Workmen
Vs. Kettlewell Bullen & Co. Ltd. [1994] INSC 4 (6 January 1994)
Agrawal, S.C. (J) Agrawal, S.C. (J) Kuldip Singh (J)
CITATION:
1994 AIR 1550 1994 SCR (1) 22 1994 SCC (2) 357 JT 1994 (1) 18 1994 SCALE (1)30
ACT:
HEAD NOTE:
The
Judgment of the Court was delivered by AGRAWAL, J.- This appeal by the workmen
of Kettlewell Bullen & Company Ltd. (hereinafter referred to as 'the
workmen') involves the question whether the workmen are entitled to customary
bonus at the rate of 10.5 per cent of the total annual salary or wages in
respect of the years 1974 to 1977.
2. By
order dated September
11, 1979 the
Government of West Bengal referred to the Eighth Industrial Tribunal
(hereinafter referred to as 'the Tribunal') the following dispute for
adjudication under Section 10 of the Industrial Disputes Act, 1947:
"Whether
the workmen are entitled to customary bonus for the accounting years 1974,
1975, 1976 and 1977? If so, at what rate?" Before the Tribunal it was
submitted by the workmen that the bonus was being paid to them since the year
1959 and that for the years 1959 to 1963 bonus was paid at the rate of three
and a quarter months' basic wages and for the years 1965 to 1973 it was paid at
the rate of 10.5 per cent of the total annual salary or wages and that in the
year 1964, it was paid at the rate of 4 per cent on the basis of Payment of
Bonus Ordinance, 1965. The Management disputed the said claim of the workmen
and asserted that the workmen were not entitled to claim customary bonus and that
they were only entitled to statutory bonus at the rate of 4 per cent payable
under the Payment of Bonus Act, 1965 (hereinafter referred to as the 'Bonus
Act'). The Tribunal by its award dated April 16, 1982 found that the bonus was
paid by the Management for a long period from 1959 onwards not on the basis of
the profit calculation and usually in the month of September before Puja
festival and that from 1965 to 1973 it was being paid at the uniform rate of
10.5 per cent, and, therefore, the bonus which was being paid by the Management
had ripened into a customary bonus due to a long usage. The Tribunal held that
the workmen were entitled to fixed customary bonus at the 360 rate of 10.5 per
cent of the annual salary or wages earned by each workman concerned for the years
1974 to 1977. The said award was challenged by the Management before the
Calcutta High Court in a writ petition filed under Article 226 of the
Constitution. The said writ petition was allowed by a learned Single Judge of
the said High Court by judgment dated September 21, 1982 whereby the learned
Single Judge set aside the award made by the Tribunal on the view that the
workmen had failed to establish that they were entitled to payment of customary
bonus. The said decision of the learned Single Judge was confirmed, in appeal,
by a Division Bench of the High Court by judgment dated November 17, 1986.
The
present appeal is directed against the said judgment of the Division Bench of
the High Court.
3.
Since the appeal relates to demand for customary bonus, it is necessary to
mention that customary bonus differs from the bonus (as normally understood)
based on the general principle that labour and capital should share the surplus
profits available after meeting prior charges. Customary bonus has also to be distinguished
from bonus claimed as an implied term of the contract of employment. The
circumstances in which an implied agreement may be inferred have been laid down
in Ispahani Ltd. Calcutta v. Ispahani Employees' Union'.
4. In
Graham Trading Co. v. Workmen2 bonus sought as a matter of tradition or custom,
has been distinguished from bonus payable as an implied term of employment and
it has been laid down that for determining whether the bonus is payable by way
of custom or tradition the following matters be taken into consideration: (SCR
pp. 111- 12) "(i) whether the payment has been over an unbroken series of
years; (ii) whether it has been for a sufficiently long period, though the
length of the period might depend on the circumstances of each case : even so
the period may normally have to be longer to justify an inference of
traditional and customary Puja bonus than may be the case with Puja bonus based
on an implied term of employment; (iii) the circumstance that the payment
depended upon the earning of profits would have to be excluded and therefore it
must be shown that payment was made in years of loss. In dealing with the
question of custom, the fact that the payment was called ex gratia by the
employer when it was made, would, however, make no difference in this regard
because the proof of custom depends upon the effect of the relevant factors
enumerated by us; and it would not be materially affected by unilateral
declarations of one party when the said declarations are inconsistent with the
course of conduct adopted by it; and (iv) the payment must have been at a
uniform rate throughout to justify an inference that the payment at such and
such rate had become customary and traditional in the particular concern."
1 (1960) 1 SCR 24 : AIR 1959 SC 1147 : (1959) 2 LLJ 4 2 (1960) 1 SCR 107 : AIR
1959 SC 1151 : (1959) 2 LLJ 393 361
5. In Tulsidas
Khimji v. Workmen3 Sinha, C.J., speaking for the majority, has held that the
four 'so-called conditions' laid down in the Graham Trading Co. case2 are not
really in the nature of conditions precedent but are circumstances which have
been taken into account in this Court in that case for coming to a conclusion
as to whether or not the claim to customary or traditional bonus had been made
out and that the observations in Graham Trading Co.2 "must be understood
as based on consideration of substance and not of form". It was further
observed: (SCR p. 688) " [W]hat is more important to negative a plea for
customary bonus would be proof that it was made ex gratia, and accepted as
such, or that it was unconnected with any such occasion like a
festival........"
6. In
that case the appellant firm had an unbroken record of profits year after year.
The Court upheld the finding of the Industrial Tribunal that the traditional or
customary bonus had been established notwithstanding that it bad not been
shown, as it could not have been shown, that it was paid in a year of loss.
7. In
Vegetable Products Ltd. v. Workmen4 the observations in the Graham Trading Co.
case2 have been thus explained:
"The
third circumstance lays down that it has to be proved that the payment has been
made even in years of loss. This only means that where there have been years of
loss, payment should have been made in those years also.
But it
does not mean that where there has been no year of loss at all and the concern
has been fortunate enough always to earn profit, there can be no customary or
traditional bonus connected with a festival like Puja, even though payment at a
uniform rate has been made for a large number of years. This circumstance
should, therefore, be read only thus: in case there have been years of loss, it
must be proved that payment has been made in those years also. The fourth
circumstance mentioned above is to the effect that payment should have been
made at a uniform rate throughout. That, however, does not mean that uniformity
should be established from the beginning to the end. Take a case where for the
first few years payment at a certain rate was made. But later on, for a much larger
number of years payment at a somewhat different but uniform rate has been made.
In those circumstances, the Tribunal may well come to the conclusion that the
payment was at a uniform rate ignoring the first years." In Mumbai Kamgar Sabha
v. Abdulbhai Faizullabhai5 this Court has dealt with the contention that custom
based bonus must be linked with some festival or other. Negativing the said
contention it has been observed: (SCR pp. 600-01 : SCC p. 841, para 17) 3
(1963) 1 SCR 675 : AIR 1963 SC 1007 : (1962) 1 LLJ 435 4 AIR 1965 SC 1499
:(1965) 1 LL,J 468 5 (1976) 3 SCC 832: 1976 SCC (L&S) 517 :(1976) 3 SCR 591
362 "Surely, communal festivals are occasions of rejoicing and spending
and employers make bonus payments to employees to help them meet the extra
expenses their families have to incur. Ours is a festival-ridden society with
many religions contributing to their plurality. That is why our primitive
practice of linking payment of bonus with some distinctive festival has
sprouted. As we progress on the secular road, may be the Republic Day or the
Independence Day or the Founder's Day may well become the occasion for
customary bonus. The crucial question is not whether there is a festival which
buckles the bonus and the custom. What is legally telling is whether by an
unbroken flow of annual payments a custom or usage has flowered, so that a
right to bonus based thereon can be predicted. The custom itself precipitates
from and is proved by the periodic payments induced by the sentiment of the
pleasing occasion, creating a mutual consciousness, after a ripening passage of
time, of an obligation to pay and a legitimate expectation to receive."
Having set out the principles governing payment of customary bonus, we may now
come to the facts of the present case.
8.
With regard to payment of bonus for the year 1959 a dispute was raised by the
workmen and the same was discussed in joint conference of the representatives
of the workmen as well as the Management before the Conciliation Officer and a
settlement was reached on July 25, 1962 whereby the parties mutually agreed to
settle not only the bonus issue for 1959 but also to enter into an agreement of
bonus for all the years up to and including 1966. The relevant terms of the
said settlement are as under:
"(a)
All workmen of Messrs Kettlewell Bullen & Co. working at 21, Strand Road,
Calcutta 1, will be paid three and a quarter months' basic salary as bonus for
each of the years 1962 to 1965 (both inclusive). The calculation of bonus will
be as under:
Total
basic salary received during the year x 3 1/4 ----------------------- 12
(b)
The above quantum of bonus will be paid irrespective of working results of the
Company during the years 1962 to 1966 (both inclusive) which will, however, not
be treated as a condition of service for further years.
The
Union also agrees not to make any demands for any additional bonus of any kind
during these years as stated hereinabove.
(c)
Regarding the quantum of bonus for the years 1959, 1960 and 1961, it is also
agreed that all the workmen of Kettlewell Bullen & Co. Ltd., working at 21,
Strand Road, Calcutta 1, will receive the said quantum of bonus on the same
conditions as specified in clauses (a) and (b) above of this agreement.
363
(d) The quantum of bonus agreed upon for the years 1959 to 1961 (both
inclusive) will be paid in two equal instalments, one in the month of September
1962 and another in the month of April 1963.
(e)
Bonus in respect of each of the years 1962 to 1966 (both inclusive) will be
paid in each of the succeeding years before the Pujas" 9.
While
the said settlement was in operation, the Payment of Bonus Ordinance, 1965 was
promulgated on May 29,
1965.
Relying
upon the provisions contained in the said Ordinance, the Management refused to honour
the settlement and for the year 1964 bonus was paid at the rate of 4 per cent.
10. On
October 15, 1966 the parties the workmen and the Management entered into
another settlement covering the period of five accounting years, i.e., 1965 to
1969 (both inclusive), whereby it was agreed as under:
"(a)
All the clerical and subordinate staff of the Company working at 21, Strand
Road, Calcutta 1, will be paid bonus in respect of each of the accounting years
1965 to 1969 (both inclusive) at the rate of 10 1/2 per cent (ten and half per
centum) of the total salary and wages (salary and dearness allowance only and
excluding attendance bonus, overtime, or any other allowance or payment) earned
by them during each of the relevant accounting years ending 1965 to 1969 (both
inclusive).
(b)
Bonus as aforesaid for each of the accounting years mentioned in clause (a)
above will be paid in the next succeeding year approximately two weeks before
the Pujas." In the said settlement, it was stated that it had been arrived
at in terms of Section 34(3) of the Payment of Bonus Act, 1965.
11.
The said settlement was followed by Memorandum of Settlement dated September 20, 1971 covering the accounting years
ending December 31,
1970, December 31, 1971 and December 31, 1972. Under the said settlement it was agreed as under:
"(a)
All the clerical and subordinate staff of the Company working at 21, Strand
Road, Calcutta 1, will be paid bonus in respect of each of the accounting years
ending December 31, 1970, December 31, 1971 and December 31, 1972 (all
inclusive) at the rate of 10 1/2 per cent (ten and a half per centum) of the
total salary and wages (basic and dearness allowance only and excluding
attendance bonus, overtime or any other allowance or payment) earned by them
during the said accounting year.
(b)
Bonus as aforesaid for each of the accounting years mentioned in clause (a)
above will be paid to the employees in the next succeeding year approximately
four weeks before the Pujas." In the said settlement also it was stated
that it was arrived at under Section 34(3) of the Payment of Bonus Act, 1965.
364
12. On
September 26, 1974 the parties entered into another
settlement in respect of the accounting year ended December 31, 1973 and agreed as under:
"
(a) All the clerical and subordinate staff of the Company working at 21, Strand
Road, Calcutta 1, will be paid bonus in respect of the accounting year ended
December 31, 1973 at the rate of 10.50 per cent (ten and a half per centum) of
the total salary and wages (basic and dearness allowance only and excluding
attendance bonus, overtime, or any other allowance or payment) earned by them
during the said accounting year." In that settlement also it was provided
that it was arrived at under Section 34(3) of the Payment of Bonus Act, 1965.
13. Before
the Tribunal Shri Kasi Nath Banerjee, General Secretary of the Employees' Union, had appeared as a witness and has stated that the
bonus was being paid since 1959 before the commencement of Puja.
14.
From the settlements referred above and the evidence that was produced before
Tribunal it appears that
(i) bonus
was being paid by the appellant ever since the year 1959,
(ii) for
the years 1959 to 1963 bonus was paid at the rate of 3 1/4 months' basic pay,
(iii) for
the year 1964, bonus was paid at the rate of 4 per cent in accordance with the
Payment of Bonus Ordinance, 1965,
(iv) for
the years 1965 to 1973, bonus was paid at the rate of 10.50 per cent of the
salary or wages, and
(v) the
said bonus was generally paid before the commencement of Puja festival.
15.
The Tribunal has found that:
"Bonus
was paid by the Management for a long period from 1959 onwards not on the basis
of profit calculation and usually in the month of September before the Puja
festival and the facts and circumstances prove that there was continuous
payment of bonus since 1959 at a relevant time without calculation of profits
according to the salary and wages since 1959 and the payments were made from
1965 to 1973 at the rate of 10.5 per cent under Section 34(3) of the Payment of
Bonus Act at a uniform rate and that too before the Puja festival and not being
based on any calculation of the profit and loss of the Company. The only
possible inference in such circumstances is that the Management paid bonus
which has ripened into a customary bonus due to long usage from 1959 onwards
covering a period of 15 years." The learned Judges on Division Bench of
the High Court have also observed :
"However,
we may point out that we are of the opinion that from the various agreements it
was clear that provisions for payment were being made irrespective of the
quantum of profit and loss." It can, therefore, be said that the payment
had been made by the Management of the respondent by way of bonus over an
unbroken series of years and the said payment did not depend upon the earning
and profits.
365
16.
The learned Judges on the Division Bench have held that the said payment could
not be regarded customary bonus for the following reasons-
(i) it
was not being paid at a uniform rate throughout, and
(ii) the
settlements that were entered into on October 15, 1966, September 20, 1971 and September
20, 1973 stated that
the said settlements were entered into under Section 34(3) of the Payment of
Bonus Act, 1965 and that the bonus paid under the said settlements was bonus
contemplated under the Payment of Bonus Act.
17. As
regards the first reason given by the High Court that the bonus was not being
paid at a uniform rate throughout, it may be stated that though during the
years 1959 to 1963 it was paid at the rate of three and a quarter months' basic
pay (which amount, as pointed out by the learned Judges of the High Court,
varied between 10.81 per cent to 12.95 per cent of total salary or wages) and
in the year 1964 it was paid at the rate of 4 per cent but in subsequent years
from 1965 to 1973 it was paid at a uniform rate of 10.50 per cent of the salary
or wages. As noticed earlier, in Vegetable Products Ltd.4 it has been held that
it is not necessary that uniformity in the rate should be established from the
beginning to the end and in a case where for the first few years payment at a
certain rate was made but later on for a much larger number of years payment at
a somewhat different rate had been made, the Tribunal could well come to the
conclusion that the payment was at a uniform rate ignoring the first few years.
Having regard to the said decision, the payment made during the years 1959 to
1964 could be ignored and, on the basis of the payment made during the years
1965 to 1973 at the uniform rate of 10.50 per cent of the salary or wages it
could be said that the payment was made at a uniform rate during the period
1965 to 1973.
18.
The question is whether the said period was sufficiently long to draw an
inference about the payment being customary in nature. In Graham Trading Co.2
the payment had been made continuously from 1940 to 1952 at the rate of one
month's wages and this Court upheld the claim of the workmen for bonus as a
customary and traditional payment. In Vegetable Products Ltd.4 bonus was paid
from 1954 to 1961 and the said payment was at a uniform rate (30 days' wages)
from 1956 to 1961. In view of the said payment at a uniform rate from 1956 to
1961 the Industrial Tribunal had held that there was a custom of payment at the
rate of 30 days' wages as bonus before Puja in the said concern.
This
Court, however, found that payment was made without dispute and without
condition from 1956 to 1958 and that in 1959 the payment was made ex gratia and
accepted as such and that in 1960 and 1961 the payment was made on condition
that it would be adjusted towards the profit bonus of the previous year and was
accepted as such. The Court, therefore, set aside the conclusion of the
Tribunal that payment of customary or traditional bonus was established.
In the
instant case there was payment at a uniform rate of
10.5
per cent of salary or wages for an unbroken period of nine years, from 1965 to
1973, which was a 366 sufficiently long period, and the Tribunal could have
reasonably drawn an inference that the said payment was customary or
traditional bonus on the occasion of Puja festival,
19.
With regard to the other reason given by the High Court, namely, reference to
Section 34(3) of the Bonus Act in the various settlements, it may be stated
that the Bonus Act is confined, in its application, to profit bonus, and other
kinds of bonus recognised in industrial law are not covered by the provisions
of the Act. In Mumbai Kamgar Sabha, Bombay5 it has been held: (SCR p. 608 : SCC
p. 848, para 35) "The conclusion seems to be fairly clear, unless we
strain judicial sympathy contrary wise, that the Bonus Act dealt with only
profit bonus and matters connected therewith and did not govern customary,
traditional or contractual bonus."
20.
The same view was reiterated in Hukum Chand Jute Mills Ltd. v. Second
Industrial Tribunal6 wherein it was held that the customary or contractual
bonus were excluded from the provisions of the Act and it was laid down: (SCR
p. 647 : SCC p. 263, para 5) "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." In Hukam Chand Jute Mills Ltd.
case6 while referring to Section 17 of the Bonus Act, this Court has observed:
(SCR p. 649 : SCC p. 264, para 9) "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."
21. As
indicated earlier the High Court has found that payments made under the
settlements had no link with the profit. In the circumstances the reference to
Section 34(3) of the Bonus Act in the settlements would not alter the nature of
the payment so as to convert it into a bonus paid under the said Act. The
reference to Section 34(3) of the Bonus Act must be regarded as having been
made by way of abundant caution to exclude the liability of the appellant for
bonus under the Act, but that would not alter the nature of the payment.
Moreover, Section 17 of the Bonus Act provides as under:
"17.
Adjustment of customary or interim bonus against bonus payable under the Act.-
Where in any accounting year- 6 (1979) 3 SCC 261 : 1979 SCC (L&S) 266:
(1979) 3 SCR 644 367 (a) an employer has paid any Puja bonus or other customary
bonus to an employee; or (b) an employer has paid a part of the bonus payable
under this Act to an employee before the date on which such bonus becomes
payable, then, the employer shall be entitled to deduct the amount of bonus so
paid from the amount of bonus payable by him to employee under this Act in
respect of that accounting year and the employee shall be entitled to receive
only the balance."
22. In
Mumbai Kamgar Sabha5 this Court has observed: (SCR p. 607: SCC p. 847, para 33)
"For this reason it is provided in Section 17 that where an employer has
paid any Puja bonus or other customary bonus, he will be entitled to deduct the
amount of bonus so paid from the amount of bonus payable by him under the Act.
Of
course, if the customary bonus is thus recognised statutorily and, if in any
instance it happens to be much higher than the bonus payable under the Act,
there is no provision totally cutting off the customary bonus. The provision
for deduction in Section 17, on the other hand, indicates the independent
existence of customary bonus although, to some extent, its quantum is
adjustable towards statutory bonus." This can only mean that if the bonus
that was being paid by the respondent is found to be customary bonus then the
respondent would be entitled to deduct the amount so paid from the amount of bonus
payable to the employee by way of bonus under the Act in respect of that
accounting year.
23. Shri
G.B. Pai, learned senior counsel appearing for the respondent, placed reliance
on the decision of this Court in Upendra Chandra Chakraborty v. United Bank of
India7. In that case, it was held that the bonus received by the workmen did
not have the characteristic of customary bonus as known to law. It was found
that no bonus was paid for the years 1950 to 1958 and from 1959 onwards the
rate had not been uniform and there was no evidence to show that the payment
was unrelated to the profits and it was nobody's case that the bonus was not
paid in any year of loss and it was also observed that the concept of any
customary bonus was unknown to nationalised banks and that in all the nationalised
banks which are wholly owned undertakings of the Government of India, the
employees must be dealt with on a common denominator in the matter of bonus.
Having regard to the aforesaid circumstances, it was held that although the payment
was made in the month of September but that payment was not customary bonus. In
our opinion, the said decision has no application to the facts of the present
case.
24.
Having considered the award made by the Tribunal as well as the judgments of
the learned Single Judge and the Division Bench of the High 7 1985 Supp SCC 26:
1985 SCC (L&S) 546: (1985) 3 SCR 1057 368 Court, we are of the view that an
inference that the bonus that was being paid by the respondent-Company to the
appellants was customary bonus payable at the rate of 10.5 per cent of the
salary or wages could be justifiably drawn by the Tribunal having regard to the
facts and circumstances of the case, and the High Court was in error in setting
aside the award and holding that the bonus that was paid was not in the nature
of customary bonus.
25.
The appeal is, therefore, allowed. The judgment and order of the Division Bench
of the High Court dated November 17, 1986 in Appeal No. 103 of 1983 as well as
that of teamed Single Judge dated September 21, 1982 in Matter No. 754 of 1982
are set aside and the award dated April 16, 1982 made by the Eighth Industrial
Tribunal holding that for the years 1974 to 1977 the appellants were entitled
to payment of customary bonus at the rate of 10.5 per cent of the annual salary
or wages earned by each workman concerned in each such year is restored. The
parties are left to bear their own costs.
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