Full Judgment Text
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PETITIONER:
THE DAILY PARTAP
Vs.
RESPONDENT:
THE REGIONAL PROVIDENT FUND COMMISSIONER, PUNJAB, HARYANA,HI
DATE OF JUDGMENT: 29/10/1998
BENCH:
S.B.MAJMUDAR, M.JAGANNADHA RAO
ACT:
HEADNOTE:
JUDGMENT:
JUDGMENT
S.B.Majmudar, J.
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
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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
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(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
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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
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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
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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
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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
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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
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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
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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
in Bridge & Roof Co. (India)Ltd. Vs. Union of India & Ors.
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
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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
Paper Mills Co. Ltd. Vs. Its Workmen (1959 Supp.(2) SCR
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
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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
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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
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case, there will be on order as to costs.