Upendra Chandra Chakraborty & ANR
Vs. United Bank of India [1985] INSC 109 (30 April 1985)
KHALID, V. (J) KHALID, V. (J) DESAI, D.A. ERADI,
V. BALAKRISHNA (J)
CITATION: 1985 AIR 1010 1985 SCR (3)1057 1985
SCC Supl. 26 1985 SCALE (1)972
ACT:
Bonus-Customary bonus, concept of-Tests to be
applied- Bonus paid to the employees of the respondent Bank during the pooja
period, whether has the characteristic of customary bonus know to
law-Applicability of section 33-C (2) of the Industrial Disputes Act, 1947.
HEADNOTE:
Two employees of the respondent Bank
preferred a claim on the basis of the existence of legal light in them to the
payment of a customary bonus on the eve of pooja. Their case was that the bonus
paid to them every year on the eve of pooja at the rate of pay as on 1st
September of the respective year was unrelated to any profit or loss made by
the company and that the consecutive payment for more than 16 years without any
break of such bonus has developed into a condition of service giving rise to a
right and an expectancy which in law assumed the characteristics of customary
bonus. The claim was resisted by the bank on the grounds, namely, (a) the
application itself was not maintainable since the alleged right pleaded by the
workmen was not a condition of service and that such a right did not exist in
fact also; (b) the conditions of service of the employees of the Bank are
governed by various awards and settlements; (c) though there were agreements
entered into between the bank and its employees on several matters there was no
agreement at any time on the question of payment of bonus; and (d) though the
bonus was paid, as a result of the employees demand every year as per separate
agreement for the payment thereof the bonus paid was related to profit and not
based on any custom. After considering correspondence that passed between the
Bank and its employees, the Labour Court dismissed the application holding that
on the basis of the material on record, there was no existing right to
customary bonus and that the Labour Court could not either create or declare a
right which was not in existence to stretch its jurisdiction under section
330(2) of the Industrial Disputes Act. Hence the appeal by special leave.
^
HELD: 1. In the facts and circumstances of
the case the bonus received by the appellants did not have the characteristic
of customary bonus as known to law and therefore they were not entitled to the
quantification of that amount under section 33-c(2) of the Industrial Disputes Act,
on the basis of tho existence of a legal right in them.
[1063 F] 1058
2. In Vegetable Products Ltd. v. Their
Workmen, 1965 (1) LLJ 468, the Supreme Court has laid down the tests to
determine what exactly is customary or festival bonus. The tests laid down are;
(I) that the payment has been made over an unbroken series of years; (2) that
it has been for a sufficiently long period-the period has to be longer than in
the case of an implied term of employment; (3) that it has been paid even in years
of loss and did not depend on the earning of profits; and (4) that the payment
has been at a uniform rate throughout. In the instant case, the record shows
that the bonus paid does not satisfy the requirements laid down by the Court.
The mere fact the payments were made in the month of September or thereabout
every year, by itself will not make the bonus paid a customary pooja bonus.
The rate has not been uniform. The management
has at all times taken the definite stand that the payment was related to profits
and that it was in anticipation of making profit.
Further the payments were made at all time
pursuant to demands made by the employees. 11061 C-F Vegetable Products Ltd v.
Their Workmen, (1965) 1 LLJ 468 applied.
3. The concept of any customary bonus is
unknown to nationalised banks. All the nationalised banks are wholly owned
undertakings of the Government of India. In the matter of bonus, the employees
of the nationalised banks must be dealt with on a common denominator. If
therefore, the contention of the appellants were to prevail the employees of
the respondent. which is only one amongst many Nationalised banks, would enjoy
an undeserved advantage compared to their counterpart in other nationalised
banks and even in the other branches of the respondent bank and may become a
cause of disharmony and inequality. Therefore, in larger public interest also,
the demand for customary bonus otherwise found to be untenable, must be
negatived.
[1063 C-E]
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1416 of 1981.
From the Judgment and Order dated 28.12.1975
of the Central Govt. Labour Court at Calcutta in Application No L.C. 28 of
1976.
M.K Ramamurthi and Amlan Ghosh for the
Appellants.
G.B. Pai, V.S. Desai, D.N. Mukherjee, N.R.
Chaudhary and R. Mukherjee for the Respondent.
KHALID, J. This appeal, by special leave, by
two employees of the United Bank of India at Calcutta, is directed against a
decision given by the Central Government Industrial Tribunal- 1059 cum-Labour
Court, Calcutta, on 28th December, 1979, in an application made under Section
31-C (2) of the Industrial Disputes Act, 1947. The claim made by them related
to the bonus paid on the eve of Pooja every year which according to them was
customary in nature, irrespective of profit or loss.
2. The Labour Court after considering the
evidence placed before it held that the bonus claimed could not be characterised
as customary since it did not answer to the requirements of law to be customary
bonus and that in the absence of an existing right to customary bonus or bonus
founded on an implied agreement as a condition of service, the application made
under section 33-C(2) was not maintainable and accordingly dismissed the same
3. The petitioners' claim was attempted to be
Supported by the fact that they were given one month's pay as bonus for the
years 1959 to 1963, one and half months' for the year 1964 and two months' pay
for the years 1965 to 1974.
Their further case was that this bonus was
paid every year on the eve of Pooja at the rate of pay as on 1st September of
the respective year and was unrelated to any profit made by the company. The
payment of such bonus consecutively for 16 years without any break and
unrelated to profit or loss, without its sanction either in law or any award or
any written settlement, payable on the eve of the Pooja developed into a
condition of service giving rise to a right and an expectancy which in law
assumed the characteristics of customary bonus. This claim was resisted by the
Bank on the ground that the application itself was not maintainable since the
alleged right pleaded by the workmen was not a condition of service and that
such a right did not exist in fact also. The conditions of service of the
employees of the Bank are governed by various awards and settlements. Though
there were agreements entered into between the bank and its employees on
several matters there was no agreement at any time on the question of payment
of bonus. Bonus was paid to its employees every year as a result of demand
raised separately by them and in respect of every year there was a separate
agreement with regard to bonus. It was further stated that the bonus paid was
related to profit and not based on any custom
4. The Labour Court considered the
correspondence that passed between the BANK and its employees and came to the
con- 1060 clusion that a right to customary bonus in favour of the employees of
the Bank did not exist. The application was dismissed holding that on the basis
of the material on record, there was no existing right to customary bonus and
that the Labour Court could not either create or declare a right which was not
in existence to stretch its jurisdiction under Section 33-C(2) of the Industrial
Disputes Act. It is the correctness of this finding that we are called upon to
decide in this appeal.
5. The Counsel on both sides took us through
the various letters that passed between the employees of the Bank and the Bank
and brought to our notice the past history relating to the payment of bonus for
a considerably long time. It is seen that the Bank had been paying bonus at the
rate of one month's salary from 1959 to 1963. This is period prior to the Bonus
Act which came into force in 1965. The payment continued even after coming into
force of the Bonus Act. We find from the materials on record that the above payments
were not made by the bank unilaterally without any demand, unrelated to profit
or loss as a customary bonus. It is true that payments were made on the eve of
the Pooja. The bonus so paid was not called Pooja bonus except in 1972 when the
words 'Pooja' was mentioned at the time when the payment was made. The bonus in
question was paid for the years 1958 and 1959 as a result of protracted
negotiations. Bonus for the year 1962 was paid at the rate of one month's pay
on the basis of Desai award. This rate continued for the year 1.963 also. In
1964, it was at the rate of 45 days' pay. This rate was further increased for
the year 1965 to two months' pay and this we find was as a result of the
discussions held on the subject between the management and the union from time
to time. The two months' rate continued till the year 1969.
In 1969, the Bank was nationalised and till
1971 bonus at the rate of two months' basic salary was sanctioned by the
Ministry of Finance and was accordingly paid to the employees. In 1972, the
General Secretary of the Union claimed by a letter that the employees were
getting bonus at the rate of two months' pay at the time of Pooja, irrespective
of profits and asked for an enhancement of rate of bonus. Discussions were
initiated and ultimately the Bank agreed to pay an additional bonus for the
year 1972 of an additional four days pay and for the year 1973 two months and
12 days and for 1974 two months and 271/2 days.
6. We have ourselves gone through the letters
which are on 1061 record that passed between the parties. The correspondence
shows . that the bonus was paid from year to year pursuant to negotiations that
took place between the Union of the employees and the Bank and that the rates
of bonus were not uniform, but were fluctuating. The Bank had a definite case
that bonus was paid out of the profits made or in anticipation of profits. The
claim of the Union that it was customary and unrelated to the profits of the
Bank was attempted to be made at a belated stage of the case.
7. Before deciding the case on the above
materials, it would be useful to refer to the decision of this Court in
Vegetable Products Ltd. v. Their Workmen(l) where this Court has laid down the
test to determine what exactly is customary or festival bonus. The tests laid
down by this Court are: (I) that the payment has been made over an unbroken
series of years; (2) that it has been for a sufficiently long period-the period
has to be longer than in the case of an implied term of employment; (3) that it
has been paid even in years of loss and did not depend on the earning of
profits; and (4) that the payment has been made at a uniform rate throughout.
From the materials disclosed in the records, reference to which was made by us
earlier, it will be evident that the bonus paid in this case does not satisfy
the requirements laid down by this Court detailed above. It may be true that
the payments were made in the month of September or thereabout every year, but
that by itself will not make the bonus paid a customary Pooja bonus.
The rate has not been uniform. The management
has at all times taken the definite stand that the payment was related to
profits and that it was in anticipation of making profit.
The payments were made at all times pursuant
to demands made by the employees. We would like to refer to only two or three
letters to fortify our conclusion that the payment was pursuant to the demands
of the employees. In the letter dated 20th September, 1958, addressed to the
General Secretary, United Bank of India's employees Association, the opening
sentence reads as follows:
"With reference to the several demands
as stated in your letter dated-we have agreed as follows:
(1) [1965] 1 LLJ 468.
1062 (1) Annual bonus for the year 1958..
In the letter dated September 3, 1968,
written to the President of the Association and marked as confidential, it is
stated that "the Bank tried to impress upon the President through a number
of discussions to persuade him to revise the present system of paying bonus in
September to a system after the year's results are available and to pay the
minimum as provided for in the Bonus Act then and the balance if any after the
year's profit figures are known and since the Bank did not propose to strain
its relationship with the employees and as the request made was not acceptable
to the employees, it was decided to pay the bonus at the rate of two months'
basic salary, as existing on 1.9.1968." In the letter dated December 29,
1972, addressed to the General Secretary of the Association it is stated that
in case of this Bank, bonus is paid on the basis of the agreement arrived at
between your association and the management equivalent to two months' basic
pay.. " Reference may also be made to a letter dated 17th April, 1973, by
the Association to the Chairman and Managing Director of the Bank which reads
as follows:
".. As you know, bonus is being paid at
the present rate of two months basic pay as on September 1st each year since
1964, when after a continuous struggle the original pre-amalgamation rate. was
restored gradually, beginning with 15 days basic pay in 1958.. " In the
letter addressed to the General Secretary (dated 26th August, 1973) reference
is again made to the demands made by the association for additional bonus for
1972 and to the subsequent discussions and agreement for payment of bonus at
the rate of two months and 12 days pay as on 1.9.1973.
8. From the above letters it is evident that
bonus was paid as a result of long discussion at every stage- No bonus was paid
for the years 1950 to 1958. From 1959 onwards, the rate has not been uniform.
There is no evidence to show that this payment was unrelated to the profits.
The letters sent by the management clearly indicated that bonus payment was
related to the profits and the Bank always wanted its employees to wait for the
financial position for computation of the bonus payable. The 1063 evidence in
this case does not also justify inference of an implied agreement on the part
of the Bank to pay bonus of a customary nature at the time of Pooja, without
any relation to profits as a condition of service. The Labour Court has noted
the fact that it was nobody's case that bonus was ever paid in any year of loss
or that there was any year of loss and that the bank had consistently taken the
position that bonus was paid out of the year's profit in anticipation.
9. There is one other aspect of the claim now
put forward which cannot be lost sight of, which affords an additional reason
to reject the contention of the appellants. The respondent is a nationalised
bank. Roughly in all there are 25 nationalised banks. The concept of any
customary bonus is unknown to nationalised banks. All the nationalised banks
are wholly owned undertakings of the Government of India in the matter of
bonus, the employees of the nationalised banks must be dealt with on a common
denominator. If therefore the contention of the appellant were to prevai the
employees of the respondent, which is only one amongst many nationalised bank,
would enjoy an undeserved advantage compared to their counterparts in other
nationalised banks and even in the other branches of the respondent bank and
may become a cause of disharmony and inequality. Therefore in larger public
interest also, the demand for customary bonus otherwise found to be untenable,
must be negatived.
10. On a careful consideration of the facts
and circumstances of the case disclosed, we find that the appellants have not
succeeded in persuading us to disagree with the findings of the Labour-Court or
to satisfy us that the bonus that they received had the characteristic of
customary bonus as known to law and that therefore they were entitled to the
quantification of that amount under Section 33-C (2) of the Industrial Disputes
Act, on the basis of the existence of a legal right in them. The appeal has,
therefore, to fail and is dismissed with out any order as to costs S.R. Appeal
dismissed.
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