The
Daily Partap Vs. The Regional Provident Fund Commissioner, Punjab, Haryana [1998] INSC 506 (29 October 1998)
S.B.Majmudar,
M.Jagannadha Rao S.B.Majmudar, J.
ACT:
HEAD NOTE:
Both
these appeals for special leave to appeal under Article 136 of the Constitution
of India have brought in challenge two orders of the Division Bench of the High
Court of Punjab & Haryana at Chandigarh dismissing two Letters Patent
Appeals arising out of the decision of the learned Single Judge of the High
Court who has considered identical questions of law. Consequently, both these
appeals were heard together. Learned counsel for the respective parties were
heard in support of their cases and thereafter both these appeals are being
disposed of by this common judgment.
The
common question which falls for consideration of this Court in these appeals is
as to whether the appellants which are carrying on the business of printing and
publishing newspapers in the State of Punjab at Jallandhar are liable to remit
contributions under Section 6 of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 (for short the 'Act') to the authorities
functioning under the Act along with the matching contributions from their
respective employees, so far as the amounts paid by the appellants to their
employees under identical schemes of Production Bonus are concerned. The
learned Single Judge of the High Court in his impugned Judgment has taken the
view that the said statutory liability is foisted on the appellants. By
summarily dismissing the Letters Patent Appeals against the said decision of
the learned Single Judge, the Division Bench has confirmed the said view and
that is how the appellants are before us in these proceedings. A few relevant
introductory facts deserve to be noted to appreciate the common grievance of
the appellants.
BACKGROUND
FACTS:
The
appellants were carrying on the business of printing of the newspapers in the
city of Jallandhar in the State of Punjab and circulating the same to their
customers.
They
were alleged to have not remitted their contributions along with the share of
their concerned employees to the extent of the amounts paid by them for the
period from August, 1975 to March, 1976 by way of Production Bonus. The
contention of the appellants was that as the disputed amounts were paid to the
concerned employees under the relevant Production Bonus Schemes they were not
liable to remit contributions for the same as per Section 6 of the Act. On the
basis of the said contention, they filed writ petitions earlier against the
aforesaid demand of the authorities before the High Court. In the said writ
petitions filed in the year 1976, the then learned Advocate Genera for the
State of Haryana appearing for the authorities, conceded before the High Court
that the appellants were not required to deposit the provident fund on the
Production Bonus and the appellants may deposit provident fund only on
"wages" as defined in the Act from August, 1975 and with regard to
the refund of the amount deposited in respect of Production Bonus, the
appellants may apply to the respondent authorities, who, after giving them
hearing, would decide the matter within three months. The said decision of the
High Court in both these writ petitions moved by the appellants were rendered
on 19th July, 1976.
Thereafter
the respondent authorities gave hearing to the appellants and ultimately took
the view that the disputed amounts for which contributions were asked for under
Section 6 of the Act from the appellants were part of the "basic
Wages" and no such Production Bonus Scheme was existing in the appellants'
concerns. Consequently, the claim of the appellants for non-application of
Section 6 of the Act of these disputed amounts was rejected. Under these
circumstances, the appellants once again carried the matters in writ petitions
before the High Court. Those writ petitions were dismissed by the learned
Single Judge by the impugned order which came in their turn to be confirmed by
the Division Bench in the Letters Patent Appeals as noted earlier.
RIVAL
CONTENTION:
Shri Ranjit
Kumar, learned counsel for the appellants vehemently submitted that pursuant to
the earlier order dated 19th
July, 1976 of the High
Court in writ petitions the only inquiry which was to be conducted by the
authorities under the Act was about the appropriate amount of refund to be
given to the appellants. The learned Advocate General for the State of Haryana
had clearly conceded that the appellants were not required to deposit such
provident fund on Production Bonus and consequently, the authorities had no
jurisdiction to go behind these orders of the High Court and decide the
question on merits once again and held that the appellants were liable to
deposit the provident fund amount on Production Bonus paid by them to the
workmen concerned. In the alternative it was contended by the learned counsel
for the appellants that even assuming that the authorities could go into this
question despite the order of the High Court dated 19th July, 1976, the
authorities had committed a patent error of law in taking the view that the
scheme in question was not a Production Bonus Scheme and that the amounts paid
by the employees for extra work rendered by the workmen were covered by the
definition of "basic wages" under Section 2(b) and consequently
Section 6 of the Act got attracted in connection with the said disputed amounts
on which the authorities were justified in seeking transmission of contribution
by the appellants along with matching contribution by the workmen. In support
of the said contention, learned counsel for the appellants vehemently relied
upon a decision of the six member Bench of this Court in Bridge & Roof Co.
(India) Ltd. vs. Union of India, (1963 (3) SCR 978) and tried to distinguish
the ratio of decision of this Court in Jay Engineering Works Ltd. & Ors. vs.
The Unior of Indian & Ors. (1963 (3) SCR 995). It was contended that the
scheme in question was clearly a Production Bonus Scheme. That those workmen
employed by the appellants who had put in more work than beyond the norms
provided for them and for which no action could have been taken by the
Management if the workmen had not carried out the extra load of work, had been
paid for this voluntary extra work. Such payment for extra work was directly
linked up with production and was a Production Incentive Bonus squarely covered
by the excepted category of the definition of "basic wages" under
Section 2(b) of the Act. He also submitted that in order to become a Production
Bonus Scheme it was not necessary that all the workmen were uniformly paid
bonus if they worked more than what was required of them by the norms. Even if
amounts of bonus varied with the quantum of extra work rendered by workmen
concerned, such bonus scheme still remained a genuine incentive Production
Bonus Scheme.
In
reply, learned counsel for the respondent Shri Harish Chander, submitted that
the Act is a beneficial piece of legislation. It is welfare measure under which
workmen belonging to the lower strata of society and suffering from economic
distress and penury are enabled by the legislature to contribute towards a
compulsory saving scheme wherein the employer would give matching contribution
and the amount credited to the workment's account maintained by the authorities
under the Act would be available for them for being available to meet the needs
of their families after their superannuation or even otherwise during
employment.
These
amounts will also be available to them to draw upon by taking loans on the
basis of the amounts standing to their credit, for meeting social obligations
like marriage or even meeting medical expenses and other pressing economic
necessities. Thus, the Act envisages a protective economic cover for the rainy
day so far as these workmen are concerned. Such a welfare legislation should be
construed liberally and not in a restrictive manner. In support of this
contention, reliance was placed on the decisions of this Court in Regional
Provident Fund Commissioner vs. S.D.College, Hoshiarpur & Ors. (1996(5) SCC
522). Reliance was also placed on the definition of the term "bonus"
as found in Corpus Juris Secundum, Volume 11 at page 515.
Learned
counsel for the respondent further submitted that the High Court had taken the
view that the Scheme pressed in service by the appellants was not a genuine
Production Bonus Scheme but was merely an attempt to get out of the provisions
of Section 6 of the Act so far as the disputed amounts were concerned. He also
submitted that earlier orders of High Court did not deprive the authorities of
statutory jurisdiction to decide the real nature of the so called Production
Bonus schemes. That the concession of learned Advocate General has to be
considered in its correct perspective.
In the
light of the aforesaid rival contentions, the following points arise for out
determination:
1.Whether
in view of earlier decision of the High Court dated 19th July, 1976 based on
the concession of learned Advocate General, Haryana, the authorities had
jurisdiction to decide the question on merits or whether the authorities were
bound to consider the only limited question of computation of appropriate
refund amount to be paid to the appellants so far as the disputed amounts which
were already paid under protest by the appellant authorities along with
matching contributions of their employees were concerned;
2.If
yes, whether the appellants were liable to remit under Section 6 of the Act
contributions on the amounts paid by them to the employees concerned under the
Production Bonus Scheme as promulgated by them at the relevant time; and
3.What
final order? We shall now proceed to consider these points seriatim.
Point
No. 1:
As
noted earlier, it is true that when the appellants in the first instance filed
writ petitions in the High Court, it was contended by them that the Production
Bonus amounts paid by them to their workmen were not part of the "basic
Wages" as defined under Section 2(b) of the Act.
It is
also true that they contended before the High Court in those proceedings that
under some mistake of law they had already deposited provident fund of the
employees with respect to Production Bonus also. That they were entitled to
appropriate refund of the said amount. It is equally true that when such a
contention was raised by them, the learned Advocate General, Haryana, who appeared
at that stage on behalf of the respondent authorities, conceded that the
appellants were not required to deposit provident fund on the Production Bonus
and they may deposit provident fund only on the "wages" as defined in
the Act from August, 1975 and that for appropriate refund they may apply to the
respondent who will give them hearing and decide the matter.
Learned
Advocate General also assured that the appellants will have to pay refund of
the provident fund to the employees to the extent that such amounts were
deducted from the salaries of the employees covered by the Production Bonus
scheme. The said assurance of the learned Advocate General was accepted by the
learned counsel for the appellants and that is how the appellants moved an
application for refund before the authorities.
However,
it has to be kept in view that the Advocate General's concession was on a
question of law as to whether the Scheme which was put forward by the
appellants as Production Bonus Scheme was covered by Section 6 read with
Section 2(b) or not. Such a concession on the question of law cannot bind the
authorities for all time to come but even apart from this aspect of the matter
the said concession has to be considered as a whole. In the same breath while
conceding that the appellants were not required to contribute on Production
Bonus amounts, the learned Advocate General made it clear that they have to
deposit provident fund on the "wages" as defined under the Act
meaning thereby the question whether the disputed amounts for which refund was
to be claimed by the appellants form the authorities fell within the definition
of "wages" under the Act or not. It was a live issue which had to be
decided by the authorities in proposed refund applications. Learned Advocate
General had not given an absolute concession that the appellants were not
liable to contribute any part of the disputed amount towards provident fund and
that it never fell within the definition of the word "wages". Under
these circumstances, when the applications for refund were moved by the
appellants they were required to be decided on their won merits. The statement
of the learned Advocate General before the High Court had no adverse effect on
such a statutory jurisdiction of the authorities. The merits of refund
applications had to be decided by the authorities after hearing the appellants.
The entire question whether the claim for refund was justified in law or not
and the further connected question whether the amounts deposited were towards
"basic wages" or otherwise were open for consideration of the
authorities. It cannot be said that such an inquiry was not open to the
authorities and was clearly shut out by the order of the High Court dated 19th July, 1976 recording the concession of the
learned Advocate General. The first point, therefore, is answered against the
appellants and in favour of the respondent authorities.
Point
No. 2:
This
takes us to the consideration of the merits of the controversy. In order to
resolve this controversy, it is necessary to have a look at the relevant
statutory scheme. It has to be kept in view that the Act in question is a
beneficial social welfare legislation meant for the protection of weaker
sections of society namely, workmen who had to eke out their livelihood from the
meagre wages they receive after toiling hard for the same. We may usefully
refer to the observations of a two Judge Bench decision of this court in
Regional Provident Fund Commissioner vs. S.D.
College, Hoshiarpur & Ors. (supra),
wherein it has been observed in para 10 of the Report that:
"....The
Act is a beneficial welfare legislation to ensure health and other benefits to
the employees. The employer under the Act is under a statutory obligation to
deduct the specified percentage of the contribution from the employee's salary
and matching contribution, the entire amount is required to be deposited in the
fund within 15 days after the date of the collection, even month." Section
6 of the Act which imposes this statutory obligation on the employers for remitting
the requisite contributions reads as under:
"6.
Contributions and matters which may be provided for in Schemes The contribution
which shall be paid by the employer to the Fund shall be [ten per cent] of the
basic wages, [dearness allowance and retaining allowances (if any)], for the
time being payable to each of the employees [(whether employed by him directly
or by or through a contractor)] and the employee's contributions shall be equal
to the contribution payable by the employer in respect of him and may, [if any
employee so desires, be an amount exceeding ten per cent of his basic wages,
dearness allowance and retaining allowance (if any), subject to the condition
that the employer shall not be under an obligation to pay any contribution over
and above his contribution payable under this section]:
[Provided
that in its application to may establishment or class of establishments which
the Central Govt. after making such inquiry as it deems fit, may, by
notification in the Official Gazette specify, this section shall be subject to
the modification that for the words ten percent", at both the places where
they occurr, the words twelve percent" hall be substituted]:
It is
not in dispute between the parties that the appellants' establishments are
governed by the Act. In fact learned counsel for the appellants stated that
they are remitting requisite contributions under Section 6 so far as the
amounts of "basic wages" paid by them to their employees are
concerned and equally matching contributions from the employees are also
deducted from their wages and remitted to the authorities under the Act. It is
obvious that these contributions from part of the fund and the provident fund
accounts of the workmen maintained by the authorities under the scheme are credited
with these amounts from time to time. These funded amounts would be available
to the workmen for the requirements as withdrawals can be made from the
workers' credit balances in the fund as envisaged by the Act. However, Shri Ranjit
Kumar's grievance is a limited one, namely, that the appellants are not liable
to contribute with reference to the amounts which are paid to the workmen which
are not "basic wages". It was submitted that under Section 6 of the
Act, only three types of contributions are required to be effected by the
employer along with the corresponding matching contributions by the employees
as requisite percentage of the amounts; i) basic wage, ii) dearness allowance
and iii) retaining allowance, if any, paid to the workmen by the employers. It
was contended that undisputably the amounts in question were not paid to the
workmen by way of dearness allowance and "retaining allowance" as
laid down by Explanation 2 to Section 6 of the Act. It means "an allowance
payable for the time being to an employee of any factory or other establishment
during any period in which the establishment is not working, for retaining his
services". Therefore, according to him unless disputed amounts are part of
"basic wages" they cannot be made subject matter of contributions.
In
order to support his aforesaid contention, learned counsel for the appellants
invited our attention to the definition of "basic wages" as found in
Section 2(b) of the Act. It will be necessary therefore, to have a look at the
said definition. It reads as under:
"2
Definitions - (b) "basic wages"means all emoluments which are earned
by an employee while on duty or [on leave or on holidays with Wages in either
case] in accordance with the terms of the contract of employment and which are
paid or payable in cash to him, but does not include.
(i) the
cash value of any food concession:
(ii)
any dearness allowance (that is to say, all cash payments by whatever name
called paid to an employee on account of a rise in the cost of living),
house-rent allowance, overtime allowance, bonus, commission or any other
similar allowance payable to the employee in respect of his employment or of
work done in such employment;
(iii)
any present made by the employer (Emphasis supplied) The first part of the
definition clearly indicates that all emoluments which are earned by an
employee while on duty in accordance with the terms of the contract of
employment and which are paid or payable in cash to him would get covered by
the main part of the definition. It is not in dispute between the parties that
the concerned employees were paid at the relevant time additional emoluments
which they had earned by their extra efforts and labor and they did so while
they were on duty and such extra work which they had done was not dehors the therms
of the contract of employment. The said amounts were payable in cash to the
concerned employees. But the general sweep of the aforesaid definition gets
curtailed in the present case according to the learned counsel for the
appellants. He placed reliance on the exception category (ii) of the said
definition, namely, that it was the amount paid by way of Production Bonus and,
therefore, the said amount gets excluded from the general sweep of the
definition "basic wages" as found in Section 2(b) of the Act.
Therefore,
the short question is whether the disputed amounts paid to the workmen employed
by the appellants during the relevant time were paid by way of Production Bonus
or not. An incidental question will also arise namely, whether in any case the
said amount can be said to be covered by the latter part of the exception
category (ii) of the definition Section 2(b) being similar allowance payable to
the employee in respect of his employment or the work done in such employment.
It was submitted that in any case this allowance was paid for the extra work by
way of incentive. The aforesaid contention of learned counsel for the
appellants will have to be examined in the light of the Production Bonus Scheme
in question which has been the sheet - anchor of the appellants' case for
getting out of the sweep of Section 6 read with Section 2(b) of the Act. The
said scheme which is identical in nature for both the appellants reads as
under:
"Production
Bonus is paid for the following reasons:-
1.
Less than the normal number of people doing the normal work of a working shift,
in which case the Production Bonus is paid according to the deficiency in the
numerical strength of the staff.
2.
Extra output given by any workmen in any shift. Output of compositors and
distributors is measured in terms of column inches of type, that of machine men
in terms of the speed of the machines and of the process section in terms of
plates and negatives. Allowance is made for delays caused by factors beyond the
control of the workmen.
Production
Bonus in 1.5 times the normal daily wage. It may be reduced or increased on
account of special reasons at the discretion of the management. It is variable
from month to month and is apart from the basic wage of the workmen".
Now, a
mere look at the aforesaid scheme, which is styled as Production Bonus Scheme,
shows that so far as the first category of cases envisaged by the Scheme is
concerned, it contemplates a situation where at a given point of time the
required number of staff may not be available with the likelihood that the
production for the day might fall and in order to ensure maintenance of the
same level of production other workmen available in the given shift may by
required to carry on the extra work than what is normally required to be done
by them. In such cases, an extra amount is contemplated to be offered to the
remaining employees who are present and who take extra load of work which
otherwise would have been discharged by their absentee colleagues. The category
of cases contemplated by the first part of the Scheme necessarily indicates
that any extra effort undertaken by the workmen discharging extra load of work
over and above the usual work expected of them normally is to ensure
maintenance of the requisite normal level of production. This situation is
entirely different from the one wherein more than normally expected out-turn of
work is being made available by the workmen who would get Production Bonus by
way of incentive to valid total production beyond its normal level.
Consequently,
the first category of cases contemplated by the Scheme cannot be said to be
introduction any Production Bonus scheme in the real sense of the term. It in
substance is a scheme of insurance against shortfall in normal production per
shift due to shortage of available staff at a given point of time. While we
turn to the second category of cases, it is true that it envisages extra
payment as an incentive to any workman in any shift who puts in extra output by
his own effects. How the extra output for the concerned workman is to be
ascertained for being eligible for the extra payment by way of an incentive is
laid down by this clause. So far as compositors and distributors are concerned,
their output will be measured in terms of column inches of type, and if their
output goes beyond the normal output expected of them under the contract of
service, then they would be eligible for getting the benefit of the Production
Bonus Scheme envisaged by category 2. Similarly, for machine men to the extent
speed of the machines handled by them per shift is beyond the normally expected
speed of machine handled by machine men would show the eligibility of the
machine men for such extra payment and so far as the workers working in the
processing section are concerned their eligibility for earning extra payment
would depend upon the additional work which they would be said to have put in
per shift in items of the plates and negatives normally to be handled by them.
It is, therefore, obvious that the extra output given by the concerned workmen
in any shift will depend upon the basic norm fixed for the output which will
have to be given by the concerned workmen during the shift and if it is found
that any extra output is put up by them beyond the requisite norms of work-load
then only the same would make them eligible to get benefit of the Production
Bonus as envisaged by category
2. It
becomes at once clear that before the situation envisaged by category 2 can be
said to have got attracted in a given case it must be shown that the workmen
concerned had put in extra work in a shift beyond what was normally required by
them. Unless that basic data is available, it would be impossible to work out
the extra output put up by him in a given shift on a particular day. It is easy
to visualise that if the workman was paid an amount for the output given by him
in a shift which is up to the norms prescribed for his output it would
obviously remain in the realm or "basic wages". In order that the
amount goes beyond the "basic wage" it has to be shown that the
workman concerned had become eligible to get this extra amount for the work
beyond the normal work which he was otherwise required to put in. There is no
date available on record to show what were the norms of work prescribed for
these workmen during the relevant period. It is, therefore, not possible to
ascertain whether extra amounts paid to these workmen were in fact paid for the
extra work which had exceeded the normal output prescribed for the workmen
working in any given shift at the relevant time. As the appellants did not
furnish such relevant data, the authorities were justified in holding that the
disputed amounts cannot be said to be forming part of a genuine Production
Bonus Scheme. But, even apart from that, the last part of category 2 of the
Scheme makes a very interesting and curious reading. Even assuming that the
workmen concerned had become eligible under the first part of category 2 of the
scheme to get bonus for the extra output, the amount of Production Bonus which
was to be available to such eligible workmen would be 1.5 times their normal
"daily wage". It is true that it may be reduced or increased on
account of special reasons but the increase or decrease for special reasons by
the management would be a uniform deduction or increase in the amount of
Production Bonus available in the said category of cases. It would not depend
upon individual cases of the workmen concerned to serve as a real incentive
bonus. Thus the scheme of Production Bonus envisaged by category 2 of the
scheme in substance has no nexus or connection with the extra production effort
by the workman. In other words, by way of Production Bonus he will not get any
extra amount in proportion to the extra output put up by him beyond the norms
as compared to this fellow workmen. The working of category 2 of the scheme can
be appreciated by taking an example. If there are five compositors working in a
shift in the appellant's concern on a given day and if each of the compositors
has to compose 20 sheets per shift being the normal work expected of a
compositor, then if they compose only 20 sheets in a shift they cannot be said
to have earned the eligibility for the Production Bonus as contemplated by
category 2 of the scheme.
But if
out of those five compositors, two are more energetic and in a given shift on a
day they compose more than 20 sheets and if one of them composes 25 sheets and
another one composes 28 sheets both of of them can be said to have put in extra
output beyond the normal output by five or eight sheets, as the case may be and
still both of them who become eligible employees for earning Production Bonus
as per category 2 of the scheme will be paid a flat rate of 1.5 times their
normal daily wage. If the normal daily wage of a compositor is Rs. 50/- then
both of the aforesaid compositors will get extra amount of Rs. 75/each even
though both of them have put in different extra outputs. The compositor who has
composed five more sheets obviously cannot be treated on par for payment of Production
Bonus with the other compositor who has put in extra output of eight sheets and
still both of them will be treated equally for the grant of Production Bonus
and will get Rs. 75/- each whatever the extra output produced by each of them.
Thus, the payment of Production Bonus as envisaged in category 2 cases under
the scheme is not directly linked up with the amount of extra output furnished
by the workmen.
Consequently,
the aforesaid scheme said to be granting Production Bonus to the employees is in
substance not a scheme which is directly linked up with extra production nor it
is commensurate with the extra production workman-wise or even
establishment-wise. It only carves out a category of more efficient workmen or
more enthusiastic workmen for being given a flat rate of extra remuneration for
discharging their duties more efficiently under the contract of employment. It
offers in substance an instantaneous superior daily wage scheme for more
efficient workmen. Consequently the definition of the term "basic
wages" as found in first part of Section 2(b) will squarely get attracted
as 1.5 times of normal wages which will be given to workmen under category 2 of
the scheme will be excess emoluments earned by them while on duty in accordance
with the terms of the contract of employment. This amount uniformly paid to
them having on direct nexus with the amount of the extra output put up by them,
strictly speaking is not a Production Bonus. Thus excepted category (ii) as
envisaged by definition Section 2(b) would not be available for being invoked
by the appellants. We repeatedly asked learned counsel for the appellants to
enlighten us as to what are the norms prescribed by the appellants for output
of compositors, distributors, machine men and those working in process sections
with a view to finding out as to how during the relevant period when the
disputed amounts were paid to them they had over shot the norms prescribed over
their daily dues. We also wanted to know whether all such workmen were to be
paid proportionately for the extra output has to be worked out in terms of the
column inches of types, the speed of the machine and the plates and negatives
manufactured by them as laid down by category 2 of the said scheme. It is
difficult to appreciate how this measure for finding out the extra output can
show that the permissible & fixed norms of output for workmen were exceeded
the workmen at the relevant time in a given shift on the days concerned. He
also could not effectively indicate as to how the Production Bonus at
1.5
times the normal daily wage to be given to concerned eligible workmen was
directly linked up with the extent of the extra output put up by each of them
individually when there is only a flat rate of 1.5 times of the normal daily
wage prescribed for all of such workmen. Shri Ranjit Kumar tried to show that
Production Bonus of 1.5 times of normal daily wage was only a measure or mode
of calculation of permissible Production Bonus. It is difficult to appreciate
this contention. On the contrary, a mere look at second part of para 2 of the
scheme clearly indicates that a flat rate of Production Bonus at 1.5 times of
normal daily wage will be available to all the workmen concerned if they are
found to have given extra output beyond the minimum output expected of them per
shift on a given day. Consequently, on the wordings of the scheme on which
strong reliance was placed by learned counsel for the appellants it is
impossible to hold that it was a genuine Production Bonus scheme linked with
extra production given by the workmen concerned.
On the
aforesaid conclusion of ours, the alternative contention of the learned counsel
for the appellants to the effect that it is an incentive bonus scheme and can
at least be covered by the phrase "any other similar allowance payable to
the employee in respect of his employment or work" as per last part of
excepted category (ii) of the definition clause 2(b) also cannot be of any
avail. Reason is obvious. In order to become an incentive allowance, it has to
be shown that those eligible workmen who had put in extra output as per para 2
of the scheme would be entitled by way of an incentive to do more work to get
additional amount directly linked up with extra output given by them. No such
linkage is found from clause 2 of the scheme as noted earlier. All those
workmen who have put in extra output and who become eligible to get the benefit
of clause 2 of the scheme are not to be paid Production Bonus commensurate with
the extent of the output put up by them. They will all be paid equally at
1.5
times the normal daily wage. If that happens the person who puts in lesser
percentage of extra output by 5% will get the same amount as his colleague who
puts on 20% of the extra output. Thus, there will be no incentive for him to
give such an amount of extra output above normal output so as to reach any
further extra output limit as compared to his colleague who was also given
extra output beyond the prescribed norms. Consequently there will be no real
incentive available to the concerned eligible workman who has put in required
percentage of extra output, to strive still more for reaching higher amount of
extra output. He would, on the contrary, rest on his own at the stage having
considered the norms even to the slightest extent. It is, therefore, not
possible to agree with learned counsel for the appellants that the scheme
concerned, apart from being a Production Bonus scheme, is at least an incentive
bonus scheme for the concerned employees.
The
nature of the bonus scheme envisaged by exception (ii) to Section 2(b) of the
Act came up for consideration of this Court in two judgments. We may usefully
refer to them at this stage. A six member Constitution Bench of this Court case
(supra) had to consider as to when a scheme of Production Bonus can be said to
be covered by the term "bonus" as found in the exception (ii) to
Section 2(b) of the Act. Wanchoo, j., (as he then was), speaking for the six
member Bench observed in this connection that "the word "bonus"
was used in the definition section of the Act without any qualification and
that the legislature had in mind every kind of bonus that may be payable to an
employee which was prevalent in the industrial field before 1952. It is not
possible to accept the contention of the respondent that whatever is the price
of labour and arises out of contract is necessarily included in the definition
of "basic wages" and therefore Production Bonus which is a kind of
incentive wage would also be included, in view of the exception of all kinds of
bonus form the definition....." .
It may
be noted that incentive Production Bonus scheme which was on the anvil of
scrutiny of this court in the aforesaid decision and which was held to get
excluded form the sweep of the main definition part of Section 2(b) of the Act
was directly linked up with production. In fact the said scheme was linked up
with the total output given by the entire body of workmen in the concerned
employment. The scheme with which the court was concerned in that case
envisaged Production Bonus to be given to the entire body of workmen after
their total output reached 5,000 tons per year.
It was
a comprehensive scheme enacted for the benefit of the entire class of workmen
to offer them incentive to work more and to get more. It was, therefore, held
to be a genuine Production Bonus Scheme. Placing reliance on an earlier
Constitution Bench decision of this court in M/s. Titaghur 1012), it was
observed that :
"....the
payment of Production Bonus depends upon production and is in addition to
wages. In effect, it is an incentive to higher production and is in the nature
of an incentive wage". The straight piece produced is the simplest of
incentive wage plans....." In the light of the aforesaid observations, it
was held that the scheme which fell for consideration of the Court was a scheme
of Production Bonus wherein beyond a base or standard up to which basic wages
or time wages have to be paid, payment were made for superior performance. This
extra payment could be called an incentive wage and also Production Bonus. The
aforesaid observations of the six member Bench clearly clinch the issue against
the appellants. In order to become a genuine Production Bonus scheme payment to
be made to meritorious workmen who put in extra output, has to have a direct
nexus and linkage with the amount of extra output produced by the eligible
workmen so that the scheme can work as a real incentive scheme equally to them
to make extra efforts. Such a scheme may have sliding scales of bonus amount
based to total extra quantity of production for which all workmen can uniformly
be paid bonus on the basis of their co-operative efforts. More the extra
production more the available surplus of bonus to be divided amongst all
eligible workmen uniformly. Other type of incentive bonus scheme may be made
available to an individual meritorious workman extra payment for extra work
having direct linkage with the extra production out-turned by him. In neither
case such distributable bonus can be a static figure as in the present case. On
the facts of the present case, as seen earlier, unfortunately for the
appellants the scheme on which they relied does not fulfil the aforesaid legal
logistic for becoming a genuine Production Bonus scheme. It is not a scheme of
sliding scale bonus having real nexus with the amount of extra output furnished
by the concerned workmen either individually or collectively. As seen earlier,
once they crossed even slightly the norm of work expected of them in a given
shift, they all fall in the same category of eligible workmen entitled to get
on uniform basis extra amount of 1.5 times the basic daily wage. Thus, this
scheme of paying extra remuneration to more eligible and efficient workmen is a
scheme of super wage fixation and is not a genuine scheme of incentive bonus
which has to be earned by the workmen by showing their capabilities for earning
such extra bonus linked up with the quantity of extra production.
In the
same volume at page 995 it reported the case of Jay Engineering Works Ltd.
& Ors. vs. Union of India & Ors.(supra), wherein
also Wanchoo,J., spoke for a four member Bench. The scheme under this very Act
which came for consideration in that case was a composite Production Bonus
scheme. It laid down that if a workman gave outturn beyond the minimum quantity
fixed for him by waly of floor quota he became entitled to additional
remuneration even though that additional remuneration was for that extra
out-turn of work which was below the norm of out-turn which he was enjoined
under the contract of service to fulfil. The very scheme also contemplated
extra amount to be paid to the workmen who exceeded the norms of output and
gave extra output beyond such norms. Analysing the said scheme Wanchool j., for
this court held that to the extent to which any more remuneration was paid to
the workman who had given outturn more than the quantity of quota output fixed
but up to limit of the normal output required of him, the extra remuneration
part-took the character of extra wage and was covered by the definition of
"basic wages" but to the extent to which such out-turn went beyond
normal requirement of amount fixed, then to that extent extra payment for such
extra output beyond the norms fixed became a Production Bonus scheme. In the
case before this Court, such extra payment was on a piece rate basis.
The workman
concerned become entitled to be paid additional remuneration to the extent to
which he produced goods beyond the norms prescribed for such work. It is easy
to visualise that once a workman under any scheme of bonus is to be paid on
piece rate basis for the extra output given by him beyond the norms prescribed
for such work, the extra amount payable to him will have a direct linkage with
the extra output furnished by him. More extra output more payment; less extra
output less payment. Such a scheme would be a genuine Production Bonus scheme.
The scheme in question does not fulfil the criteria laid down for a genuine
production bonus scheme by either of the judgments of this Court in Bridge
& Roof Co. (India) Ltd. vs. Union of India case (supra) or in Jay
Engineering Works Ltd. Y Ors. vs The Union of India & Ors. case (supra).
In
this connection, we may now usefully refer to the Constitution Bench judgment
in M/s. Titaghur Paper Mills Co. Ltd. vs. Its Workmen case (supra), wherein an
earlier Constitution Bench speaking through Wanchoo,j., had occasion to
consider the legal connotation of a Production Bonus scheme as distinct from
profit bonus scheme. The scheme which fell for consideration of the Constitution
Bench in the said case was one floated by the company wherein up to the
production 36,000 tons, there was a uniform rate of bonus payable by the
company for giving appropriate remuneration to the workmen for producing that
much quantity of goods but the scheme did not provide for production bonus for
production above 36,000 tons, as there was on agreement between the Management
and the Union in this respect. The question before the Industrial tribunal from
whose decision appeal came to this court was whether the workmen were entitled
to be given further benefit of production incentive scheme if by their joint
efforts production of the company went beyond 36,000 tons and whether it was
necessary to provide for Production Bonus beyond this limit. The tribunal, in
that case while giving clearance to such a scheme, gave two reasons for
increase in the rates of payment of Production Bonus (i) the intensification of
the efforts of the workmen in increasing production, and (ii) the progressive
going down of the labour cost of production per ton as production increased.
The rates had to be increased progressively with production. Consequently, for
each 460 tons increase in production the proper rates for payment of Priduction
Bonus would be 1.5, 1.5, 1.75 and 2 days basic wages respectively for
production between 36,000 and 42,000 tons, 42,000 and 48,000 tons, 48,000 and
54,000tons and 54,000 and 60,000tons.
It is
this additional Production Bonus scheme ordered by the Tribunal which was
examined by this Court in the said decision. While upholding the said
modification in the bonus scheme of the company, this court held that this was
not a profit bonus scheme but was a genuine production incentive bonus scheme
as the Production Bonus to be paid to the workmen was directly linked with the
extra output furnished by them by their own efforts earn such nouns. Thus in
each case payment of bonus cannot be of a fixed or proven nature having on
nexus with the quantity of extra output produced by them. As in the present
case the scheme relied on by the appellants does not fulfil this legal test it
does not attract the exception (ii) to Section 2(b). It remains in the realm of
basic extra wage. The decision rendered by learned Single Judge of the High
Court as confirmed by the Division Bench decision, cannot, therefore be found
fault with. The submission of learned counsel for the appellants that in the
scheme in question there was no compulsion for the workman to put in extra work
and the management could not compel him to do extra work not can it allege any
misconduct on the part of such workman who does not want to do excess work
cannot be of any avail to the learned counsel for the appellants as even if
this criteria may be common to the present scheme as well as the genuine Production
Bonus scheme, the further requirement of the scheme to become a genuine
Production Bonus scheme, namely, that the payment by way of bonus to the
concerned eligible workman should very in proportion to the extra output put up
by him beyond the norm of output prescribed for him, is conspicuously absent in
the present scheme, as seen earlier, and on the other hand, this requirement
which is the very heart of a genuine Production Bonus scheme is missing in the
present scheme and therefore, similarity on only one aspect between the genuine
production incentive scheme and the present scheme, namely, that the workman
could not have been compelled to carry out extra work pales into insignificance
on the facts of the present case.
Therefore,
the second question has to be answered against the appellants and in favour of
the respondent.
Point
No.3 :
While
granting special leave to appeal in this case, by an order dated 9th May, 1958 this court had stayed the recovery
of the amounts of the Employees Provident Fund contribution for the past
period, subject to furnishing a bank guarantee for payment of that sum. But no
stay of recovery of future contribution was granted. As the appeals fail, the
bank guarantee if furnished by the appellants, will be available for being encashed
by the respondents towards the liability of the appellants for the
contributions for the past period which had remained stayed by order of this
court.
In the
result, the appeals fail and are dismissed.
Interim
relief vacated. In the facts and circumstances of the case, there will be on
order as to costs.
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