinction between the bonus payable under the Act
and "puja" bonus or other customary bonus. So long as this Section
remains without amendment the inference is clear that the categories covered by
the Act, as amended, did not deal with customary bonus Strong reliance was
placed by counsel for the appellant on new s. 31A read with substituted s. 34.
It is proper to read s. 34 at this stage:
"34. Subject to the provisions of
section 31A, the provisions of this Act shall have effect notwithstanding
anything inconsistent therewith contained in any other law for the time being
in force or in the terms of any award, agreement, settlement or contract of
service." The only changes that we notice as between this Section and its
predecessor are (i) that agreements, settlements and contracts of service
inconsistent with the provisions of the Act regardless of whether they were
made before 29th May, 1965 or after would now stand superseded; and (ii) s. 24
shall be subject to the provisions of s. 31A newly inserted.
We may straightway dispose of the argument
based on s. 31A. That relates to bonus linked with production or productivity
in lieu of bonus based on profits. We are not concerned with such a situation
and we agree that in regard to productivity bonus s. 31A shall have operation
but it speaks nothing about the other kinds of bonus and cannot, therefore, be
said to have the spin-off benefits claimed by the appellant. Similarly, the
submission that all agreements inconsistent with the Bonus Act shall become
inoperative also has no substance vis-a-vis customary bonus. The fallacy is
simple. Once we agree-and this is incontestable now-that the Bonus Act (1965)
does not deal with customary bonus and is confined to profit-based or
productivity-based bonus, the provisions of the Act have no say 650 on
customary bonus and cannot, therefore, be inconsistent therewith. Conceptually,
statutory bonus and customary bonus operate in two fields and do not clash with
We have reached the end of journey because
the focal point of the debate is as to whether customary bonus, as claimed in
this case, is impaired or eliminated by the 1976 amendment Act. Moreover, both
parties have agreed that throughout they have been dealing with customary bonus
only and whenever there has been a settlement or agreement it has been not the
source of the right but the quantification thereof. The claim was rooted in
custom but quantified by contract. It did not originate in any agreement, but
was organised by it. We are, therefore, satisfied that the appeal must fail.
We should have unhesitatingly directed costs
to be paid by the management-appellant to the respondent-workmen; but during
the course of the hearing we were far from impressed with the attitude taken up
by the respondent. While the merits of the matter have to be decided
indifferent to such factors, costs are discretionary and we are constrained to
dismiss the appeal, directing both the parties to bear their respective costs.
N.V.K. Appeal dismissed.