Full Judgment Text
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PETITIONER:
WORKMEN
Vs.
RESPONDENT:
KETTLEWELL BULLEN & CO. LTD.
DATE OF JUDGMENT06/01/1994
BENCH:
AGRAWAL, S.C. (J)
BENCH:
AGRAWAL, S.C. (J)
KULDIP SINGH (J)
CITATION:
1994 AIR 1550 1994 SCR (1) 22
1994 SCC (2) 357 JT 1994 (1) 18
1994 SCALE (1)30
ACT:
HEADNOTE:
JUDGMENT:
The Judgment of the Court was delivered by
AGRAWAL, J.- This appeal by the workmen of Kettlewell Bullen
& Company Ltd. (hereinafter referred to as ’the workmen’)
involves the question whether the workmen are entitled to
customary bonus at the rate of 10.5 per cent of the total
annual salary or wages in respect of the years 1974 to 1977.
2. By order dated September 11, 1979 the Government of
West Bengal referred to the Eighth Industrial Tribunal
(hereinafter referred to as ’the Tribunal’) the following
dispute for adjudication under Section 10 of the Industrial
Disputes Act, 1947:
"Whether the workmen are entitled to customary
bonus for the accounting years 1974, 1975,
1976 and 1977? If so, at what rate?"
Before the Tribunal it was submitted by the workmen that the
bonus was being paid to them since the year 1959 and that
for the years 1959 to 1963 bonus was paid at the rate of
three and a quarter months’ basic wages and for the years
1965 to 1973 it was paid at the rate of 10.5 per cent of the
total annual salary or wages and that in the year 1964, it
was paid at the rate of 4 per cent on the basis of Payment
of Bonus Ordinance, 1965. The Management disputed the said
claim of the workmen and asserted that the workmen were not
entitled to claim customary bonus and that they were only
entitled to statutory bonus at the rate of 4 per cent
payable under the Payment of Bonus Act, 1965 (hereinafter
referred to as the ’Bonus Act’). The Tribunal by its award
dated April 16, 1982 found that the bonus was paid by the
Management for a long period from 1959 onwards not on the
basis of the profit calculation and usually in the month of
September before Puja festival and that from 1965 to 1973 it
was being paid at the uniform rate of 10.5 per cent, and,
therefore, the bonus which was being paid by the Management
had ripened into a customary bonus due to a long usage. The
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Tribunal held that the workmen were entitled to fixed
customary bonus at the
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rate of 10.5 per cent of the annual salary or wages earned
by each workman concerned for the years 1974 to 1977. The
said award was challenged by the Management before the
Calcutta High Court in a writ petition filed under Article
226 of the Constitution. The said writ petition was allowed
by a learned Single Judge of the said High Court by judgment
dated September 21, 1982 whereby the learned Single Judge
set aside the award made by the Tribunal on the view that
the workmen had failed to establish that they were entitled
to payment of customary bonus. The said decision of the
learned Single Judge was confirmed, in appeal, by a Division
Bench of the High Court by judgment dated November 17, 1986.
The present appeal is directed against the said judgment of
the Division Bench of the High Court.
3. Since the appeal relates to demand for customary bonus,
it is necessary to mention that customary bonus differs from
the bonus (as normally understood) based on the general
principle that labour and capital should share the surplus
profits available after meeting prior charges. Customary
bonus has also to be distinguished from bonus claimed as an
implied term of the contract of employment. The
circumstances in which an implied agreement may be inferred
have been laid down in Ispahani Ltd. Calcutta v. Ispahani
Employees’ Union’.
4. In Graham Trading Co. v. Workmen2 bonus sought as a
matter of tradition or custom, has been distinguished from
bonus payable as an implied term of employment and it has
been laid down that for determining whether the bonus is
payable by way of custom or tradition the following matters
be taken into consideration: (SCR pp. 111- 12)
"(i) whether the payment has been over an
unbroken series of years; (ii) whether it has
been for a sufficiently long period, though
the length of the period might depend on the
circumstances of each case : even so the
period may normally have to be longer to
justify an inference of traditional and
customary Puja bonus than may be the case with
Puja bonus based on an implied term of
employment; (iii) the circumstance that the
payment depended upon the earning of profits
would have to be excluded and therefore it
must be shown that payment was made in years
of loss. In dealing with the question of
custom, the fact that the payment was called
ex gratia by the employer when it was made,
would, however, make no difference in this
regard because the proof of custom depends
upon the effect of the relevant factors
enumerated by us; and it would not be
materially affected by unilateral declarations
of one party when the said declarations are
inconsistent with the course of conduct
adopted by it; and (iv) the payment must have
been at a uniform rate throughout to justify
an inference that the payment at such and such
rate had become customary and traditional in
the particular concern."
1 (1960) 1 SCR 24 : AIR 1959 SC 1147 : (1959) 2 LLJ 4
2 (1960) 1 SCR 107 : AIR 1959 SC 1151 : (1959) 2 LLJ 393
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5. In Tulsidas Khimji v. Workmen3 Sinha, C.J., speaking
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for the majority, has held that the four ’so-called
conditions’ laid down in the Graham Trading Co. case2 are
not really in the nature of conditions precedent but are
circumstances which have been taken into account in this
Court in that case for coming to a conclusion as to whether
or not the claim to customary or traditional bonus had been
made out and that the observations in Graham Trading Co.2
"must be understood as based on consideration of substance
and not of form". It was further observed: (SCR p. 688)
" [W]hat is more important to negative a plea
for customary bonus would be proof that it was
made ex gratia, and accepted as such, or that
it was unconnected with any such occasion like
a festival........"
6. In that case the appellant firm had an unbroken record
of profits year after year. The Court upheld the finding of
the Industrial Tribunal that the traditional or customary
bonus had been established notwithstanding that it bad not
been shown, as it could not have been shown, that it was
paid in a year of loss.
7. In Vegetable Products Ltd. v. Workmen4 the observations
in the Graham Trading Co. case2 have been thus explained:
"The third circumstance lays down that it has
to be proved that the payment has been made
even in years of loss. This only means that
where there have been years of loss, payment
should have been made in those years also.
But it does not mean that where there has been
no year of loss at all and the concern has
been fortunate enough always to earn profit,
there can be no customary or traditional bonus
connected with a festival like Puja, even
though payment at a uniform rate has been made
for a large number of years. This
circumstance should, therefore, be read only
thus: in case there have been years of loss,
it must be proved that payment has been made
in those years also. The fourth circumstance
mentioned above is to the effect that payment
should have been made at a uniform rate
throughout. That, however, does not mean that
uniformity should be established from the
beginning to the end. Take a case where for
the first few years payment at a certain rate
was made. But later on, for a much larger
number of years payment at a somewhat
different but uniform rate has been made. In
those circumstances, the Tribunal may well
come to the conclusion that the payment was at
a uniform rate ignoring the first years."
In Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai5 this Court
has dealt with the contention that custom based bonus must
be linked with some festival or other. Negativing the said
contention it has been observed: (SCR pp. 600-01 : SCC p.
841, para 17)
3 (1963) 1 SCR 675 : AIR 1963 SC 1007 : (1962) 1 LLJ 435
4 AIR 1965 SC 1499 :(1965) 1 LL,J 468
5 (1976) 3 SCC 832: 1976 SCC (L&S) 517 :(1976) 3 SCR 591
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"Surely, communal festivals are occasions of
rejoicing and spending and employers make
bonus payments to employees to help them meet
the extra expenses their families have to
incur. Ours is a festival-ridden society with
many religions contributing to their
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plurality. That is why our primitive practice
of linking payment of bonus with some
distinctive festival has sprouted. As we
progress on the secular road, may be the
Republic Day or the Independence Day or the
Founder’s Day may well become the occasion for
customary bonus. The crucial question is not
whether there is a festival which buckles the
bonus and the custom. What is legally telling
is whether by an unbroken flow of annual
payments a custom or usage has flowered, so
that a right to bonus based thereon can be
predicted. The custom itself precipitates
from and is proved by the periodic payments
induced by the sentiment of the pleasing
occasion, creating a mutual consciousness,
after a ripening passage of time, of an
obligation to pay and a legitimate expectation
to receive."
Having set out the principles governing payment of customary
bonus, we may now come to the facts of the present case.
8. With regard to payment of bonus for the year 1959 a
dispute was raised by the workmen and the same was discussed
in joint conference of the representatives of the workmen as
well as the Management before the Conciliation Officer and a
settlement was reached on July 25, 1962 whereby the parties
mutually agreed to settle not only the bonus issue for 1959
but also to enter into an agreement of bonus for all the
years up to and including 1966. The relevant terms of the
said settlement are as under:
"(a) All workmen of Messrs Kettlewell Bullen & Co. working
at 21, Strand Road, Calcutta 1, will be paid three and a
quarter months’ basic salary as bonus for each of the years
1962 to 1965 (both inclusive). The calculation of bonus
will be as under:
Total basic salary received
during the year x 3 1/4
-----------------------
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(b) The above quantum of bonus will be paid irrespective of
working results of the Company during the years 1962 to 1966
(both inclusive) which will, however, not be treated as a
condition of service for further years.
The Union also agrees not to make any demands for any
additional bonus of any kind during these years as stated
hereinabove.
(c) Regarding the quantum of bonus for the years 1959, 1960
and 1961, it is also agreed that all the workmen of
Kettlewell Bullen & Co. Ltd., working at 21, Strand Road,
Calcutta 1, will receive the said quantum of bonus on the
same conditions as specified in clauses (a) and
(b) above of this agreement.
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(d) The quantum of bonus agreed upon for the years 1959 to
1961 (both inclusive) will be paid in two equal instalments,
one in the month of September 1962 and another in the month
of April 1963.
(e) Bonus in respect of each of the years 1962 to 1966
(both inclusive) will be paid in each of the succeeding
years before the Pujas" 9.
While the said settlement was in operation, the Payment of
Bonus Ordinance, 1965 was promulgated on May 29, 1965.
Relying upon the provisions contained in the said Ordinance,
the Management refused to honour the settlement and for the
year 1964 bonus was paid at the rate of 4 per cent.
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10. On October 15, 1966 the parties the workmen and the
Management entered into another settlement covering the
period of five accounting years, i.e., 1965 to 1969 (both
inclusive), whereby it was agreed as under:
"(a) All the clerical and subordinate staff of
the Company working at 21, Strand Road,
Calcutta 1, will be paid bonus in respect of
each of the accounting years 1965 to 1969
(both inclusive) at the rate of 10 1/2 per
cent (ten and half per centum) of the total
salary and wages (salary and dearness
allowance only and excluding attendance bonus,
overtime, or any other allowance or payment)
earned by them during each of the relevant
accounting years ending 1965 to 1969 (both
inclusive).
(b) Bonus as aforesaid for each of the
accounting years mentioned in clause (a) above
will be paid in the next succeeding year
approximately two weeks before the Pujas."
In the said settlement, it was stated that it had been
arrived at in terms of Section 34(3) of the Payment of Bonus
Act, 1965.
11. The said settlement was followed by Memorandum of
Settlement dated September 20, 1971 covering the accounting
years ending December 31, 1970, December 31, 1971 and
December 31, 1972. Under the said settlement it was agreed
as under:
"(a) All the clerical and subordinate staff of
the Company working at 21, Strand Road,
Calcutta 1, will be paid bonus in respect of
each of the accounting years ending December
31, 1970, December 31, 1971 and December 31,
1972 (all inclusive) at the rate of 10 1/2 per
cent (ten and a half per centum) of the total
salary and wages (basic and dearness allowance
only and excluding attendance bonus, overtime
or any other allowance or payment) earned by
them during the said accounting year.
(b) Bonus as aforesaid for each of the
accounting years mentioned in clause (a) above
will be paid to the employees in the next
succeeding year approximately four weeks
before the Pujas."
In the said settlement also it was stated that it was
arrived at under Section 34(3) of the Payment of Bonus Act,
1965.
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12. On September 26, 1974 the parties entered into another
settlement in respect of the accounting year ended December
31, 1973 and agreed as under:
" (a) All the clerical and subordinate staff
of the Company working at 21, Strand Road,
Calcutta 1, will be paid bonus in respect of
the accounting year ended December 31, 1973 at
the rate of 10.50 per cent (ten and a half per
centum) of the total salary and wages (basic
and dearness allowance only and excluding
attendance bonus, overtime, or any other
allowance or payment) earned by them during
the said accounting year."
In that settlement also it was provided that it was arrived
at under Section 34(3) of the Payment of Bonus Act, 1965.
13. Before the Tribunal Shri Kasi Nath Banerjee, General
Secretary of the Employees’ Union, had appeared as a witness
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and has stated that the bonus was being paid since 1959
before the commencement of Puja.
14. From the settlements referred above and the evidence
that was produced before Tribunal it appears that (i) bonus
was being paid by the appellant ever since the year 1959,
(ii) for the years 1959 to 1963 bonus was paid at the rate
of 3 1/4 months’ basic pay, (iii) for the year 1964, bonus
was paid at the rate of 4 per cent in accordance with the
Payment of Bonus Ordinance, 1965, (iv) for the years 1965 to
1973, bonus was paid at the rate of 10.50 per cent of the
salary or wages, and (v) the said bonus was generally paid
before the commencement of Puja festival.
15. The Tribunal has found that:
"Bonus was paid by the Management for a long
period from 1959 onwards not on the basis of
profit calculation and usually in the month of
September before the Puja festival and the
facts and circumstances prove that there was
continuous payment of bonus since 1959 at a
relevant time without calculation of profits
according to the salary and wages since 1959
and the payments were made from 1965 to 1973
at the rate of 10.5 per cent under Section
34(3) of the Payment of Bonus Act at a uniform
rate and that too before the Puja festival and
not being based on any calculation of the
profit and loss of the Company. The only
possible inference in such circumstances is
that the Management paid bonus which has
ripened into a customary bonus due to long
usage from 1959 onwards covering a period of
15 years."
The learned Judges on Division Bench of the
High Court have also observed :
"However, we may point out that we are of the
opinion that from the various agreements it
was clear that provisions for payment were
being made irrespective of the quantum of
profit and loss."
It can, therefore, be said that the payment had been made by
the Management of the respondent by way of bonus over an
unbroken series of years and the said payment did not depend
upon the earning and profits.
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16. The learned Judges on the Division Bench have held that
the said payment could not be regarded customary bonus for
the following reasons-
(i) it was not being paid at a uniform rate
throughout, and
(ii) the settlements that were entered into
on October 15, 1966, September 20, 1971 and
September 20, 1973 stated that the said
settlements were entered into under Section
34(3) of the Payment of Bonus Act, 1965 and
that the bonus paid under the said settlements
was bonus contemplated under the Payment of
Bonus Act.
17. As regards the first reason given by the High Court
that the bonus was not being paid at a uniform rate
throughout, it may be stated that though during the years
1959 to 1963 it was paid at the rate of three and a quarter
months’ basic pay (which amount, as pointed out by the
learned Judges of the High Court, varied between 10.81 per
cent to 12.95 per cent of total salary or wages) and in the
year 1964 it was paid at the rate of 4 per cent but in
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subsequent years from 1965 to 1973 it was paid at a uniform
rate of 10.50 per cent of the salary or wages. As noticed
earlier, in Vegetable Products Ltd.4 it has been held that
it is not necessary that uniformity in the rate should be
established from the beginning to the end and in a case
where for the first few years payment at a certain rate was
made but later on for a much larger number of years
payment at a somewhat different rate had been made, the
Tribunal could well come to the conclusion that the payment
was at a uniform rate ignoring the first few years. Having
regard to the said decision, the payment made during the
years 1959 to 1964 could be ignored and, on the basis of the
payment made during the years 1965 to 1973 at the uniform
rate of 10.50 per cent of the salary or wages it could be
said that the payment was made at a uniform rate during the
period 1965 to 1973.
18. The question is whether the said period was
sufficiently long to draw an inference about the payment
being customary in nature. In Graham Trading Co.2 the
payment had been made continuously from 1940 to 1952 at the
rate of one month’s wages and this Court upheld the claim of
the workmen for bonus as a customary and traditional
payment. In Vegetable Products Ltd.4 bonus was paid from
1954 to 1961 and the said payment was at a uniform rate (30
days’ wages) from 1956 to 1961. In view of the said payment
at a uniform rate from 1956 to 1961 the Industrial Tribunal
had held that there was a custom of payment at the rate of
30 days’ wages as bonus before Puja in the said concern.
This Court, however, found that payment was made without
dispute and without condition from 1956 to 1958 and that in
1959 the payment was made ex gratia and accepted as such and
that in 1960 and 1961 the payment was made on condition that
it would be adjusted towards the profit bonus of the
previous year and was accepted as such. The Court,
therefore, set aside the conclusion of the Tribunal that
payment of customary or traditional bonus was established.
In the instant case there was payment at a uniform rate of
10.5 per cent of salary or wages for an unbroken period of
nine years, from 1965 to 1973, which was a
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sufficiently long period, and the Tribunal could have
reasonably drawn an inference that the said payment was
customary or traditional bonus on the occasion of Puja
festival,
19. With regard to the other reason given by the High
Court, namely, reference to Section 34(3) of the Bonus Act
in the various settlements, it may be stated that the Bonus
Act is confined, in its application, to profit bonus, and
other kinds of bonus recognised in industrial law are not
covered by the provisions of the Act. In Mumbai Kamgar
Sabha, Bombay5 it has been held: (SCR p. 608 : SCC p. 848,
para 35)
"The conclusion seems to be fairly clear,
unless we strain judicial sympathy contrary
wise, that the Bonus Act dealt with only
profit bonus and matters connected therewith
and did not govern customary, traditional or
contractual bonus."
20. The same view was reiterated in Hukum Chand Jute Mills
Ltd. v. Second Industrial Tribunal6 wherein it was held that
the customary or contractual bonus were excluded from the
provisions of the Act and it was laid down: (SCR p. 647 :
SCC p. 263, para 5)
"The Bonus Act (1965) was a complete code but
was confined to profit-oriented bonus only.
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Other kinds of bonus have flourished in Indian
industrial law and have been left uncovered by
the Bonus Act. The legislative universe
spanned by the said statute cannot therefore
affect the rights and obligations belonging to
a different world or claims and conditions."
In Hukam Chand Jute Mills Ltd. case6 while referring to
Section 17 of the Bonus Act, this Court has observed: (SCR
p. 649 : SCC p. 264, para 9)
"That section in express terms refers to Puja
bonus and other customary bonus as available
for deduction from the bonus payable under the
Act, thus making a clear distinction between
the bonus payable under the Act and ’Puja’
bonus or other customary bonus. So long as
this section remains without amendment the
inference is clear that the categories
covered by the Act, as amended, did not deal
with customary bonus."
21. As indicated earlier the High Court has found that
payments made under the settlements had no link with the
profit. In the circumstances the reference to Section 34(3)
of the Bonus Act in the settlements would not alter the
nature of the payment so as to convert it into a bonus paid
under the said Act. The reference to Section 34(3) of the
Bonus Act must be regarded as having been made by way of
abundant caution to exclude the liability of the appellant
for bonus under the Act, but that would not alter the nature
of the payment. Moreover, Section 17 of the Bonus Act
provides as under:
"17. Adjustment of customary or interim bonus against bonus
payable under the Act.- Where in any accounting year-
6 (1979) 3 SCC 261 : 1979 SCC (L&S) 266: (1979) 3 SCR 644
367
(a) an employer has paid any Puja bonus or other customary
bonus to an employee; or
(b) an employer has paid a part of the bonus payable under
this Act to an employee before the date on which such bonus
becomes payable,
then, the employer shall be entitled to deduct the amount of
bonus so paid from the amount of bonus payable by him to
employee under this Act in respect of that accounting year
and the employee shall be entitled to receive only the
balance."
22. In Mumbai Kamgar Sabha5 this Court has observed: (SCR
p. 607: SCC p. 847, para 33)
"For this reason it is provided in Section 17
that where an employer has paid any Puja bonus
or other customary bonus, he will be entitled
to deduct the amount of bonus so paid from the
amount of bonus payable by him under the Act.
Of course, if the customary bonus is thus
recognised statutorily and, if in any instance
it happens to be much higher than the bonus
payable under the Act, there is no provision
totally cutting off the customary bonus. The
provision for deduction in Section 17, on the
other hand, indicates the independent
existence of customary bonus although, to some
extent, its quantum is adjustable towards
statutory bonus."
This can only mean that if the bonus that was being paid by
the respondent is found to be customary bonus then the
respondent would be entitled to deduct the amount so paid
from the amount of bonus payable to the employee by way of
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bonus under the Act in respect of that accounting year.
23. Shri G.B. Pai, learned senior counsel appearing for the
respondent, placed reliance on the decision of this Court in
Upendra Chandra Chakraborty v. United Bank of India7. In
that case, it was held that the bonus received by the
workmen did not have the characteristic of customary bonus
as known to law. It was found that no bonus was paid for
the years 1950 to 1958 and from 1959 onwards the rate had
not been uniform and there was no evidence to show that the
payment was unrelated to the profits and it was nobody’s
case that the bonus was not paid in any year of loss and it
was also observed that the concept of any customary bonus
was unknown to nationalised banks and that in all the
nationalised banks which are wholly owned undertakings of
the Government of India, the employees must be dealt with on
a common denominator in the matter of bonus. Having regard
to the aforesaid circumstances, it was held that although
the payment was made in the month of September but that
payment was not customary bonus. In our opinion, the said
decision has no application to the facts of the present
case.
24. Having considered the award made by the Tribunal as
well as the judgments of the learned Single Judge and the
Division Bench of the High
7 1985 Supp SCC 26: 1985 SCC (L&S) 546: (1985) 3 SCR 1057
368
Court, we are of the view that an inference that the bonus
that was being paid by the respondent-Company to the
appellants was customary bonus payable at the rate of 10.5
per cent of the salary or wages could be justifiably drawn
by the Tribunal having regard to the facts and circumstances
of the case, and the High Court was in error in setting
aside the award and holding that the bonus that was paid was
not in the nature of customary bonus.
25. The appeal is, therefore, allowed. The judgment and
order of the Division Bench of the High Court dated November
17, 1986 in Appeal No. 103 of 1983 as well as that of teamed
Single Judge dated September 21, 1982 in Matter No. 754 of
1982 are set aside and the award dated April 16, 1982 made
by the Eighth Industrial Tribunal holding that for the years
1974 to 1977 the appellants were entitled to payment of
customary bonus at the rate of 10.5 per cent of the annual
salary or wages earned by each workman concerned in each
such year is restored. The parties are left to bear their
own costs.
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