Full Judgment Text
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PETITIONER:
WORKMEN OF M/S BATA SHOE CO., (P) LTD.
Vs.
RESPONDENT:
M/S BATA SHOE CO. (P) LTD.
DATE OF JUDGMENT01/05/1972
BENCH:
VAIDYIALINGAM, C.A.
BENCH:
VAIDYIALINGAM, C.A.
DUA, I.D.
CITATION:
1972 AIR 1436 1973 SCR (1) 450
1972 SCC (3) 627
ACT:
Payment of Bonus Act 1965 -payment of profit bonus Workers
having agreed in writing to accept bonus in terms of the
agreements Whether under s. 32(vii) (a) such agreements bar
further bonus.
HEADNOTE:
A dispute arose between the respondent company and the
appellants workmen as regards payment of profit bonus under
the Payment of Bonus Act 1965. The company, and the
appellants, represented by its Union had been entering into
various agreements from time to time, the last being the
agreement on August 30, 1962 (,Ex. A-5). As per Ex. A-5,
the respondent paid bonus for the year 1964 at the rates
mentioned therein. The appellants demanded that they should
be paid the profit bonus as per the Act in addition to what
has been paid under the agreement, Ex. A-5. The Company
pleaded s. 32(vii) (a) of the Bonus Act as a bar to further
bonus. On a reference to the Industrial Tribunal, it was
held that in view of the general bonus paid under agreement
Ex. A-5, it was an annual bonus, though paid quarterly, and
it was linked with production or productivity and that it
was paid in lieu of bonus based on profits. Therefore, the
workmen are not entitled to claim bonus for the year 1964
under the Act. On appeal to this Court, it was contended
that payments. under the agreement, Ex. A-5, was made
quarterly and they do not have that character of an annual
bonus. There is no material or record to show that the
company paid the amount in lieu of bonus based on profits.
The amount paid under the agreement was only an ex-gratia
payment and not a profit bonus under the Act.
The respondent, however, contended that in order to decide
the character of the general bonus paid under the agreement
of 1962, previous agreement must be referred to, which would
clearly show that what was being paid by the company was
production bonus or as an incentive wage and not an ex-
gratia payment.
Dismissing the appeal,
HELD : The general_ bonus paid under Art. VI or the
agreement dated August, 30, 1962, Ex. A-5, was a payment of
annual bonus based on profits. Although Article VI of Ex.
A-5 does not throw much light as to the nature and character
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of the general bonus payable under it, a reference back to
previous settlements and discussions between the parties
will- show that the pattern of bonus paid to the workers
weresometimes called production bonus, later on called ex-
gratia payment., but from 1951 called as general bonus,
which was paid quarterly, at the request of the workers, at
a particular percentage based on salary excluding dearness
allowance, having this background in mind, it is clear that
what was being paid under Art. VI of Ex. A-5 was a payment
linked with production or productivity. The principal
emphasis was that the amount, was being paid as an incentive
to production and therefore, it was paid as production bonus
as a wage incentive. Further, it was an annual bonus paid
from year to year not only during the period of agreement
but also for the succeeding year till the required notice
was given under the agreement. Even then, the agreement was
to continue to have
451
force notwithstanding the notice till a fresh agreement
entered into. Therefore, it is clear that the payment of
general bonus paid quarterly was "annual bonus" as
contemplated by s. 32(vii)(a) of the Act.
[464 A-465 G]
Smith v. Smith, (1923) P.D. 191, and Moss’ Empires Ltd. v.
Inland Revenue Commissioners, [1937] 3 All E.R. 381
followed.
Under the circumstances’ workers could claim not any
additional bonus under the Art for the period for which the
agreement was in operation and s. 32 (vii) (a) of the Act
was a bar to their claim. [465 C]
M/s Titaghur Paper Mills Co. Its Workmen, [1959] Supp. 2,
S.C.R. 1012; The New Manek Chowk Spinning and Weaving Co.
Ltd. Ahmedabad and others v. The Textile Labour
Association, Ahmedabad, [1961] 3 S.C.R. I and Sanghi
Jeevaraj Chewar Chand and others v. Secretary, Madras
Chillies, Grains Kirana Merchants Workers Union and another,
[1969] 1 S.C.R. 366, referred to,
JUDGMENT:
CIVIL APPELLATE JURISDICTION: C.A. No. 1040 of 1968.
Appeal by special leave from the Award dated September 16,
1967 of the Third Industrial Tribunal, West Bengal in Case
No. VIII-235/66.
Debabrata Mookherjee, Janardan Sharma and Anil Das Chow-
dhury, for the appellants.
C. K. Daphtary and M. C. Bhandare, B. P. Maheshwari and
Leila Sheth, for the respondent.
The Judgment of the Court was delivered by
Vaidialingam J. In this ’appeal, by special leave, the short
question that arises for consideration is whether the
appellants are precluded by s. 32 (vii) (a) of the Payment
of Bonus Act, 1965 (hereinafter to be referred as the Act)
from claiming bonus under the Act in view of the agreement
Ex. A5 dated August 30, 1962.
The respondent Company is a fairly prosperous concern and
one of the biggest of its kind in Asia. It has factories at
Batanagar in West Bengal, Faridabad in the present Haryana
State, Digha and Mokamehghat in Bihar and Administrative
Offices in Calcutta. It has Central Repair shops in
Calcutta and other places and a Purchasing Depot in Kerala.
It has about 900 shops for retail sale scattered throughout
the country besides the wholesale agents. Its branches have
a wide market both in this country as well as abroad. It
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employs a very large number of workmen in its factory,
Administrative Office and Central Repair Shops. The Company
and the appellants, represented by its Unions have been
entering into various agreements from time to time, the last
of which was on August 30, 1962, Ex. A.5. As per Ex. A.5
the respondent paid bonus for the year 1964 at the rates
mentioned therein. The appellants demanded that they should
be paid the profit bonus as per the Act in addition to what
has been paid as
452
per Ex. A.5 The Company declined to accede to the demand of
the workmen on the ground that the general bonus paid under
Ex. A.5 was an amount paid as production bonus or incentive
wages. The Company also pleaded s. 32 (vii) (a) as a bar to
the workmen making a claim for payment of bonus under the
Act. During the conciliation proceedings the Union and the
Company agreed to have the dispute referred for adjudication
to the Industrial Tribunal. Accordingly, the State
Government on June 25, 1966, referred to the Third
Industrial Tribunal, West Bengal, for adjudication the
following dispute :
"Whether the employees of the Company represented by Bata
Mazdoor Union are entitled to Bonus for the year, 1964 under
the Payment of Bonus Act, 1965 in addition to the Bonus paid
to them and whether in view of the Agreement dated the 30th
August, 1962, between the Union and the Company for payment
of Bonus, the Payment of Bonus Act, 1965 is applicable to
such employees."
Before the Tribunal the appellants’ plea was that the amount
paid under the agreement Ex. A. 5 is an ad hoc or an ex-
gratia payment made out of charity and as a supplement to
the wages and that it was not a bonus linked with production
or productivity. It was not an annual payment, nor was it
paid in lieu of bonus based on profits. The workmen
accepted the position that the general bonus paid under the
agreement was neither customary nor a profit bonus; nor a
bonus as an implied term of contract. On all these grounds
the workmen pleaded that s. 32 (vii) (a) is no bar to their
claim for bonus under the Act.
The Company on the other hand, after a reference to the
various prior agreements, under which the amounts have been
paid as bonus, though under different names, pleaded that
the general bonus paid under the agreement Ex. A5 was an
amount paid as production bonus or incentive wages. The
Company placed considerable reliance on the minutes of the
discussions that took place between the Union and the
Company whenever demands were raised and the agreements
arrived at between the parties, which were later on
incorporated as formal settlements from time to time. These
proceedings were relied on by the Company for the purpose of
showing that the demands for payment of bonus were as pro-
duction bonus and that what was ultimately paid under the
various agreements including the one in question, namely,
Ex. A.5 were all understood by all parties as production
bonus or incentive wages. As the necessary conditions
required under s. 32 (vii) (a) were present in this case,
according to the Company, the claim for profit bonus under
the Act is not sustainable.
453
The Industrial Tribunal, after a fairly elaborate
consideration of the various agreements as well the record
of the proceedings leading upto those agreements and the
other materials on record has held in its award that the
general bonus that was being paid by the Company including
the payment of bonus under the agreement Ex. A.5 was not a
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profit sharing bonus. The Tribunal has found that the
general bonus paid under the agreement of 1962 was an annual
bonus linked with production or productivity and that it was
paid in lieu of bonus based on profits. The mere cir-
cumstance that the payment of bonus was made quarterly,
according to the Tribunal, does not take it away from the
nature of an annual payment. The Tribunal ultimately held
that in view of the agreement Ex. A.5 the workmen are not
entitled to claim bonus for the year 1964 under the Act.
On behalf of the appellants Mr. D. Mookerjee, learned coun-
sel, very strenuously criticised the reference made by the
Tribunal to the previous agreements for interpreting the
nature of the payment under Ex. A.5. It was contended that
the Tribunal having held that the agreement of 1962 was a
self-contained agreement, committed a very serious error in
law in interpreting the term "General Bonus" occurring in
the said agreement by reference to the previous agreements.
According to Mr. Mookerjee, the Tribunal should have
considered the nature of the payment by a reference only to
the provisions contained in the agreement of 1962. Read in
that manner, it was pointed out, the inevitable conclusion
should be that the general bonus paid under the agreement of
1962 was not an annual bonus, nor was it linked with
production or productivity and it has not been paid in lieu
of bonus based on profits. The general bonus paid does not
satisfy the test of production bonus as laid down by this
Court. The payments admittedly being made quarterly do not
have the character of an annual bonus. There is no material
on record to show that the Company paid the amount under the
agreement in lieu of bonus based on profits. the contention
taken before the Tribunal by the workmen that the amount
paid under the agreement was only an ex-gratia payment to
supplement the wage bill of the workmen without any relation
to production or productivity was also pressed before us by
the counsel.
On the other hand, Mr. C. K. Daphtary, learned counsel for
the respondent Company, pointed out that in order to
appreciate and decide about the character of the general,
bonus paid under the agreement of 1962, it was not only
necessary but also obligatory on the part of the Tribunal to
refer to the previous agreements. The counsel pointed out
that the various demands made from time to time by the
workmen as well as the minutes of the discussion that took
place between the parties which ultimately resulted in
454
the various agreements extending over a fairly long period,
win ,clearly show that what was being paid by the Company
was production bonus or as an incentive wage. As the same
payment was being continued under the agreement of 1962, the
Tribunal was justified in holding that the general bonus
that was being paid by the Company over a long number of
years was by way of production bonus or as an incentive
wage. Mr. Daphtary also referred us to the various
provisions contained in the several agreements regarding the
duration of the agreements and also to their having binding
effect till they were terminated by notice given in accor-
dance with the terms of the agreement. All this, according
to the counsel, will clearly show that the intention of the
parties was that ,the agreements under which the payments
were made were to be throughout the year and also to be
continued from year to year. The material on record,
according to the counsel, will also show that the payments
were made quarterly at the express desire and request of the
workmen, but as the payments extended throughout the year
and will also continue year to year, they are in the nature
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,of annual payment of bonus.
Before we consider the various contentions of the learned
,counsel on both sides, it is desirable to refer to the
material provisions of the Act. All parties are agreed that
the additional claim for bonus for the year 1964 was under
the provisions of the Act. Section 2(21) defines the
expression "Salary or wage". This definition among other
things includes dearness allowance also. Section 8 lays
down the conditions for eligibility for bonus. Sections 1 0
and 11 deal with the payment of minimum and maximum bonus
respectively in the circumstances mentioned therein. Sec-
tion 17 enables an employer to adjust the amount paid as
pooja or customary bonus or interim bonus against the final
bonus payable under the Act. Section 32 deals with various
classes of employees to whom the Act does not apply. The
relevant pro-vision with which were are concerned is section
32 (vii) which is as follows :
"Section 32. Nothing in this Act shall apply to
(a) who have entered before the 29th May, 1965 into any
agreement or settlement with their employers for payment of
an annual bonus linked with production or productivity in
lieu of bonus based on profits; or
(b) who have entered or may enter after that date into any
agreement or settlement with their employers for payment of
such annual bonus in lieu of the bonus payable under this
Act,
455
for the period for which such agreement or settlement is in
operation;"
We are particularly concerned with sub-clause (a) of cl.
(vii) as the appellants claim is resisted on the basis of
the agreement dated August 30, 1962. In order to attract s.
32(vii) (a) the Company will have to establish :
(1) That there has been an agreement or settlement entered
into between the workmen and the Company before May 29,
1965;
(2) The said agreement or settlement was one for payment of
annual bonus;
(3) The said payment of bonus was linked with production or
productivity; and
(4) The said payment was in lieu of bonus based on profits.
In this case there is no controversy that there has been an
agreement Ex. A.5 entered into between the parties on
August 30, 1962, which is anterior to May 29, 1965. There
is also no controversy that the amount paid under this
agreement is characterised as general bonus. The question
then arises whether the said payment as general bonus was an
annual bonus linked with production or productivity and paid
in lieu of bonus based on profits.
The nature of production bonus has been discussed by this
Court in M/s Titaghur Paper Mills Co. Ltd. v. Its
Workmen(1). It has been stated that payment of production
bonus is by way of’ an incentive to higher production and is
in the nature of an incentive wage. The extra payment
depends not on extra profit’ but on production. From this
decision it is clear that the principals element in the
payment of extra amount is to provide an incentive to
production.
In The New Maneck Chowk Spinning and Weaving Co. Ltd.
Ahmedabad and others v. The Textile Labour Association,
Ahmedabad(2), it has been stated that there are four types
of bonus which have been evolved under the Industrial Law as
laid down by this Court, namely, (1) Production bonus or
Incentive wage, (2) Bonus as an implied term of contract
between the parties (3) Customary bonus in connection with
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some festival, and (4) Profit Bonus which was evolved by the
Labour Appellate Tribunal and approved by this Court. Under
the Act there is no controversy, what is payable is the
profit bonus. In the case before us, from the Award it is
seen that the Union conceded that the amount paid as general
bonus under the agreement was neither customary
(1) [1959] Supp. 2 S.C.R. 1012.
(2) [1961] 3 S.C.R. 1.
456
nor profit bonus; nor bonus as an implied term of contract.
In the nature of things the Union has not raised the plea
that the amount paid under the agreement is a profit bonus.
Equally, the Company could not also take up such a plea as
their attempt was to show that it is a payment as production
bonus or incentive wages.
In Sanghi Jeevaraj Ghewar Chand and others v. Secretary,
Madras Chillies, Grains Kirana Merchants Workers’ Union and
another (1), it has been held that where the bar of s. 32
(vii) (a) of the Act operates, the employees in such cases
so long as the agreement or settlement is in operation
cannot claim bonus on the basis of Full Bench Formula or
under the Act.
Therefore, it becomes essential to find out the nature of
the payment made under Ex. A.5. That is an agreement
entered into between the appellant and the respondent
Company on August 30, 1962. The purpose of the agreement is
stated to be to promote and improve industrial and economic
relationship between the Company and its workmen and to
establish and maintain satisfactory working conditions. In
Article IV, among various other .,matters, the Union, has
acknowledged that it is the exclusive right and function of
the Company to maintain among other matters the efficiency.
In Article V dealing with lock out and strikes, the Company,
on the one hand, has agreed not to declare any lock out so
long as the workmen do not commit any breach of the
agreement. The Union, on the other hand, has also agreed
while retaining its right to go on strike, not to permit its
members individually or collectively to curtail or restrict
production and certain other matters. Article VI dealing
with general bonus is as follows "Article VI-General Bonus:
"Article VI--General Bonus:
The Company declares and makes a payment of General Bonus
one month after the end of each quarter at the rate of 20%
of the total salary and/or wages paid to each workman and
employee during the quarter immediately
preceding (such salary or wages are exclusive
of Dearness Allowance or any other special
allowances or rewards granted to him
during
such period). Such Bonus will be payable to
those who have completed six months approved
service ending on the last day of the quarter;
and to those who have completed less than six
months approved service on the last day of the
quarter, the Bonus will be payable at the rate
of 10% of their total salary or wages as
aforesaid. The Bonus will be available only
to those who are in the employ of the
(1)[1969] 1 S.C.R. 366.
457
Company on the last date of the quarter and who have given
regular and approved service during the quarter, to which
the payment of Bonus is available."
Under Article VIII it is provided that the agreement is to
be in force until December 31, 1965 and that it shall
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continue from year to year thereafter unless either party
gives notice in writing of its intention to enter into
negotiations for the purpose of amendin- the agreement. The
said Article further provides for the period of notice as
well as the starting of negotiations and the agreement
continuing to be in force till a new settlement or agreement
is arrived at.
A mere reading of Article VI relating to general bonus will
not by itself throw much light on the character of such
payment. But, it is clear that the payment is to be made at
the end of each quarter at the percentage mentioned therein
of the total salary or wages which does not include Dearness
Allowance. The said Article also provides for the period of
service necessary for qualifying to get the higher or lower
percentage of bonus as the case may be. The emphasis is also
laid on the workmen giving regular and approved service
during the quarter to which the payment of bonus is
available.
Normally, it is the agreement Ex. A.5, which has to be
looked into for the purpose of ascertaining the rights and
liabilities of the employer and employees. That is, the
agreement will have to be looked into for the purpose of
ascertaining the nature and character of the general bonus
payable under Art. VI, provided that clause gives a full
and clear indication regarding the character of such
payment. But, a mere reading of Article VI does not give
any indication regarding the character of such payment. The
other clauses in the agreement also do not throw much light
on this aspect. But it is not as if that agreement Ex. A.5
has been entered into between the parties for the first
time. The expression "General Bonus" occurs, as we will
show presently, in certain previous agreements. Under those
circumstances, in our opinion, in order to properly
appreciate the character and nature of the payment that was
being made originally and that was continued under Article
VI of the agreement of 1962, it is not only relevant but
also necessary to consider the various settlements and
agreements that took place between the parties on prior
occasions.
We are not inclined to agree with the contention of Mr.
Mookerjee that the Tribunal has committed a very serious
error in law when it tried to interpret the nature of the
payment under Ex. A.5 by reference to the previous
settlements and discussions that took place between the
parties. The Tribunal was perfectly justified in
considering those agreements as they, in our opinion,
458
give a complete and clear picture of the nature of the
claims made by the Union, the stand taken by the Company and
the nature of the agreement ultimately arrived at between
the parties regarding the payment of the amount in question.
Hence we will also refer to the prior agreements as well as
the events leading upto those agreements. The earliest
agreement is Ex. A. dated May 16, 1946. Under Article V the
Company agreed to pay Victory bonus of six weeks pay, for
the employees mentioned therein. Under Article VI, the
Company agreed to pay bonus on production or special bonus
equivalent to 10% of pay. It is significant to note that
the payment under Art. VI of this agreement is
characterised as a production or special bonus at a fixed
percentage on the pay of the employees.
On March 6, 1947, the Union addressed a letter Ex. B to the
Company requiring "Production Bonus" to be increased in the
manner stated therein. In fact the Union wanted an
increased percentage depending upon the salary drawn by the
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employees. It is to be noted that the Union also understood
the payment made under Ex. A. as a production bonus; and
under Ex. B it is the production bonus that they wanted to
be increased. In view of this demand, there were
discussions between the parties and ultimately they entered
into an agreement Ex. C on July 12, 1947. This agreement
states that 10% production bonus given under Ex. A is not
to be increased. But an extra amount of 5% or 2% was given
as an Attendance Bonus.
On November 22, 1948, there was another agreement Ex. A.1
entered into between the parties. Article VI related to ex-
gratia payment of bonus, which is as follows:
’Article VI-Ex-Gratia Payment of bonus
The Company declares and makes an ex-gratia payment of Bonus
one month after the end of each quarter at the rate of 1 0
per cent of the total salary and/or wages paid to each
employee during the quarter immediately preceding (such
salary or wages are exclusive of dearness allowance or any
other special allowances or attendance bonus or rewards
granted to him during the said period); such bonus will be
payable only to those employees who have completed six
months’ approved service ending on the last day of the
quarter; and to those employees who have completed less than
six months’ approved service on the last day of the quarter
the exgratia Bonus will be payable at the rate of 5 % of
their total salary or wages as aforesaid. The ex-gratia
Bonus, will be available only to those employees who are in
the employ of the Company on the date fixed for payment
459
and who have given regular and approved service
during the quarter to, Which the ex-gratia
payments of Bonus is available.’
It will be noted that while in the agreements Exs.A and C,
what was characterised as production bonus, has been changed
in Ex. A. 1 as ex-gratia payment of bonus. Article VIII
provided for the. agreement being in force till December 31,
1950 and to continue year to year unless either party gives
notice in writing of its intention to enter into
negotiations for the purpose of amending the agreement.
On May, 15, 1951, the Union made a representation for modi-
fying the agreement Ex. A. 1. In respect of this demand on
October 3, 1951, agreed minutes of discussion and agreement
between the parties were recorded in Ex. D.
From Ex. D it is seen that the Union had accepted the
position that the approximate living wage has been attaired
in this Company and therefore the bonus has to, be, paid as
an incentive to greater efficiency, in production as. well
as towards labour’s contribution to the
prosperity of the Company. In view of this the Union,
represented that the, bonus that is being paid should not be
regarded as ex-gratia payment. Hence the Company was
requested to delete the expression "ex-gratia" and to
substitute, the word "general". The Union further suggested
that as the payment of bonus on the basis of earned salary
is a sufficient incentive for attendance, the attendance
bonus, which was being paid at a flat rate discontinued and
that a general bonus is to be paid at a flat rate of 15%
every quarter to all the employees. This representation was
accepted by, the Company and Ex. D. shows that it was
agreed between the parties that the attendance bonus was to
be discontinued and that the term "ex-gratia" was to be
substituted by the word "general". It was also greed that
the rate should be increased to 15% and 7 1/2 %
respectively. The suggestion of the Union for payment of
the amount every quarter was also agreed to by the parties.
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It was also agreed that the arrangements entered into
between the parties are to continue till December 31, 1953.
From Ex. D. it is clear that the Union itself has required
the payment of bonus to be made " as an incentive to
greater efficiency in production "and the workmen wanted
the expression "ex-gratia" to be substituted by the
word"general". The Union accepted that approximiate living
wage is being earned by the employees of this Company.
Further the Union wanted teh amount to be paid at a flat
fixed rate every quarter. It is also to be noted from Ex.D.
that the changes agreed to between the parties were to take
effect from the first quarter of 1952. On the basis of the
arrangement recorded in Ex. D. the parties entered into a
formal agreement Ex. A.2 on November 22, 1951. This is
called Collective Agree
L1286SupCI/72
460
ment as finally amended by the settlement of October 3,
1951, evidenced by Ex. D. Article I dealing with the
purpose of the agreement states that it was with a view to
promote and improve industrial and economic relationship
between the Company and its employees and to establish and
maintain satisfactory working conditions. Article VI
dealing with the general bonus is as follows :
" Article VI--General Bonus
The Company declares and makes a payment of General Bonus
one month after the end of each quarter at the rate of 15
per cent of the total salary and/or wages paid to each
employee during the quarter immediately preceding (such
salary or wages are exclusive of Dearness Allowance or any
other special allowance or rewards granted to him during
such period); such bonus will be payable only to those
employees who have completed six months’ approved service
ending on the last day of the quarter; and to those
employees who have completed less than six months’ approved
service on the last day of the quarter the Bonus will be
payable at the rate of 7 1/2% of their total salary or wages
as aforesaid. The Bonus will be available only to those
employees who are in the employ of the Company on the last
date of the quarter and who have given regular and approved
service during the quarter to Which the payment of Bonus is
available."
It will be noted that this article is in substitution of the
original Article VI in the 1948 agreement Ex. A.1. What was
characterised as ex-gratia payment of bonus in Ex. A.1 was
designated as general bonus in Ex.A.2. It must be noted that
it was for the first time that the expression "general
bonus" has found a place in the agreement between the
parties. This change was effected due to the representation
made by the Union and accepted by both the parties as
recorded in the minutes Ex.D. The rate has been increased to
15% and 7 1/2% respectively depending upon the service of
the employee. This rate is on the basic wages; and dearness
allowance has been excluded for purposes of calculation.
Attendance bonus was abolished and the rate in Article VI
shows that it has combined the old production bonus as well
as the attendance bonus. The payment is also to be made
every quarter as required by the Union. Article VIII
provided that the agreement shall be in force upto December
31, 1953 and was to continue from year to year thereafter
unless either party gives notice in writing of its intention
to enter into negotiations for the purpose of amending the
agreement.
461
On December 28, 1953 the Union made a representation for
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effecting certain modification in the agreement Ex. A.2.
This was followed by the proposals contained in Ex. B. 3 on
March II, 1954. Paragraph 3 of Ex. B.3 relates to bonus.
After referring to the existing payment of general bonus at
the rate mentioned in Ex. A.2, the Union made a request to
the Company to revise the rate of bonus by including
dearness allowance also in the wages or salaries for
purposes of calculation of bonus, the reason being "the
necessity of giving incentive to the employees and the rate
at which bonus is paid to employees of ’many other
comparable concerns." There was also a demand for pooja or
festival bonus. Ultimately, the demand with regard to bonus
was that : (a) the general bonus paid quarterly at the end
of each quarter of the year should be increased to 20% and
10% depending upon the length of service of the employee and
the payment at the said percentage should be on a
calculation of both the basic wages and dearness allowance
paid to an employee during the quarter; and (2) the workmen
should be paid pooja bonus equal to three months wages
including dearness allowance besides the general bonus.
There was a supplementary claim made on behalf of the Union
on March 15, 1954 under Ex. B.4, that the payment to be
made under Ex. B.3, should have retrospective effect from
January 1, 1954. Three points emerge from this demand of
the Union : (1) Increase in the rate of general bonus and
percentage to be worked out on wages including dearness
allowance; (2) A claim for payment of pooja or festival
bonus; and (3) The payments of both (1) and (2) to take
effect from January 1, 1954. But the significant point to
be noted is that in Ex. B. 3 the reason given by the Union
itself for claiming general bonus at an increased rate and
for working out the percentage of wages including dearness
allowance was "the necessity for giving incentive to the
employe---. . . . " These demands of the Union were
discussed and agreed minutes of discussion and agreement
were recorded in Ex. D. 1 dated February 18, 1955. It is
seen that there were as many as 45 meetings between the
representatives of the Union and the Company beginning from
April 9, 1954. Ex. D.1 shows that the demands in letters
dated December 28, 1953, March 11, 1954 and March 15, 1954
were discussed thread bare between the parties. The minutes
show that the Company was not willing to accede in full to
the increased rates claimed by the Union regarding general
bonus: nor was it inclined to take into account dearness
allowance for the purpose of calculation of bonus. But the
Company was prepared to show some consideration by merging a
part of the dearness allowance in the basic wages as that
will result in a slightly higher amount being received as
general bonus by the workmen. The claim for pooja or
festival bonus was not accepted by the Company. Both
parties ultimately agreed that the gene-
462
ral bonus will be paid at 17 1/2% instead of the original
15% as per Ex. A.2. The minutes further show that all
demands made by the Union have be-en fully settled by
increasing the percentage of general bonus. The tentative
agreement recorded in Ex. D.1 was the subject of a
collective agreement between the parties under Ex. A.3 dated
February 18, 1955. Article VI deals with general bonus.
Except for the difference in the rate of 17 1/2 % and 8.7 5
% on the, basic wages excluding dearness allowance, the
provision regarding payment of general bonus under this
Article was similar to those contained in Article VI of Ex.
A.2 of 195 1.
Article Vill provided that the agreement is to be, in force
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till December 3 1, 1957 and that it was to continue from
year to year thereafter unless either party has, given
notice in the manner provided therein.
On December 24, 1957 the Union sent a letter Ex. B.5 to the
Company requiring the general bonus. to be paid at 50% and
25% respectively in place of the present rate of 17 1/2 %
and 8.75%. The demand was also to calculate this rate on
salaries including the dearness allowance. A further
request was made that half of the bonus as per the demand
be paid "in four quarters in a year as at present and the
remaining half at the time of pooja every year". This again
led to the parties discussing the demands and the minutes of
discussion and conclusions arrived at, by the parties by
agreement are recorded in Ex. D.2 dated October 6, 1958.
The minutes disclose that the demands of the Union were
carefully considered by the Company. The Chairman of the
Company drew the attention of the, Union to the agreed
minutes of settlement Ex. D and pointed out "that bonus was
being paid as an incentive to greater efficiency in.
’production........ and suggested that "bonus payment be
linked with the generally accepted formula and be no longer
paid on percentage basis. But the Union did riot accept the
suggestion of the Chairman and stated that "as a matter of
security they would like the continuation of the same to be
paid on a fixed percentage basis." After further discussion,
the Chairman agreed to a token increase in the rate of
bonus. It was agreed between both the parties that the
payment of general bonus will be increased from 171% to 18-
21% on the wages excluding dearness allowance. The
conclusions so arrived at were incorporated in the agreement
Ex. A.4 on October 6, 1948. This again is styled as a
collective agreement. Article VI relating to general bonus
is substantially the same as Art. VI in Ex. A.5 excepting
that the rate was 18 1/2% and 9.25% depending upon the
service of the workman. The percentage was to be calculated
only on the total salary excluding dearness allowance and
the general bonus was to be paid at the end of every
quarter. Article VIII provides that the claim was to be in
force- till December 31,
463
1965 and that it was to continue from year to year unless a
notice was given by either party in- the manner provided
therein.
This takes us to the agreement under consideration Ex. A.5
dated August 30, 1962. This is the seventh agreement in the
series. We have in the earlier part of the judgment
referred to Articles VI and VIII. Article VI deals with
general bonus and it was to be paid at 20% and 10%
respectively on the basic wages excluding dearness
allowance. It was to be paid at the end of each quarter.
It will be seen that the rates ate slightly higher than
those provided in the previous agreement Ex. A.4 of 1958.
We have very exhaustively dealt with the various demands
made by the workmen, the minutes recording the discussion
that took place between the patties regarding the demands,
the conclusions arrived at therein as well as the final
agreements entered into on different dates between the
parties, as they furnish the background, so to say, for the
agreement under consideration Ex. A.5. It will be seen that
originally in 1946 the payment was made as production or
special bonus. Specific demand was made by the Union on
March 6, 1947 to increase "production bonus". The Company
did not agree to this request. On the other hand, Ex. C.,
the agreement, clearly shows that there would be no increase
in production bonus. But an additional amount was given as
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attendance bonus. In 1948 what was originally characterised
as production bonus was termed "ex-gratia" payment of
bonus. The Union specifically desired in 1951 to substitute
"exgratia bonus" by "general bonus" and to abolish
attendance bonus. The demand also was for general bonus to
be paid at a flat rate every quarter. For the first time
the expression "general bonus" occurs in the demand made by
the Union on May 15, 1951 and in the agreed minutes of
October 3, 1951. The same was incorporated in the final
agreement of November 22, 1951. The Union made a demand
on March 11, 1954 for increase in the rate of general bonus
so as to provide an incentive to the employees. This was
accepted and embodied final in the agreement dated February
18, 1955. In Ex. B.5, the Union made a specific demand for
further increase of the rate of general bonus and wanted
half the amount to be paid quarterly as at present and the
balance at the time of pooja. Though, the minutes of the
discussion in respect of this demand shows that the
Chairman. of the Company wanted to alter what was given as
incentive to greater efficiency in production to one on
profit basis, the Union preferred the payment to be
continued as was being done on a fixed percentage basis.
The pattern of bonus paid sometimes called production bonus,
later on called ex-gratia payment, but from 1951 called as
general bonus, was being paid quarterly at a ’Particular
percentage base on the salary excluding dearness allowance.
Having this background in mind, it is clear that what was
being paid under Art.VI
464
of Ex. A.5 was a payment linked with production or
productivity. The principal emphasis is that the amount is
being paid as an ,incentive to production and therefore it
is paid as production bonus or as a wage incentive. That it
is an incentive payment in order to secure greater
efficiency in production is clear from Exs. D, B.3, and
D.2. We have already referred to the contents of these
exhibits in great detail. Even the workmen in Ex. B.3
required the rate of general bonus to be increased in view
of the necessity of giving incentive to the employees. But
a more important point emerges from the minutes of
discussion recorded on October 6, 1958 in Ex. D.2. The
Chairman of the Company emphasised that what was being paid
as general bonus was as an incentive to greater efficiency
in production. The Chairman specifically wanted this method
of payment to be changed and suggested that the bonus
payment be linked with the generally accepted formula,
namely, of profit bonus and that the payment on a fixed
percentage be abolished. But this suggestion to alter the
nature of the payment from a fixed percentage as a
production bonus for providing an incentive to greater
efficiency in production was not accepted by the Union,
which wanted the fixed percentage basis to be continued.
That is, the Union was not prepared to receive bonus on the
basis of profits, but wanted to continue the existing
arrangement of payment at a fixed percentage as an incentive
to efficiency in production. That is, the Union wanted the
character of the payment as production bonus being
continued. Therefore, these circumstances clearly lead to
the conclusion that the payment that was being made and
continued in the agreement Ex. A.5 was payment of bonus
linked with production or productivity. It is also clear
that the said payment was made in lieu of bonus based on
profits because the Union itself did not agree to the
suggestion of the Chairman as contained in Ex. D.2 to alter
the character of payment to one of profit sharing bonus.
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Therefore, this also shows that the payment under Ex. A.5
was in lieu of bonus based on profits. The expressions used
in s. 32 (vii) (a) are "linked with production or
productivity" and that test is satisfied in respect of the
payment made under Ex. A.5. It is not the case of the Union
that the character of payment which was designated as an
incentive to greater efficiency in production even as early
as 1951 (vide Ex. D) has been altered either in the
subsequent agreements or in the agreement Ex. A.5. If so,
it follows that the payment of general bonus in Ex. A.5
retains the same character as a payment by way of an
incentive to greater efficiency in production.
As the minutes of the discussion that took place between the
parties have been recorded then and there, they are items of
evidence which are more valuable and useful than the oral
evidence adduced by the parties. For instance, P.W. 1,
Secretary of the Union, has deposed that the payment in Ex.
A.5 is not linked with
465
production. On the other hand, the Labour Officer of the
Company, as D.W. I has stated that the said payment is
linked with production. This type of evidence does not lead
us any where. That is why, we have placed more emphasis and
reliance on the documentary evidence adduced by the parties,
more especially when there is no controversy that the record
of the meetings do not represent the actual facts.
Then the question is whether the bonus paid is an annual
bonus, which is another requirement of S. 32 (vii) (a) of
the Act. That bonus has been paid at the end of every
quarter at any rate from 1948, is clear from the various
settlements and agreements, referred to earlier. That the
Union itself required that bonus should be continued to be
paid quarterly, is clear from the letters written by the
Union, particularly Ex. B.5 dated December 24, 1957. We
have already referred to the various agreements which no
doubt prescribe the normal duration of the period of the
agreement, which extends to over a year. There is also a
further provision to the effect that even after the date of
expiry mentioned therein, the agreement will continue to be.
in force till a notice is given in the manner provided for
in the agreement. Therefore, it will be seen that it is not
as if that bonus is paid for one quarter and does not enure
for a succeeding quarter. On the other hand, the amounts
payable are not restricted to one particular quarter and the
intention is made clear in the agreement that it has to
operate throughout the year and also continue from year to
year. It is not possible to accept the contention of Mr.
Mookerjee that it is only when a payment is made at the end
of the year, it can be considered to be an annual bonus.
The essential test to be satisfied is that the payment
should enure throughout the year and it should also be
continued from year to year. As observed by Lord Maugham in
Moss’ Empires, Ltd. v. Inland Revenue Commissioners(") the
expression "annual" must be taken to have the quality of
being recurrent or being capable of recurrence. Adopting
this test, the payments in the case before us were to
continue the whole of the year and also were to be paid from
year to year not only during the period of agreement but
also for the succeeding year till the required notice was
given under the agreement Even then there is a provision in
the agreement to the effect that the agreement will continue
to have force notwithstanding the notice till a fresh
agreement or settlement is entered into. Therefore it is
clear that the payment of general bonus is "annual bonus" as
contemplated by s. 32 (vii) (a) of the Act. The Court of
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Appeal in Smith v. Smith (2 ) had to consider whether a
payment to be made weekly during the life time of a person
was an "annual payment". It was held as follows
(1) [1937] 3 All. E.R. 381. (2) [1923] Probate
Division 191.
466
"It is no doubt payable weekly, but that fact does not
prevent it from being an annual payment if the weekly
payments may extend beyond a year."
The position, as pointed opt by us earlier, in the case
before, us, is also the same.
It follows from the discussion above that the general bonus
paid under Article VI of the agreement dated August 30,
1962, Ex. A.5 is a payment of annual bonus linked with
production or productivity in lieu of bonus based on
profits. It further follows that as the agreement has been
entered into before May 29, 1965, the employees cannot claim
any additional bonus under the Act for the period for which
the agreement is in operation. It is the case of all
parties that the agreement Ex. A.5 at the relevant time was
in operation. If so, it follows that the view of the
Tribunal that s. 32(vii) (a) of the Act is a bar to claim
any additional bonus under the Act is correct.
In the result, the award of the Industrial Tribunal is
confirmed and this appeal dismissed. There will be no order
as to costs.
S.C. Appeal
dismissed
467