Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4
PETITIONER:
MANAGING DIRECTOR, CHALTHAN VIBHAG SAHAKARIKHAND UDYOG, CHAL
Vs.
RESPONDENT:
GOVERNMENT LABOUR OFFICER & ORS.
DATE OF JUDGMENT04/02/1981
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
CITATION:
1981 AIR 905 1981 SCR (2) 738
1981 SCC (2) 147 1981 SCALE (1)234
ACT:
Payment of Bonus Act, 1965-Section 2(21)-Whther the
expression ‘salary or wage’ in s.2(21) of the Act covers
retaining allowance during the off season granted to the
workmen in the seasonal establishment of the sugar factory
of the Udyog.
HEADNOTE:
The appellant which runs a sugar factory, treated the
retaining allowance paid to the workmen during the off-
season as part of their wages for the purpose of the
Employees’ Provident Fund Act, 1972, but not for the purpose
of the Payment of Bonus Act, 1965. On a reference of an
industrial dispute, the Industrial Court, Gujarat made an
award holding that the allowance cannot be included in wages
or remuneration for the purpose of calculation of bonus. The
Gujarat High Court set aside the award in writ petition and
held that the allowance fell within the definition of the
expression ‘salary or wage’ in s. 2(21) of the Act. The
appellant sought special leave to appeal under Art. 136 of
the Constitution.
Dismissing the special leave petition, the Court.
^
HELD : The retaining allowance paid to the employees
during the off-season in the sugar industry partakes the
nature of deferred wages on a lower scale and falls within
the definition of the expression ‘salary or wage’ within the
meaning of s.2(21) of the Payment of Bonus Act, 1965 and,
therefore, must be taken into account for the purpose of
calculation of bonus payable under s.10 of the Act. The
definition of the expression ‘salary or wage’ as given in
s.2(21) of the Act is wide enough to cover the retaining
allowance granted to the workmen during the off-season. The
retaining allowance is nothing but remuneration correlated
to service and it would be a misnomer to call it an
allowance. It does not fall within the purview of clause (i)
of the exclusionary clause of s.2(21) but comes within the
substantive part of the definition of ‘salary or wage’ in s.
2(21) of the Act. [741A-D]
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Special Leave Petition
(Civil) No. 1122 of 1981.
From the Judgment and Order dated 28-11-1980 of the
Gujarat High Court in Special Application No. 2003/80.
F. S. Nariman, H. K. Puri and Arun B. Desai for the
Petitioner.
Charanlal Sahu for Respondent No. 3.
739
The Order of the Court was delivered by
SEN, J.-The controversy in this case is whether for the
purpose of bonus to the workmen employed in the Chalthan
Vibhag Sahakari Khand Udyog, Chalthan, which is a seasonal
establishment, retaining allowance paid to such workmen
should be regarded as remuneration or wages under the
Payment of Bonus Act, 1965. The question arises under the
following circumstances :
The Industrial Court, Gujarat, by its Award dated July
11, 1980 held that the retaining allowance paid to the
workmen could not be included for the purpose of calculation
of bonus and, therefore the demand of the workmen was not
justified. Thereupon, the workmen challenged the Award by a
Writ Petition in the Gujarat High Court. The High Court by
its judgment dated December 15, 1980 set aside the Award of
the Industrial Court and held that the retaining allowance
falls within the definition of the expression ‘salary or
wage’ given in s. 2(21) of the Payment of Bonus Act, 1965 so
as to attract the payment of bonus in the context thereof
under s. 10 of the Act.
For a proper understanding of the question involved, it
is necessary to state a few facts. Chalthan Vibhag Sahakari
Khand Udyog runs a seasonal factory which crushes sugarcane
and produces sugar. It does not work for all the 12 months
in year. There is an off-season during the year during which
the factory remains closed. For this off-season during which
the workmen suffer forced idleness, full wages are not paid.
There are several categories of workmen employed by the
management. There are unskilled workmen who are paid 10% of
the basic wages and dearness allowance as retaining
allowance during the off-season. There are also semi-skilled
workmen who get 25% of the basic wages and dearness
allowance as retaining allowance. The rest, i.e., skilled
‘C’ to supervisory class of workmen, are paid at the rate of
50% of basic wages and dearness allowance as retaining
allowance during the off-season. The retaining allowance is
paid to these workmen after 40 days of work in the next
crushing season. Workmen in sugar factories in the State of
Gujarat usually come from the State of Uttar Pradesh. During
the off-season, they engage themselves in different
occupation. Retaining allowance is a sort of incentive which
is offered to the workmen to attract them to return to the
factory after the expiry of the off-season.
The retaining allowance is paid in pursuance of the
Report of the Second Central Industrial Wage Board on the
Sugar Industry and subsequently in implementation of the
Award of the Industrial Court. Gujarat, based on the
adoption of the U.P. Pattern Scales of Wages and Dearness
Allowance for workmen employed in all sugar factories
740
working by vacuum Pan Manufacturing Process. In the
Management of Shri Chalthan Vighab Khand Udyog Sahakari
Mandali Ltd. etc. v. B. S. Barot and Anr. etc. the
Management challenged the Award on other grounds but did not
question its liability to pay retaining allowance to the
seasonal workmen. The payment of the retaining allowance by
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4
the Management to the workmen during the off-season is
obligatory. The Management treated the retaining allowance
to be part of wages for purposes of the Employees’ Provident
Funds Act, 1952 but not for purposes of the Payment of Bonus
Act, 1965.
The obligation to pay bonus to the workmen is created
by s. 10 of the Act. Under s. 8 thereof, every employee is
eligible for payment of bonus. The question is whether
retaining allowance should be regarded as remuneration or
wages for purposes of computation of bonus. The decision
whether the retaining allowance forms part of ‘salary or
wage’ must turn on the construction of the definition of
that expression contained in s. 2(21) of the Act which, in
so far as it is relevant, reads :
2(1). "salary or wage" means all remuneration
(other than remuneration in respect of overtime work)
capable of being expressed in terms of money which
would, if the terms of employment, express or implied,
were fulfilled, be payable to any employee in respect
of his employment or of work done in such employment
and includes 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),
but does not include-
(i) any other allowance which the employee is for
the time being entitled to;
xx xx xx
There can be no doubt that the retaining allowance paid
to the workmen during the off-season falls within the
substantive part of the definition of the expression ‘salary
or wage’. It undoubtedly is remuneration which would, if the
terms of employment, express or implied, were fulfilled, be
payable to any employee in respect of his employment. The
retaining allowance is a remuneration on a lower scale which
is paid to the workmen by the management during the off-
season for their forced idleness. The payment of such
allowance by the management to its workmen during the off-
season when there is no work and when the factory is not
working, is indicative of the fact that it wants to retain
their services for the next crushing season. The very fact
that retaining allowance is paid to the workmen clearly
741
shows that their services are retained and, therefore, the
jural relationship of employer and the employee continues.
It is true that a workman may not return to work and may
take up some other job or employment. In that event, he
forfeits the right of payment of the retaining allowance.
But when the workmen returns to work when the next crushing
season starts, the payment of retaining allowance during the
off-season, partakes the nature of basic wage on a
diminished scale. The definition of the expression ’salary
or wage’ given in s. 2(21) of the Act is wide enough to
cover the payment of retaining allowance to the workmen. It
is nothing but remuneration correlated to service and it
would be a misnomer to call it an allowance. The retaining
allowance does not fall within the purview of clause (i) of
the exclusionary clause of s. 2(21), but comes within the
substantive part of the definition of ’salary or wage’ in s.
2(21) of the Act. The retaining allowance cannot be
construed to be any other allowance which the employee is,
for the time being, entitled. The High Court was, therefore,
justified in holding that the retaining allowance paid to
the seasonal employees was a part of their ’salary or wage’
within the meaning of s. 2(21) of the Act and, therefore,
must be taken into account for the purpose of calculation of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4
bonus payable under the Payment of Bonus Act, 1965.
For these reasons, the judgment of the High Court is
upheld.
S.R. Petition dismissed.
742