Haryana State Co.Op. Land Devpt. Bank Ltd. Vs. Haryana State Co.Op Land Devpt. Banks Emp. Union & Anr [2003] Insc 670 (18 December 2003)
Doraiswamy
Raju & Arijit Pasayat Arijit Pasayat, J.
Special Leave Petition (civil) 3729 of 2003
Delay
condoned.
Leave
granted.
The
pivotal issue involved in this appeal relates to the question as to whether the
employees working with Primary Agricultural Cooperative Banks (in short
'Primary Banks') are entitled to bonus at the same rate at which it was paid to
employees working in the Apex Bank (also described as 'State Bank') i.e. The Haryana
State Cooperative Land Development Bank Limited. The Apex Bank is governed by
the Haryana Cooperative Society Act, 1984 (in short the 'Act'). The appellant
transacts its business mainly through Primary Banks which are its members. The
members of the Apex Bank belonging to the area of operation of the particular
Primary Bank automatically become members of the concerned Primary Bank from
the date of registration. Staff of the Primary Banks except class IV employees
are drawn from the Apex Bank out of the cadre maintained by it in terms of
clause 70 of the model by- laws applicable to the Primary Banks. The respondent
no.1-union raised a demand stating that it is entitled to bonus at the rate
applicable to employees of the Apex Bank. The claim was resisted by the Primary
Banks on the ground that they are separate entities with separate Balance Sheet
and Profit and Loss accounts and have a distinct cooperative and corporate
identity under the Act and, therefore, is not required to pay bonus at the same
rate as the employees of the Apex Bank in terms of Payment of Bonus Act, 1965
(in short 'the Act'). Accepting the writ petition filed by respondent
no.1-union, learned Single Judge of the Punjab and Haryana High Court directed
payment of bonus at the rate payable to the staff working with the Apex Bank,
which is also described as the State Bank in the rules framed by the Registrar
of Cooperative Societies under Section 37(2) of the Act. The view was confirmed
by a Division Bench in Letters Patent Appeal by the impugned judgment.
Mr.
P.P. Rao, learned senior counsel, appearing for appellant-Bank submitted that
the High Court lost sight of third proviso to Section 34 of the Act, which
clearly stipulated that the minimum bonus was 8.33 per cent of the salary or
wages earned by the employee concerned during the accounting year, if the
employer has no allocable surplus in the accounting year or the amount of such
allocable surplus is only that which for the proviso to sub-section (2A) of
Section 10 would entitle the employees only to receive the amount of bonus
which is less than the aforesaid percentage.
It was
submitted that the High Court erroneously held that Rule 21 has overriding
effect vis-vis the aforesaid provision. It was further submitted that merely
because the members of the staff were drawn from the Apex State Bank, it does
not mean that they continued to be the employees of the State Bank. On the
contrary, they are employees of the Primary Bank with different service
conditions. It was further submitted that if really allocable surplus was to be
taken as a whole including the financial results of both the Apex Bank and the
primary Banks for payment at par with that of the employees of the Apex Bank,
then there has to be aggregation of the profits of the Primary Banks which are
running at loss with that of the Apex Bank. Unless that is done there was no
rationale for the direction given by the High Court to pay at par with the
employees of the Apex Bank.
Per
contra, learned counsel for the respondent no.1-union submitted that the High
Court has correctly analysed the legal position.
In any
event, the appellant itself was adopting the formula approved by the High Court
in terms of Rule 21. Reference was made to certain correspondences made by the
Managing Director in the matter of bonus i.e. letter dated 28.8.1980 (relating
to payment of bonus for year 1978- 79).
In
order to appreciate the rival submission a few provisions need to be noted. Sections
3, 10, 34 and 34-A are as under:
"3.
Establishment to include departments undertakings and branches:- Where an
establishment consists of different departments or undertakings or has
branches, whether situated in the same place or in different places, all such
departments or undertakings of branches shall be treated as parts of the same
establishment for the purpose of computation of bonus under this Act.
Provided
that where for any accounting year a separate balance sheet and profit and loss
account are prepared and maintained in respondent of any such department or
undertaking or branch then, such department or undertaking or branch shall be
treated as a separate establishment for the purpose of compensation of bonus
under this Act for that year, unless such department or undertaking or branch
was immediately before the commencement of that account year treated as part of
the establishment for the purpose of computation of Bonus.
10.
Payment of Minimum Bonus Subject to the other provisions of this Act, every
employer shall be bound to pay to every employee in respect of the accounting
year commencing on any day in the year 1979 and in respect of every subsequent
accounting year a minimum bonus which shall be 8.33 per cent of the salary or
wage earned by the employee during the accounting year or one hundred rupees,
whichever is higher, whether or not the employee has any allocable surplus in
the accounting year.
Provided
that where an employee has not completed fifteen years of age at the beginning
of the accounting year the provisions of this Section shall have effect in
relation to such employee as if for the words "one hundred rupees"
the words "sixty rupees" were substituted.
34.
Employees and employers are to be precluded from entering into agreements for
grant of bonus under a different formula Nothing contained in this Act shall be
construed to preclude employees employed in any establishment or class of
establishments from entering into agreement with their employer for granting
them an amount of bonus under a formula which is different from that under this
Act.
Provided
that no such agreement shall have effect unless it is entered into with the
previous approval of the appropriate Government.
Provided
further that any such agreement whereby the employees relinquish their rights
to receive the minimum bonus under sub-section (23A) of Section 10 shall be
null and void and in so far it purports to deprive them of such right;
Provided
also that such employees shall not be entitled to be paid bonus in excess of
(a) 8.33 per cent of the salary or wage earned by them during the accounting
year if the employer has no allocable surplus in the accounting year or the
amount of such allocable surplus is only so much that, but for the provisions
of sub- section (2A) of Section 10, it would entitle the employees only to
receive an amount of bonus which is less than the aforesaid percentage; or (b)
Twenty per cent of the salary or wage earned by them during the accounting
year.
34A.
Effect of laws and agreements inconsistent with the Act Subject to the
provisions of Section 31A and 34, 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." Third proviso to Section 3 makes it clear that where
for any accounting year, a separate Balance Sheet and Profit and Loss account
are prepared and maintained in respect of any department or undertaking or
branch, such department or undertaking or branch shall be treated as a separate
establishment for the purpose of computation of bonus under the Act for that
year, unless for the previous period such department or undertaking or branch
was treated as a part of the establishment for the purpose of computation of
bonus. Similarly, third proviso to Section 34 deals with modalities for working
out entitlement for bonus.
The
normal function of a proviso is to except something out of the enactment or to
qualify something enacted therein which but for the proviso would be within the
purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880
(5) QBD 170, (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory
v. Subhash Chandra Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co.
Ltd. v. Corporation of Calcutta (AIR 1965 SC 1728); when one finds a proviso to
a section the natural presumption is that, but for the proviso, the enacting
part of the section would have included the subject matter of the proviso.
The
proper function of a proviso is to except and to deal with a case which would
otherwise fall within the general language of the main enactment and its effect
is confined to that case. It is a qualification of the preceding enactment
which is expressed in terms too general to be quite accurate. As a general
rule, a proviso is added to an enactment to qualify or create an exception to
what is in the enactment and ordinarily, a proviso is not interpreted as
stating a general rule. "If the language of the enacting part of the
statute does not contain the provisions which are said to occur in it you
cannot derive these provisions by implication from a proviso." Said Lord
Watson in West Derby Union
v. Metropolitan Life Assurance Co. (1897 AC 647)(HL).
Normally,
a proviso does not travel beyond the provision to which it is a proviso. It
carves out an exception to the main provision to which it has been enacted as a
proviso and to no other. (See A.N. Sehgal and Ors. v. Raje Ram Sheoram and Ors.
(AIR 1991 SC 1406), Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors. (AIR 1991
SC 1538) and Kerala State Housing Board and Ors. v. Ramapriya Hotels (P)Ltd. and Ors.
(1994 (5) SCC 672).
"This
word (proviso) hath divers operations. Sometime it worketh a qualification or
limitation; sometime a condition; and sometime a covenant" (Coke upon
Littleton 18th Edition, 146) "If in a deed an earlier clause is followed
by a later clause which destroys altogether the obligation created by the earlier
clause, the later clause is to be rejected as repugnant, and the earlier clause
prevails....But if the later clause does not destroy but only qualifies the
earlier, then the two are to be read together and effect is to be given to the
intention of the parties as disclosed by the deed as a whole" (per Lord Wrenbury
in Forbes v. Git [1922] 1 A.C. 256).
A
statutory proviso "is something engrafted on a preceding enactment"
(R. v. Taunton, St James, 9 B. & C. 836).
"The
ordinary and proper function of a proviso coming after a general enactment is
to limit that general enactment in certain instances" (per Lord Esher in
Re Barker, 25 Q.B.D. 285).
A
proviso to a section cannot be used to import into the enacting part something
which is not there, but where the enacting part is susceptible to several
possible meanings it may be controlled by the proviso (See Jennings v. Kelly
[1940] A.C. 206).
The
above position was noted in Ali M.K. & Ors. v. State of Kerala and Ors. (2003 (4) SCALE 197).
The
allocable surplus is an amount calculated out of the available surplus. How the
available surplus is to be computed is provided under Section 5 of the Act. It
is determined after deducting from the gross profit such amounts as are
detailed in Section 6 of the Act. The inevitable result is that the gross
profit has to be worked out and therefrom the prior charges mentioned in
clauses (a) to (d) of Section 6 are to be deducted. Gross profit is determined
in terms of Section 4 of the Act. In case of non-banking companies, it is calculated
in the manner prescribed in the Second Schedule while in case of banking
company it is calculated in the manner specified in the First Schedule.
The
payment of minimum bonus is provided in Section 10 of the Act and is fixed at
8.33 percentage of the salary or wages earned by the employee.
The
entitlement of higher bonus comes in case the allocable surplus permits payment
of higher bonus in terms of the applicable formula. A reading of the impugned
judgment shows that the High Court was of the view that Rule 21 had overriding
effect vis-vis Section 34, by referring to Section 34-A of the Act. The view is
clearly untenable.
Rule
21 was interpreted to mean as if all other provisions of the Act had to give
way to Rule 21. It is really not so. Sections 34 and 34-A make the position
clear. The Primary Banks have independent corporate existence and were
undisputedly maintaining separate Balance Sheet and Profit and Loss account.
Therefore, proviso to Section 3 of the Act has full application. Unfortunately,
the High Court did not take into account the effect of the proviso to Section
3, and third proviso to Section 34.
As
noted above, separate books of accounts were maintained and separate Balance
Sheet and Profit and Loss account were prepared. The primary co-operative banks
are distinct cooperate entities with their own respective registration or
Incorporation. As observed by this Court in M/s. Alloy Steel Project v. The
workmen (1971 (1) SCC 536) and The K.C.P. Employees' Association, Madras v. The Management of K.C.P. Ltd., Madras and Ors. (1978 (2) SCC 42), where
in a company having number of undertakings separate accounts are kept for each
separate undertaking though it is not a requirement of the Companies Act, 1956
(in short 'the Company Act'), they shall be treated as different undertakings
for the purpose of the Act. These aspects do not appear to have been considered
by the High Court which erroneously proceeded to hold about Rule 21 having
overriding effect over Section 34. Rules are framed under Section 32 of the
Act. Therefore, question of Rules have overriding effect does not arise.
Coming
to the relevance of documents referred to by the respondent no.1 it is to be
seen that those relating to a period when the Primary Banks were earning
profits. Presently, admittedly, the Primary Banks are incurring losses, and
there is no allocable surplus.
That
being the position, the documents in question do not help the respondents in
any event.
The
impugned judgment is indefensible and is set aside and the writ petition filed
before the High Court shall stand dismissed. The appeal succeeds, but in the
circumstances without any order as to costs.
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