JUDGMENT
U.N. Sinha, J.
1. This application under Articles 226 and 227 of the Constitution of India has been filed by the Management of Newspapers and Publications (P) Limited, Patna, praying that an award (Annexure 14) dated the 15th April, 1968, given by an arbitrator appointed under Section 10A of the Industrial Disputes Act, 1947 (Act 14 of 1947), in Arbitration Case No. 1 of 1967 be quashed.
2. The relevant facts are as follows; on the 30th April, 1966 an agreement was entered into between the petitioner Company and the Newspapers and Publications Karmachari Union and the Bihar Working Journalists Union, Patna, on account of a dispute regarding payment of bonus, which had resulted in a strike starting from the 19th April, 1966. A copy of this agreement has been supplied as Annexure 6. The terms relating to this writ application were these:–
“(1). It is agreed that the management will distribute a sum of Rs. 1,35,000/- as an advance towards bonus for the accounting year 1964 65 of the Company before the expiry of the due date, i.e. by the 31st May, 1966.
(2) It is further agreed to refer the whole question of bonus to the arbitration of any High Court Judge to be nominated by the Labour Department.
(3) This amount will be subject to adjustment from the bonus of the next year if paid in excess of the amount that might be awarded by the Arbitrator. In case this amount fails short of the amount that might be awarded by the Arbitrator, the management further agree to pay the balance to the worker within sixty days of the publication of the award.”
As a result of this agreement, the following reference was made by the Government of Bihar under Section 10A of the Industrial Disputes Act to the arbitrator in question:–
“It is hereby agreed between the parties to refer the following industrial dispute to the arbitration of Sri H.K. Chowdhury retired Judge, Patna High Court, Patna.
(i)
Specific matters in dispute
(i)
To what quantum of bonus the Workmen are entitled for the year 64-65 ?
(ii)
Details of the parties to the dispute including the names and address of the establishment or undertak-ing involved.
(ii)
Newspapers and Publications (P) Ltd., Patna.
(iii)
Name of the Union, if any repre-senting the workmen in question.
(iii)
(a) N. & P. Karamchari Union, Patna.
(b) Bihar Working Journalists Union
(iv)
Total number of workmen employed in the undertaking affected.
(iv)
About 500.
(v)
Estimated number of workmen affected or likely to be affected by the dispute.
(v)
About 500.
A copy of this reference has been supplied as Annexure 7.
3. In the due course, written statements were filed on behalf of the workmen concerned and on behalf of the petitioner Company. It will be necessary to refer to some of the contentions raised by the workmen concerned in their written statement, which was filed earlier than that of the petitioner Company. It was mentioned that the workmen of this Company had pressed their claim about payment of annual bonus to them as part of their service condition in the early fifties and the late Maharajdhiraj (meaning the then Maharaja of Darbhanga) had accepted the workmen’s demand regarding grant of annual bonus as part of their service condition. It was stated that in the year 1956-57 the workmen were paid one month’s salary as annual bonus. Since then they were getting annual bonus in pursuance of the contractual obligations of the Company. It was mentioned that for the years 1956-57 and 1957-58 the workmen got annual bonus at the rate of one month’s basic salary and in the year 1958-59 it was increased to one and a half months’ basic salary and from the year 1959-60 three months’ wages were offered as annual bonus. This had continued for three years, upto 1961-62.
It was stated that from 1962-63 the Company paid twenty per cent. of the total emoluments to the workmen concerned as annual bonus and this continued till the year 1963-64 before the promulgation of the Payment of Bonus Ordinance. It was stated that for the year 1964-65, the Company had decided to pay bonus only under the Payment of Bonus Act 1965 (Act 21 of 1965), whereas the workmen were entitled to the aforesaid contractual bonus as well as the statutory bonus under the Payment of Bonus Act. This was said to be the cause of the resulting strike. It was also mentioned in the written statement that the payment of contractual bonus was unrelated to the fluctuating profits of the Company and the decision of the Company to pay bonus under the Payment of Bonus Act amounted to a breach of the
workmen’s implied service condition. The written statement specifically mentioned , that the claim of the Union was that they may be given their contractual bonus, which they have been receiving as well as their share under the Payment of Bonus Act.
The substance of the contentions raised by the petitioner Company in its written statement was to the following effect. It was stated that the workmen were entitled to bonus only in accordance with the provisions of the Payment of Bonus Act, and the management of the Company had made provision for payment on the basis of allocable surplus for the accounting year 1964-65. It was stated that the claim of the workmen to the payment of any higher amount of ratio of bonus, on the assumption that during the previous years any higher amount of money was paid not as bonus but on ex gratia basis, was illegal, as that computation was irrelevant for the purpose of determining the quantum of bonus to which the workmen were legally entitled for the accounting year 1964-65, It was stated that the management was prepared to pay bonus in accordance with the provisions of Sections 10 and 11 of the Payment of Bonus Act, and if any error was found in calculating the allocable surplus, determined by the management, they undertook to make payment in accordance with the correct calculation of the surplus.
It appears from the award under challenge that the following points were agitated before the arbitrator. The work-men had contended that they were entitled to two kinds of bonus, that is to say annual bonus as condition of service and also statutory bonus under the Payment of Bonus Act. This contention was rejected by the arbitrator. The second contention raised was whether the workmen were entitled to claim bonus as a condition of service or bonus under the Payment of Bonus Act Under this point the arbitrator has held that the payments of Bonus made by the Company to the workmen in the past were not in the nature of ex gratia payments and that
these annual payments were not based upon trading results. It is held that the workmen were entitled to claim bonus as an implied condition of service and the arbitrator has concluded that they were entitled to three months’ basic wages for the year 1964-65, on certain conditions enumerated in paragraph 22 of the award,
4. The learned Advocate-General appearing for the petitioner Company has contended that it was not open to the arbitrator to uphold a right or supposed right of the workmen inconsistent with the Payment of Bonus Act. It is urged that the agreements relied upon by the workmen, express or implied, for payment of bonus are now abrogated by Section 34, except to the extent mentioned in that section itself, in cases where the question of payment of bonus of years subsequent to this Act arises. It is argued that the quantum of bonus, where the Act applies, must be ascertained by the provisions of this Act. According to the learned Advocate-General, further, the Payment of Bonus Act is comprehensive, now, and parties cannot contract out of its provisions, except to the extent mentioned in the Act itself.
The substantial arguments advanced by Sri Acharya appearing for the workmen, are two-fold. According to him, the Payment of Bonus Act does not apply to bonus payable as part of service condition, because the Act governs only profit-sharing bonus. Secondly, it is argued that the parties in this case had chosen to waive their rights under the Payment of Bonus Act, as is clear both from the agreement entered into on the 30th April, 1966 (Annexure 6) and the agreement published by the Government for adjudication by arbitrator. In other words, the second contention is that when the arbitrator appointed under Section 10A of the Industrial Disputes Act was asked to ascertain. “To what quantum of bonus the workmen are entitled for the year 1964-65 ?” the arbitrator was given the liberty to decide the matter without being fettered by the requirements of the Payment of Bonus Act. In my opinion, the contentions raised by the learned Advocate-General must be upheld on the question of the payment of bonus to the workmen concerned for the year 1964-65.
In a recent decision of their Lordships of the Supreme Court, in the case? of Sanghi Jeevraj Ghevyar Chand v. Secretary, Madras Chillies, Grains Kirana Merchants Workmen’s Union and Indian Telephone Industries Ltd. v. Workmen of the Indian Telephone Industries Ltd. Civil Appeals Nos. 1630 and 1721 of 1967, dated the 16th July, 1968= (AIR 1969 SC 530), their Lordships have laid down the scope of the Payment of Bonus Act, clearly
and categorically. The picture drawn by their Lordships about the scope of the Act cannot possibly be improved upon, and I would like to quote some observations from this judgment. In connection with the scope of the Act their Lordships have stated thus:–
“Thus bonus which was originally a voluntary payment acquired under the Full Bench formula the character of a right to share in the surplus profits enforceable through the machinery of the Industrial Disputes Act, 1947 and other corresponding Acts. Under the Act liability to pay bonus has now become a statutory obligation imposed on the employers. From the history of the legislation it is clear (1) that the Government set up a Commission to consider comprehensively the entire question of bonus in all its aspects; and (2) that the Commission accordingly considered the concept of bonus, the method of computation, the machinery for enforcement and a statutory formula in place of the one evolved by industrial adjudication”
Referring to Section 34 of the Act, their Lordships have stated thus:–
“Section 34 provides for the overriding effect of the Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in terms of any award, agreement, settlement or contract of service made before May 29, 1965”
Referring to the stand taken by the petitioner Company in its written statement to the effect that if there was any error in the calculation of the allocable surplus determined by the management, the management undertook to make payment according to the correct amount found, it will be useful to refer to the distinction between Sections 22 and 39 of the Payment of Bonus Act, to which reference has been made by their Lordships of the Supreme Court. In this context their Lordships have stated thus:–
“The effect of Section 22 thus is (1) to make the disputes referred to therein industrial disputes within the meaning of the Industrial Disputes Act or other corresponding law and (2) having so done to apply the provisions of that Act or other corresponding law for investigation and settlement of such disputes. But the application of Section 22 is limited only to the two types of disputes referred to therein and not to others. Section 39 on the other hand, provides that ‘save as otherwise expressly provided’ the provisions of the Act shall be in addition to and not in derogation of the Industrial Disputes Act or any corresponding law relating to investigation and settlement of industrial disputes in force in a State. Except for providing for recovery of bonus due under a settlement, award, or agreement
as an arrear of land revenue as laid down in Section 21, the Act does not provide any machinery for the investigation and settlement of disputes between an employer and an employee. If a dispute, for instance, were to arise as regards the quantum of available surplus, such a dispute not being one falling under Section 22, Parliament had to make a provision for investigation and settlement thereof. Though such a dispute would not be an industrial dispute as defined by the Industrial Disputes Act or other corresponding Act in force in a State, Section 39 by providing that the provisions of this Act shall be in addition to and not in derogation of the Industrial Disputes Act or such corresponding law makes available the machinery in that Act or the corresponding Act available for investigation and settlement of industrial disputes thereunder for deciding the disputes arising under this Act. As already seen Section 22 artificially makes two kinds of disputes therein referred to as industrial disputes and having done so applies the provisions of the Industrial Disputes Act and other corresponding law in force for their investigation and settlement. But what about the remaining disputes ? As the Act does not provide any machinery for their investigation and settlement, Parliament by enacting Section 39 has sought to apply the provisions of those Acts for investigation and settlement of the remaining disputes, though such disputes are not industrial disputes as defined in those Acts.”
That the Payment of Bonus Act is now comprehensive is clear from the following observations of their Lordships of the Supreme Court. In repelling the contentions raised on behalf of the respondents to those appeals, their Lordships have stated thus:–
“The right to the payment of bonus and the obligation to pay it arose on principles of equity and fairness in settling such disputes under the machinery provided by the Industrial Acts and not as a statutory right and liability as provided for the first time by the present Act. In providing such statutory liability, Parliament has laid down a statutory formula on which bonus would be calculated irrespective of whether the establishment in question has during a particular accounting year made profit or not. It can further lay down that the formula it has evolved and the statutory liability it provides in the Act shall apply only to certain establishments and not to all.”
In dealing with this judgment of the Supreme Court Shri Acharya has argued that their Lordships were considering a limited aspect of this Act only without going into its comprehensive nature or otherwise. It is urged that their Lord-
ships were only dealing with the question of applicability or inapplicability of the Act to establishments, not being factories and which employ less than 20 persons therein and with the question of exemption of employees in an establishment in public sector though employing more than 20 persons. It is argued that the decision of the Supreme Court, therefore, does not lay down a general principle of the applicability of the Payment of Bonus Act to other concerns. I do not think that this contention is valid.
Towards the end of the Judgment their Lordships have stated thus:–
“Considering the history of the legislation, the background and the circumstances in which the Act was enacted, the object of the Act and its scheme, it is not possible to accept the construction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing comprehensively with the subject-matter of bonus in all its aspects …..” Therefore, it is hardly possible to hold, that, bonus can now be awarded as part of service condition ignoring the Payment of Bonus Act altogether. It is difficult to hold that the Act refers only to profit-sharing bonus, and if bonus had been paid before the 29th May, 1965, on implied or express agreement, as part of service condition, irrespective of trading results, the workmen can still claim it on the same basis for the year 1964-65. Section 10 of the Payment of Bonus Act now governs payment of minimum bonus, whether there are profits in any account year or not, and the scope of the Payment of Bonus Act is further clarified by Section 17, under which Puja Bonus or other customary bonus paid can be deducted from the amount of bonus payable under the Act.”
5. The second contention raised by Sri Acharya, mentioned above, is also not valid. Neither the agreement dated the 30th April, 1966 (Annexure 6) nor the agreement mentioned in the notification made by the Government (Annexure 7) mentions any waiver of the Company’s right to rely on the Payment of Bonus Act, for calculating the bonus payable for the year 1964-65. As indicated earlier, the workmen were claiming bonus under the provisions of the Payment of Bonus Act also, in the written statement, and the Company was relying on the provisions of this Act only in its turn. Moreover, there is internal evidence to the effect that neither party was of the view that the Payment of Bonus Act will not apply. If we refer to the terms of the agreement dated the 30th April, 1966, quoted above, it will appear that the Company agreed to pay a substantial amount as advance bonus for the accounting year 1964-65 of the Company “before
the expiry of the due date, i.e., by the 31st May, 1966”. This shows that both parties had in view Section 19 (b) of the
Payment of Bonus Act Under this subsection, all amounts payable to an employee by way of bonus under this Act shall be paid within a period of eight months from the close of the accounting year. In the case of this Company the accounting year 1964-65 closed on the 30th September 1965. That was the reason for mentioning the time-limit as the 31st May, 1966. Then, both parties had agreed that if the amount awarded by the arbitrator was more than that paid by the Company as advance bonus, it would pay the balance within sixty days of the publication of the award. Apparently, this time-limit was settled in view of Section 19(a) of the Payment of Bonus Act, read with Section 17A (1) of the Industrial Disputes Act.
Under Section 19 (a) of the Payment of Bonus Act, when there was a dispute regarding payment of bonus before any authority under Section 22, payment of bonus had to be made within a month from the date on which the award became enforceable. Under Section 17A (1) of Industrial Disputes Act, the award, including an arbitration award, becomes enforceable on the expiry of thirty days from the date of its publication under Section 17. Clearly, this was the reason why sixty days’ time-limit was mentioned in the agreement dated the 30th April, 1966. The agreement mentioned in Annexure 7 does not also give any indication that the petitioner Company had waived its right to contend that it was liable to pay bonus only under the Payment of Bonus Act, for the year 1964-65.
6. It appears that on the main question dealt with by the arbitrator about the liability of the petitioner Company to pay bonus as an implied condition of service for the year 1964-65, he has committed an error in considering this point on the footing that the case of Vegetable Products Ltd, v. Their Workmen, AIR 1965 SC 1499, will apply to this case. In another recent judgment of the Supreme Court, in the case of the Management of Churakulam Tea Estate (P) Ltd. v. The Workmen, Civil Appeal No. 552 of 1966, decided on the 3rd September 1968 (SC) the question of bonus unconnected with festivals has been clarified by their Lordships of the Supreme Court. The arbitrator has followed the principles of the case of the Vegetable Products Ltd., AIR 1965 SC 1499, without realising that in the instant case, the bonus was not connected with any festival. In this unreported derision of the Supreme Court in the case of the Management of Churakulam Tea Estate (P) Ltd Civil Appeal No. 552 of 1966, D/- 3-9-1968 (SC) their Lordships have considered the case of the Graham
Trading Co. (India) Ltd, v. Its Workmen,
AIR 1959 SC 1151, dealt with in Vegetable Products’ case. AIR 1965 SC 1499 by the Supreme Court and referring to other cases of the Supreme Court, their Lordships have explained that before a claim can be established for payment of bonus, not connected with any festival, one of the essential ingredients to be proved is that past payments had been made at a uniform rate throughout. I may usefully refer to the conclusions of their Lordships in Churakulam Tea Estate’s case. Civil Appeal No. 552 of 1966, D/-3-9-1968 (SC) regarding a claim of bonus unconnected with any festival, given in the following words:–
“From the decisions, cited above. It follows that the Tribunal, in the instant case, was wrong in holding that as Inference could be drawn for payment of bonus, as an implied condition of service, in the circumstances of the present cast, when the payment, admittedly was not uniform and was not connected with any festival In our view, it is impossible to Infer an implied condition of service where payment has not been uniform in the past, unless such payment can be connected with some festival. In this case, admittedly, the payments have neither been uniform, nor were they connected with any festival.”
Even with respect to customary or traditional bonus, unconnected with festivals, their Lordships have held that for establishing a claim it must be shown that past payments had been made at a uniform rate throughout.
In the instant case, the payments made in the past were not uniform throughout and if the principles laid down by their Lordships of the Supreme Court to Vegetable Products’ case, AIR 1965 SC 1499 cannot be applied then the conclusion of the arbitrator to the effect that the workmen in this case were entitled to bonus as an implied condition of service was erroneous. In the circumstances of the case, it is not necessary to consider the abstract question as to whether it is permissible to contract out of the provisions of the Payment of Bonus Act altogether or not.
7. For the reasons given above. I am of the opinion that the award must be quashed. If the arbitration proceeding continues under Section 10A of the Industrial Disputes Act, the arbitrator must proceed to adjudicate upon the question on the conclusions given above. The application is, therefore, allowed and the award dated the 15th April, 1968 is quashed. There will be no order as to costs.
Kanhaiyaji, J.
8. I agree.