PETITIONER:
MUMBAI KAMGAR SABHA, BOMBAY
Vs.
RESPONDENT:
M/S ABDULBHAI FAIZULLABHAI & ORS.
DATE OF JUDGMENT10/03/1976
BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
UNTWALIA, N.L.
CITATION:
1976 AIR 1455 1976 SCR (3) 591
1976 SCC (3) 832
CITATOR INFO :
RF 1979 SC 876 (5)
RF 1982 SC 149 (971)
R 1984 SC 457 (3)
R 1986 SC1486 (4)
ACT:
Payment of Bonus Act, 1965-Workers' Union-Not being a
party to dispute had locus standi-Bonus Act-If a complete
code-Bonus based on custom, usage or a condition of service-
If excluded by the Act.
Res judicata-if applicable to industrial disputes.
HEADNOTE:
A considerable number of workmen were employed by a
large number of small businessmen in a locality in the city.
Prior to 1965, the employers made ex-gratia payment to the
workers by way of bonus which they stopped from that year. A
Board of Arbitrators appointed under s. 10A of the
Industrial Disputes Act, to which the bonus dispute was
referred, rejected the workers demand for bonus. The dispute
was eventually referred to an Industrial Tribunal which in
limine dismissed the workers' demand as being barred by res
judicata, in view of the decision of the Arbitration Board.
The Tribunal in addition. held that bonus so far paid having
been founded on tradition and custom, did not fall within
the four-corners of the Bonus Act which is a complete code
and came to the conclusion that the workers were not
entitled bonus.
On appeal to this Court it was contended that (i) the
appellant-Union not being a party to the dispute had no
locus standi, (ii) the claim of the workmen not being
profit-based bonus, which is what the Bonus Act deals with,
the Act has no application to this case; and (iii) since no
case of customary or contract bonus was urged before the
Arbitration Board such a ground was barred by the general
principles of res judicata.
Dismissing the appeal.
^
HELD: 1(a) In an industrial dispute the process of
conflict resolution is informal, rough and ready and invites
a liberal approach. Technically the union cannot be the
appellant, the workmen being the real parties. There is a
terminological lapse in the cause title, but a reading of
the petition, the description of the parties, the grounds
urged and grievances aired, show that the battle was between
the workers and the employers and the Union represented the
workers. The substance of the matter being obvious, formal
defects fade away. [596H]
(b) Procedural prescriptions are handmaids, not
mistresses of justice and failure of fair play is the spirit
in which Courts must view processual deviances. Public
interest is promoted by a spacious construction of locus
standi in our socio-economic circumstances, conceptual
latitudinarianism permits taking liberties with
individualisation of the right to invoke the higher courts
where the remedy is shared by a considerable number,
particularly when they are weaker. [597B; D]
Dhabolkar [1976] 1 S.C.R. 306 and Nawabganj Sugar Mills
[1976] 1 S.C.C. 120 held inapplicable.
(e) In industrial law collective bargaining, union
representation at conciliations, arbitrations, adjudications
and appellate and other proceedings is a welcome development
and an enlightened advance in industrial life. [597G]
In the instant case the union is an abbreviation for
the totality of workmen involved in the dispute. The appeal
is, therefore, an appeal by the workmen compendiously
projected and impleaded through the union. [598D]
592
2(a) The demands referred by the State Govt. under s.
10(1) (d) of the Industrial Disputes Act, specifically speak
of payment of bonus by the employers which had become custom
or usage or a condition of service in the establishments.
The subject matter of the dispute referred by the Govt.
dealt with bonus based on custom or condition of service.
The Tribunal was bound to investigate this question. The
workers in their statements urged that the demand was not
based on profits or financial results of the employer but
was based on custom. [599 D-E]
(b) The pleadings, the terms of reference and the
surrounding circumstances support the only conclusion that
the core of the cause of action is custom and/or term of
service, not sounding in or conditioned by profits. The
omission to mention the name of a festival as a matter of
pleading did not detract from the claim of customary bonus.
An examination of the totality of materials leads to the
inevitable result that what had been claimed by the workmen
was bonus based on custom and service condition, not one
based on profit. [600E; 601B]
Messrs. Ispahani Ltd. v. Ispahani Employees' Union
[1960] 1 S.C.R. 24, Bombay Co. [1964] 7 S.C.R. 477, Jardine
Henderson [1962] Supp.3 S.C.R.382, Howrah-Amta Light Rly.
[1966] II LLJ 294, 302, Tulsidas Khimji [1962] I LLJ 435 and
Tilak Co. A.I.R. 1959 Cal. 797 referred to.
(c) When industrial jurisprudence speaks of bonus it
enters the area of right and claim to what is due beyond
strict wages. Viewed from this angle prima facie one is led
to the conclusion that if the Bonus Act deals wholly and
solely with profit bonus it cannot operate as a bar to a
different species of claim merely because the word 'bonus'
is common to both. [604G]
(d) The welfare of the working classes is not only a
human problem but a case where the success of the nation's
economic adventures depends on the cooperation of the
working classes to make a better India. Against such a
perspective of developmental jurisprudence there is not much
difficulty in recognising customary bonus and contractual
bonus as permissible in industrial law. [605B]
Churakulam Tea Estate [1969] 1 SCR 931, Ispahani [1960]
1 S.C.R. 24, Bombay Co. [1964] 1 S.C.R. 477, Jardine
Henderson [1962] Supp. 3 S.C.R. 382, Howrah-Amta Light Rly.
[1966] II LLJ 294, 302 and Tulsidas Khimji [1962] I LLJ 435
referred to.
3(a) It is true that if the Bonus Act is a complete
code and is exhaustive of the subject whatever the species
of bonus, there may be a bar to grant of bonus not covered
by its provisions. But it is quite conceivable that the
codification may be of everything relating to profit bonus
in which case other types of bonus are left untouched.
Merely calling a statute a code is not to silence the
claimant for bonus under heads which have nothing to do with
the subject matter of the code. [605D]
(b) The history of the Act, the Full Bench formula, the
Bonus Commission Report and the statutory milieu as also the
majuscule pattern of bonus prevalent in the Indian
industrial world, converge to the point that the paramount
purpose of the Act was to regulate profit bonus. If such be
the design of the statute, its scheme cannot be stretched to
supersede what it never meant to touch or tackle. [607C-D]
(c) The objects and reasons of the Bonus Act indicate
that the subject matter of the statute was the question of
payment of bonus based on profit to employees employed in
establishments. Schematically speaking, statutory bonus is
profit bonus. To avoid an unduly heavy burden under
different heads of bonus it is provided in s. 17 that where
an employer has paid any puja bonus or other customary
bonus, he would be entitled to deduct the amount of bonus so
paid from the amount of bonus payable by him under the Act.
If the customary bonus is thus recognised statutorily and,
if in any instance it happened 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
593
in s. 17 on the other hand, indicates the independent
existence of customary bonus although, to some extent, its
quantum is adjustable towards statutory bonus. Section 34
does not mean that there cannot be contractual bonus or
other species of bonus. This provision only emphasises the
importance of the obligation of the employer, in every case,
to pay the statutory bonus. The other sub-sections of s. 34
also do not destroy the survival of other types of bonus
than provided by the Bonus Act. The heart of the statute,
plainly read, from its object and provisions, reveals that
the Act has no sweep wider than profit bonus. [607E-G; 608
B-D]
(d) The fact that certain types of bonus which are
attended with peculiarities deserving all special treatment
have been expressly saved from the bonus Act did not mean
that whatever had not been expressly saved was by necessary
implication included in the Bonus Act. [608D]
(e) The long title of the Bonus Act seeks to provide
for bonus to persons employed "in certain establishments"
not in all establishments. Moreover, customary bonus does
not require calculation of profits, available surplus,
because it is a payment founded on long usage and the Act
gives no guidance to fix the quantum of festival bonus. It
is, therefore, clear that the Bonus Act deals with only
profit bonus and matters connected therewith and does not
govern customary, traditional or contractual bonus. [608G-H]
(f) The Bonus Act speaks and speaks as a whole code on
the sole subject of profit-based bonus but is silent on and
cannot therefore annihilate by implication, other distinct
and different kinds of bonus such as the one oriented on
custom. [609D]
Ghewar Chand's case [1969] 1 S.C.R. 366 distinguished
and held inapplicable.
(g) The principle that a ruling of a superior court is
binding law is not of scriptural sanctity but is of ratio-
wise luminosity within the edifice of facts where the
judicial lamp plays the legal flame. So there is no
impediment in reading Ghewar Chand's case as confined to
profit-bonus, leaving room for non-statutory play of
customary bonus. That case relates to profit bonus under the
Industrial Disputes Act. The major inarticulate premise of
the statute is that it deals with-and only with-profit-based
bonus. There is no categorical provision in the Bonus Act
nullifying all other kinds of bonus, nor does such a
conclusion arise by necessary implication. The core question
about the policy of the Parliament that was agitated in that
case turned on the availability of the Industrial Disputes
Act as an independent method of claiming profit bonus de
hors the Bonus Act and the Court took the view that it would
be subversive of the scheme of the Act to allow an invasion
from the flank in that manner. A discerning and concrete
analysis of the scheme of the Act and the reasoning of the
Court leaves no doubt that the Act leaves untouched
customary bonus. [609E-H; 611D-E]
(4) So long as Pandurang stands industrial litigation
is no exception to the general principle underlying the
doctrine of res judicata. But the case of Pandurang is
distinguishable. In that case there was a binding award of
the Industrial Tribunal relating to the claim which had not
been put an end to and so this Court took the view that so
long as that award stood the same claim under a different
guise could be subversive of the rule of res judicata. In
the present case the Arbitration Board dealt with one
dispute; the Industrial Tribunal with a fresh dispute. The
Board enquired into one cause of action based on profit
bonus; the Tribunal was called upon to go into a different
claim. [612D-F]
[The court expressed a doubt about the extension of the
sophisticated doctrine of constructive res judicata to
industrial law which is governed by special methodology of
conciliation, adjudication and considerations of peaceful
industrial relations where collective bargaining and
pragmatic justice claim precedence over formalised rules of
decision based on individual contests, specific causes of
action and findings on particular issues.]
594
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 61 of
1971.
Appeal by Special Leave from the Award dated 14-7-71 of
the Industrial Tribunal Maharashtra Bombay in Reference
(I.T.) No. 116 of 1970.
V. M. Tarkunde, P. H. Parekh, H. K. Sowani and Manju
Jetley for the Appellant.
G. B. Pai, Shri Narain, O. C. Mathur and J. B.
Dandachanji for Respondent Nos. 27, 68, 160, 182, 226, 265,
312, 403, 522, 722 and 903.
The Judgment of the Court was delivered by
KRISHNA IYER, J.-A narration of the skeletal facts,
sufficient to get a hang of the four legal issues debated at
the bar in this appeal, by special leave, will help direct
the discussion along a disciplined course, although the
broader social arguments addressed have spilled over the
banks of the jural stream.
Nag Devi, a locality in the city of Bombay, is studded
with small hardware businesses where pipes and fittings,
nuts and bolts, tools and other small products, are made
and/or sold. These establishments, well over a thousand,
employ a considerable number of workmen in the neighbourhood
of 5,000, although each unit has (barring four), less than
the statutory minimum of 20 workmen. This heavy density of
undertakings and workers naturally produced an association
of employers and a Union of workmen, each recognising the
other, for the necessary convenience of collective
bargaining. Apparently, these hardware merchants huddled
together in the small area, were getting on well in their
business and in their relations with their workmen, and this
goodwill manifested itself in ex-gratia payments to them of
small amounts for a number of years prior to 1965, when
trouble began.
Although rooted in goodness and grace, the annual
repetition of these payments ripened, in the consciousness
of the workers, into a sort of right-nothing surprising when
we see in our towns and temples a trek of charity-seekers
claiming benevolence as of right from shop-keepers and
pilgrims, especially when this kindly disposition has been
kept up over long years. The compassion of yesterday
crystallises as the claim of today, and legal right begins
as that which is humanistically right. Anyway, the hardware
merchants of Nag Devi, made of sterner stuff, in the year
1965, abruptly declined to pay the goodwill sums of the
spread-out past and the frustrated workmen frowned on this
stoppage by setting up a right to bonus averring
considerable profits for the Industry (if one may
conveniently use that expression for a collective coverage
of the conglomeration of hardware establishments). The
defiant denial and the consequent dispute resulted in the
appointment of a Board of Arbitrators under s. 10A of the
Industrial Disputes Act to arbitrate upon twelve demands put
forward by the Mumbai Kamgar Sabha, Bombay (the Union which
represents the bulk of workers employed in the tiny, but
numerous, establishments). The charter of demands included,
inter alia, claim for 4
595
months’ wages as bonus for the year 1965. The arbitral
board, however, rejected the demand for bonus. The
respondents-establishments discontinued these payments
thereafter and the Union’s insistence on bonus led to
conciliation efforts. The Deputy Commissioner of Labour
mediated but since his intervention did not melt the
hardened mood of the employers, formal demands for payments
of bonus were made by the Union and government was persuaded
to refer the dispute for adjudication to an Industrial
Tribunal. The Tribunal formulated two issues as arising from
the statements of the parties and rendered his award
dismissing the reference.
At this stage, it may be useful to set out the terms of
reference made under s. 10(1)(d) of the Industrial Disputes
Act, 1947 (for short, the ID Act), for adjudication by the
Tribunal:
“1. Whether the establishments (mentioned in the
annexure) have been giving bonus to their
workers till 1965 ? If so, how long before
1965 have the employers been giving bonus to
their workmen ? And at what rate ?
2. Whether payment of bonus by the employers to
their workmen has become custom or usage or
condition of service in these establishments
? If so, what should be the basis on which
employers should make payment of bonus to
their workmen for the years ending on any
date in 1966, 1967 1968 and 1969 ?
Following upon the statements of parties, the Tribunal
framed two issues which ran thus:
“1. Whether Award of the Arbitration Board made
in Reference (VA) No. 1 of 1967 and published
in M.G.G. Part I-1 dated 31st October 1968,
pages 4259-4286, operates as res judicata to
the demands of the workmen.
2. Whether the reference in respect of the
demands is tenable and legal.”
He answered the first in the affirmative and the second in
the negative.
The Union, representing the workers in the mass, has
assailed the findings of the Tribunal, the reasonings he has
adopted and the misdirection he has allegedly committed. The
Tribunal did not enter the merits of the claim but dismissed
it in limine on the score that the demand for bonus was
barred by res judicata the arbitral board’s decision
negativing the bonus for 1965 being the basis of this
holding. The second ground for reaching the same conclusion
was that the Bonus Act was a comprehensive and exhaustive
law dealing with the entire subject of bonus and its
beneficiaries. In short, in his view, the Bonus Act was a
complete Code and no species of bonus could survive outside
the contours of that statute. Admittedly, here the claim for
bonus for the relevant four years was founded on tradition
or custom or
596
condition of service and in that light, the Tribunal made
short shrift of the workmen’s plea in these words:
“In my opinion, the demand pertaining to the
practice or custom prevailing in the establishments
before 1965 is not such a matter as has to be
adjudicated and it also does not fall under the
provisions of Bonus Act. I, therefore, find that the
reference in that respect also is not tenable and
legal.”
The submissions of counsel may be itemised into four
contentions which may be considered seriatim. They are:
(a) Was the Industrial Tribunal competent to entertain
the dispute at all ?
(b) Was the claim for bonus for the years 1966-69
barred by res judicata ?
(c) Was there, apart from profit-based bonus,
customary bonus or bonus as a condition of service
?
(d) If answer to (c) is in favour of the workmen, does
the Bonus Act interdict such a demand since it
does not provide for those categories of bonus and
confines itself to profit-based bonus, or does the
Bonus Act speak on the topic of bonus of all
species and, therefore, stands four square between
a claim for bonus and its grant, unless it finds
statutory expression in the provisions of that Act
?
The first contention which, curiously enough, has appealed
to the Industrial Tribunal, need not be investigated as it
is devoid of merit and has rightly been given up by counsel
for the respondent. A casual perusal of the provisions
bearing on the jurisdiction of the Labour Court and the
Industrial Tribunal as well as the relevant schedules will
convince anyone that this industrial dispute comes within
the wider ambit of the Industrial Tribunal’s powers. It is
unfortunate that the Tribunal has made this palpable error.
It is right to give plausible reasons for one’s verdict and
not mar it by bad, perfunctory supplementaries.
Fairness to respondent’s counsel constrains us to
consider in limine a flawsome plea forcibly urged that the
Union figured as the appellant before us but being no party
to the dispute (which was between the workers on the one
hand and the establishments on the other) had no locus
standi. No right of the Union qua Union was involved and the
real disputants were the workers. Surely, there is
terminological lapse in the cause-title because, in fact,
the aggrieved appellants are the workers collectively, not
the Union. But a bare reading of the petition, the
description of parties, the grounds urged and grievances
aired, leave us in no doubt that the battle is between the
workers and employers and the Union represents, as a
collective noun, as it were, the numerous humans whose
presence is indubitable in the contest, though formally
invisible on the party array. The substance of the
597
matter is obvious and formal defects, in such circumstances,
fade away. We are not dealing with a civil litigation
governed by the Civil Procedure Code but with an industrial
dispute where the process of conflict resolution is
informal, rough-and-ready and invites a liberal approach.
Procedural prescriptions are handmaids, not mistresses of
justice and failure of fair play is the spirit in which
Courts must view processual deviances. Our adjectival branch
of jurisprudence, by and large, deals not with sophisticated
litigants but the rural poor, the urban lay and the weaker
societal segments for whom law will be an added terror if
technical mis-descriptions and deficiencies in drafting
pleadings and setting out the cause-title create a secret
weapon to non-suit a party. Where foul play is absent, and
fairness is not faulted, latitude is a grace of processual
justice. Test litigations, representative actions, pro bono
publico and like broadened forms of legal proceedings are in
keeping with the current accent on justice to the common man
and a necessary disincentive to those who wish to bypass the
real issues on the merits by suspect reliance on peripheral
procedural short-comings. Even Art. 226, viewed in wider
perspective, may be amenable to ventilation of collective or
common grievances, as distinguished from assertion of
individual rights, although the traditional view, backed by
precedents, has opted for the narrower alternative. Public
interest is promoted by a spacious construction of locus
standi in our socio economic circumstances and conceptual
latitudinarianism permits taking liberties with
individualisation of the right to invoke the higher courts
where the remedy is shared by a considerable number,
particularly when they are weaker. Less litigation,
consistent with fair process, is the aim of adjectival law.
Therefore, the decisions cited before us founded on the
jurisdiction under Art. 226 are inept and themselves
somewhat out of tune with the modern requirements of
jurisprudence calculated to benefit the community. Two
rulings of this Court more or less endorse this general
approach: Dhabolkar and Newabganj Sugar Mills.
All this apart, we are dealing with an industrial
dispute which, in some respects, lends itself to more
informality especially in the matter of Union
representation. Technically, the Union cannot be the
appellant, the workmen being the real parties. But the
infelicity of drafting notwithstanding, the Union’s role as
merely representing the workers is made clear in the
description of the parties. Learned counsel took us through
s. 36(1) and (4) of the Act, rr. 29 and 36 of the Central
Rules under that Act, s. 15(2) of the Payment of Wages Act
and some rulings throwing dim light on the rule regarding
representation in industrial litigation. We deem it needless
to go deeper into this question, for in industrial law,
collective bargaining, union representation at
conciliations, arbitrations, adjudications and appellate and
other proceedings is a welcome development and an
enlightened advance in industrial life.
Organised labour, inevitably involves unionisation.
Welfare of workers being a primary concern of our
Constitution (Part IV), we
598
have to understand and interpret the new norms of procedure
at the pre-litigative and litigative stages, conceptually
recognising the representative capacity of labour unions. Of
course, complications may arise where inter-union rivalries
and kilkenny cat competitions impair the peace and
solidarity of the working class. It is admitted, in this
case, that there is only one union and so we are not called
upon to visualize the difficult situations counsel for the
respondents invited us to do, where a plurality of unions
pollute workers’ unity and create situations calling for
investigation into the representative credentials of the
party appearing before the Tribunal or court. It is enough,
on the facts of this case, for us to take the Union as an
abbreviation for the totality of workmen involved in the
dispute, a convenient label which, for reasons of
expediency, converts a lengthy party array into a short and
meaningful one, group representation through unions being
familiar in collective bargaining and later litigation. We
do not expect the rigid insistence on each workman having to
be a party eo nomine. The whole body of workers, without
their names being set out, is, in any case, sufficient,
according to the counsel for the respondents, although
strictly speaking, even there an amount of vagueness exists.
For these reasons, we decline to frustrate this appeal by
acceptance of a subversive technicality. We regard this
appeal as one by the workmen compendiously projected and
impleaded through the Union.
Next we come upon the plea of res judicata, as a
roadblock in the way of the appellant. But we will deal with
it last, as was done by counsel, and so straight to the
piece de resistance of this lis. Points (b) and (c) bearing
on bonus therefore claim our first attention and, in a
sense, are integrated and amenable to common discussion.
Shri G. B. Pai, appearing for the respondents,
contended that the claim put forward by the appellant before
the Tribunal was, on the face of it, unsustainable on the
short ground that what was pleaded was profit-based bonus
only and, therefore, fell squarely within the Bonus Act.
That Act being a complete Code, it expressly excluded by s.
1(3) all establishments employing less than 20 workmen and
all but four of the respondents were admittedly such small
undertakings, with the result that the death knell to the
plea of bonus was tolled by the Act itself. Therefore, the
conclusion was irresistible, argued counsel for the
respondents, that the plea for a profit-based bonus, being
negatived by the statute, stands self-condemned.
This argument drives us into an enquiry as to whether
the claim before the Tribunal was for profit-based bonus.
“Yes”, was his holding and so he said ‘no’ to the workmen.
The answer is the same, if the claim is founded on a similar
basis.
Shri Tarkunde, for the appellant, countered this
seemingly fatal submission by urging that whatever might
have been the species of bonus demanded in 1965, the present
dispute referred by the State Government related to a
totally different type of bonus, namely, customary bonus or
one which was a term of the employment itself. Even
599
if this be true, Shri G. B. Pai has his case that the Bonus
Act is all comprehensive and no kind of bonus can gain legal
recognition if it falls outside the sweep and scope of the
Bonus Act itself. No brand of bonus has life left if it does
not find a place in the oxygen tent of the complete Code
called the Bonus Act.
What thus first falls for our examination is the
reference by the State Government to the Tribunal, the
pleading of the workmen before the Tribunal and the counter
statement by the employers before the Tribunal with a view
to ascertain the character of the bonus demanded by the
workers and covered by the dispute. It must be remembered
that the award has rejected the claim not substantively but
on the ground of two legal bars and care must be taken not
to mix up maintainability with merits. A short cut is a
wrong cut often times and the Tribunal’s easy recourse to
dismissal on preliminary grounds may well lead-and it has,
as will be presently perceived-to a re-opening of the case
many years later if the higher Court reverses the legal
findings. Be that as it may, let us test the validity of the
plea that only a profit based bonus has been claimed by the
workers.
The demands referred by the State Government under s.
10(1)(d) specifically speak of payment of bonus by the
employers which ‘has become custom or usage or a condition
of service in the establishments’. The subsidiary or rather
consequential point covered by the reference is ‘if so, what
should be the basis on which employers should make payment
of bonus to their workmen for the years. . .’. It is plain
that the subject matter of the dispute, as referred by the
Government, deals with bonus based on custom or condition of
service. The Tribunal is therefore bound to investigate this
question, the terms of reference being the operational basis
of its jurisdiction.
The workmen, in their statement, have asserted that
bonus had been paid for several years and what transpired at
the conciliation stages is clear from the letter of the
Commissioner of Labour who adverts to the ‘usual’ custom and
practice of payment of bonus’. The colour of the workers’
claim has been clarified further in paragraphs 10 to 12 of
their statement before the Tribunal. While they do mention
that the hardware merchants of Nag Devi have been making
large profits during the years in question and, therefore,
can afford to pay bonus according to the standards and
criteria applicable to large and prosperous industrial
establishments, the real foundation of their claim is set
out in indubitable language as attributable to ‘custom,
usage and condition of service’. Surely, they have no case
of bonus dependent upon the quantum of profits of the
establishments nor uniformity region-wise. On the other
hand, the amount of bonus, the time of payment, etc., vary
from establishment to establishment. The constant factor,
however, is allegedly that there is ‘consistency,
predictability and uniformity’, continuity and payment
‘without reference to the fluctuations in the financial
performance and profits of each firm’. The Sabha does not
mince words when, in praying for relief, it states that the
Tribunal ‘be pleased to restore the custom, usage and
conditions of service represented by the payment of bonus in
these firms. In short, the bedrock of the bonus claim of the
workers is custom and
600
usage bad/or implied condition of service. Nor have the
establishments, who are the respondents before the Tribunal
and before us, made any mistake about the nature of the
demand. In their statement before the Tribunal they have
urged that a scrutiny of the accounts of the firms is
unnecessary ‘since the demand is not based on the profits or
the financial results of the employers but is based on
custom’:
“The contentions of the Sabha that the conditions
of service under all these employers should be governed
by one standard and one criteria is, not tenable. Since
all the shops are not owned by one person and since
every shop is a different entity there is no question
of uniformity of service conditions. Moreover, there is
no law which lays down that the service conditions of
the employees under all these employers should be
uniform. It is submitted that the reference to the
capital-turnover ratio in this paragraph is irrelevant.
It is also submitted that the Sabha’s demand that a
sample scrutiny of the Accounts of the firms should be
made by the Tribunal is irrelevant in this respect
since the demand is not based on the profits or the
financial results of the employers but is based on
custom.”
More over the ex gratia payments for the pre-Bonus Act
period are admitted by the respondents. They seek sanctuary
on the counterplea that free acts of grace, even if
repeated, can neither amount to a custom, usage or condition
of service. In sum, a study of the pleadings, the terms of
reference and the surrounding circumstances supports the
only conclusion that, peripheral reference to the profits of
the establishments notwithstanding, the core of the cause of
action or the kernel of the claim for bonus is custom and/or
term of service, not sounding in or conditioned by profits.
Shri G. B. Pai did urge that the precedents of this
Court have linked custom-based bonus with some festival or
other and that bonus founded on custom de hors some festival
is virtually unknown to case law on the point. From this he
argues that since the bonus has not been related by
reference to any festival by the workmen in their pleadings
(reference to Diwali as the relevant festival in the
statement of the case in this Court is an ingenious
innovation to fit into the judge-made law according to Shri
Pai) the claim must fail. Legal life is breathed into
customary bonus only by nexus with Puja or other festival.
We are unable to agree with this rather meretricious
submission. 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 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, maybe 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
601
of annual payments a custom or usage has flowered, so that a
right to bonus based thereon can be predicated. 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. We are, therefore, satisfied that the omission
to mention the name of a festival, as a matter of pleading,
does not detract from the claim of customary bonus. The
impact of this omission on proof of such custom is a
different matter with which we are not concerned at this
stage since the Tribunal has not yet enquired into the
merits.
Shri Pai urged that the custom, even if true, stood
broken in 1965 and, therefore, during the post-1965 period,
customary bonus stood extinguished. The effect of the
arbitral board’s negation of the profit-based bonus claim in
1965 on custom-based bonus for the subsequent period is
again relevant, if at all, as evidence, which falls outside
our consideration at present. In the event of the Tribunal
having to adjudicate upon the question, maybe this rather
anaemic circumstance will be urged by the employer and
explained by the employees.
There is hardly any doubt that custom has been
recognised in the past as a source of the right to bonus as
the several decisions cited before us by Shri Tarkunde make
out and s. 17(a) of the Bonus Act, in a way, recognizes such
a root of title. In Churakulam Tea Estate(1) this Court
surveyed the relevant case law at some length. Ispahani(2)
implied as a term of the contract the payment of bonus from
an unbroken, long spell. Vaidialingam J., in Churakulam(1)
referring to some of the precedents, observed:
“In Ispahani’s case(2) this Court had to consider
a claim for Puja bonus, in Bengal, and the essential
ingredients, for sustaining such a claim when it is
based on an implied agreement. After stating that the
claim, for Puja Bonus, can be based either as a matter
of implied agreement between the employers and
employees, creating a term of employment for payment of
Puja bonus, or that even where no implied agreement can
be inferred, it may be payable as a customary bonus,
this Court, in the said decision, specifically dealt
with a claim for payment of bonus as an implied
condition of services. This Court further accepted as
correct the tests laid down by the Appellate Tribunal
in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi
Cotton Mills Workers’ Union (1952 L.A.C. 370) for
inferring that there is an implied agreement for grant
of such bonus. The three circumstances, laid down by
the Appellate Tribunal, were: (1) that the payment must
be unbroken; (2) that it must be for a sufficiently
long period; and (3) that the circumstances, in which
payment was made should be such as to exclude that it
was paid out of bounty…….
602
This Court, again, had to consider the essential
ingredients to be established when payment of bonus, as
customary or traditional, is claimed-again related to a
festival-in The Graham Trading Co. (India) Ltd. v. Its
Workmen (1960 1 SCR 107, 111) and dealt with the question as
follows:
“In dealing with puja bonus based on an implied
term of employment, it was pointed out by us in Messrs.
Ispahani Ltd. v. Ispahani Employees’ Union that a term
may be implied, even though the payment may not have
been at a uniform rate throughout and the Industrial
Tribunal would be justified in deciding what should be
the quantum of payment in a particular year taking into
account the varying payments made in previous years.
But when the question of customary and traditional
bonus arises for adjudication, the considerations may
be some what different. In such a case, the Tribunal
will have to consider: (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. It will be seen
that these tests are in substance more stringent than
the tests applied for proof of puja bonus as an implied
term of employment.
It will be seen from the above extract that an additional
circumstance has also been insisted upon, in the case of
customary or traditional bonus, that the payment must have
been at a uniform rate throughout to justify an inference
that the payment at such and such a rate had become
customary and traditional in the particular concern.”
603
In Bombay Co.(1) this Court, after pointing out the
distinction in the ingredients of customary and contractual
bonus, affirmed the existence of categories like customary
bonus which are different from and unconnected with profit-
based bonus. The learned Judge discussed Jardine Henderson
and other rulings, but the judicial chorus of legally
claimable customary or contractual bonus is not marred by
and discordant note.
It may be otiose to refer to holdings of High Courts
when this Court has laid down the law. Even so, two
decisions, one of Patna and the other of Calcutta, deserve
mention. One of us, (Untwalia J., as he then was) speaking
for the Division Bench, observed in Howrah-Amta Light Rly.
thus:
“Apart from the profit bonus, the sense of social
justice has led to the recognition in law of the right
of the workmen to get other kinds of bonus which do not
depend upon nor are necessarily connected with the
earnings of profits by the industrial concern. One such
kind of bonus is that which is paid on the occasion of
special festival well celebrated in particular parts of
India, as for example, puja bonus in Bengal and Diwali
bonus in Western India.”
The Court, referring to Tulsidas Khimji, restated the tests
for the claim of customary bonus and rightly held that these
tests are but circumstances and not conditions precedent,
that it is not necessary to show that such bonus has been
paid even in years of loss. The grounds to be made out for
customary, as distinguished from contractual, bonus overlap
in many respects but differ in some aspects.
P. B. Mukherji, J as he then was, in Tilak Co.
observed:
“Akin to this conception of bonus is the case of a
bonus annexed to the employment by custom or social
practices such as Customary bonus and Puja or Festivity
bonus. In case of such customary and traditional bonus,
the question of profit may or may not arise at all and
such customary and traditional bonus will depend on the
content and terms of that custom or the tradition on
which the claim for bonus is made.
“Each claim for bonus must depend on the facts of
such claim. No doctrinaire view about bonus is possible
or desirable. This much however is judicially settled
that bonus is not deferred wages. It is a narrow and
static view that considers bonus as always an ex gratia
payment or a glorified tip or ‘Bakshish’ or a mere cash
patronage payable at the pleasure of the employer. In
the industrial jurisprudence of a modern economic
society, it is a legal claim and a legal category,
whose potentialities are not as yet fully conceived,
but whose types and boundaries the Courts in
604
India are struggling to formulate. It is a vital
instrument of industrial peace and progress, dynamic in
its implication and operation.”
Since we are not called upon to investigate the veracity of
the claim we stop with stating that the employers’ awareness
of social justice, which fertilises the right of his
employees for bonus, blooms in many ways of which, profit-
based bonus is but one-not the only one. All this is the
indirect bonanza of Part IV of the Constitution which
bespeaks the conscience of the nation, including the
community of employers. Law is not petrified by the past,
but responds to the call of the changing times. So too the
social consciousness of employers. Of course, Labour has its
legal-moral duty to the community of a disciplined
contribution to the health and wealth of the Industry. Law
is not always an organiser of one-way traffic.
This general survey of the case-law conclusively makes
out that Labour’s claim for bonus is not inflexibly and
solely pegged to profit as the one and only right. Bonus is
a word of many generous connotations and, in the Lord’s
mansion there are many houses. There is profit-based bonus
which is one specific kind of claim and perhaps the most
common. There is customary or traditional bonus which has
its emergence from long, continued, usage leading to a
promissory-and-exceptancy situation materialising in a
right. There is attendance bonus, production bonus and what
not. An examination of the totality of pertinent materials
drives us to the inevitable result that what has been
claimed by the workmen in the present case is bonus based on
custom and service condition-not one based on profit. But
the critical question pops up: Is the Bonus Act a killer of
every other kind of bonus not provided for by it ?
We have thus to move on to a study of the scheme of the
Bonus Act in order to ascertain whether it extinguishes
claims founded on customary bonus or contractual bonus. In
one sense, a bonus may be a mere gift or gratuity as a
gesture of goodwill or it may be something which an employee
is entitled to on the happening of a condition precedent and
is enforceable when the condition is fulfilled. Any extra
consideration given for what is received, or something given
in addition to what is ordinarily received by, or strictly
due to the recipient is a bonus (Black’s Legal Dictionary).
But when industrial jurisprudence speaks of ‘bonus’, it
enters the area of right and claim to what is due beyond
strict wages. Viewed from this angle, prima facie one is led
to the conclusion that if the Bonus Act deals wholly and
solely with profit bonus, it cannot operate as a bar to a
different species of claim merely because the word bonus is
common to both. Of course, if the statute has spoken so
comprehensively, as it can, effect must be given to it.
The cosmos of bonus is expanding as working class
contentment and prosperity become integral components of
industrial peace and progress. The bone of contention
between the parties before us is as to whether the Bonus Act
is the alpha and omega of all extra claims, outside wages
and salaries, labelled bonus with separate adjectives
605
demarcating the identity of each species. But this issue has
to be sized up not in vacuo but against the backdrop of the
progressive change around us.
Today it is accepted doctrine that Labour is the
backbone of the nation, particularly in the area of economic
self-reliance. This means the welfare of the working classes
is not only a human problem but a case where the success of
the nation’s economic adventures depends on the cooperation
of the working classes to make a better India. Indeed, on
the national agenda is the question of Labour participation
in Management. Against such a perspective of developmental
jurisprudence there is not much difficulty in recognising
customary bonus and contractual bonus as permissible in
Industrial Law, given proper averments and sufficient proof.
Shri G. B. Pai has raised what he regards as a lethal
infirmity in the claim of the Sabha. In his submission the
Bonus Act is a complete Code and what is not covered by its
provisions cannot be awarded by the Tribunal. It is true
that if the Bonus Act is a complete Code and is exhaustive
of the subject, whatever the species of bonus, there may be
a bar, but it is quite conceivable that the codification may
be of everything relating to profit bonus in which case
other types of bonus are left untouched. Merely calling a
statute a Code is not to silence the claimant for bonus
under heads which have nothing to do with the subject matter
of the Code. On listening to the intricate argument about
implicit codification of the law of bonus by this Act, one
is reminded of Professor Gilmore who put the case against
codification thus :
“The law, codified, has proved to be quite as
unstable, unpredictable, and uncertain-quite as
mulishly unruly-as the common law, uncodified, had ever
been. The rules of law, purified, have remained the
exclusive preserve of the lawyers; the people are still
very much in our toils and clutches as they ever were-
if not more so.”
The argument of the Bonus Act being an all-inclusive
Code is based on the anatomy of the Act and the ruling in
Ghewar Chand. So the judicial task is to ascertain the
history and object of the Act, the relevant surrounding
circumstances leading up to it, its scheme and the
prohibitions, exclusions, exemptions and savings which
reveal the intent and ambit of the enactment. Long ago,
Plowden, with sibylline instinct, pointed out that the best
way to construe the scope of an Act of Parliament is not to
stop with the words of the sections. ‘Every law consists of
two parts viz., of body and soul. The letter of the law is
the body of the law, and the sense and reason of the law is
the soul of the law’. The ‘social conscience’ of the judge
hesitates to deprive the working class, for whom Part IV of
the Constitution has shown concern, of such rights as they
currently enjoy by mere implication from a statute unless
there are compulsive provisions constraining the court to
the conclusion. From this perspective, let us
606
examine exclusionary contention based on the body and soul
of the Bonus Act. If the Bonus Act is a complete Code, on a
true decoding of its scheme and spirit, the industrial Court
cannot take off the ground with any other forms of bonus-
yes, that is the implication of ‘a complete Code’.
Bonus has varying conceptual contents in different
branches of law and life. We are here concerned with its
range of meanings in industrial law but, as expatiated
earlier, there is enough legal room for plural patterns of
bonus, going by lexicographic or judicial learning. It
implies no disrespect to legal dictionaries if we say that
precedents notwithstanding, the critical word ‘bonus’ is so
multiform that the judges have further to refine it and
contextually define it. Humpty Dumpty’s famous words in
‘Through the Looking Glass’-‘When I use a word…… it
means just what I choose it to mean ….. neither more nor
less’-is an exaggerated cynicism. We have to bring in some
legal philosophy into this linguistic problem as it
incidentally involves doctrinal issues where the
Constitution is not altogether non-aligned. Statutory
interpretation, in the creative Indian context, may look for
light to the lodestar of Part IV of the Constitution e.g.,
Arts. 39(a) and (c) and Art. 43. Where two judicial choices
are available, the construction in conformity with the
social philosophy of Part IV has preference.
In Jalan Trading Co. Shah J. (as he then was) gave a
synopsis of the development of the branch of industrial law
relating to bonus from the days of the First World War to
the Report of the Bonus Commission culminating in the Bonus
Act, 1965. The story of ‘war bonus’, the Full Bench formula
and this Court’s view that ‘bonus is not a gratuitous
payment made by the employer to his workmen, nor a deferred
wage, and that where wages fall short of the living standard
and the industry makes profit part of which is due to the
contribution of labour, a claim for bonus may be
legitimately made by the workmen’ are set out in that
decision. The Full Bench formula was based on profits and
the terms of reference to the Commission put profit in the
forefront as the foundation of the Scheme-‘to define the
concept of bonus, to consider in relation to industrial
employments the question of payment of bonus based on
profits and to recommend principles for computation of such
bonus and methods of payment …..’A glance at the various
Chapters of the Report brings home the point that bonus
based on profits is its central theme. The conclusions and
recommendations revolve round the concept of profit bonus.
Little argument is needed to hold that the bonus formula
suggested by the Commission was profit-oriented. Indeed,
that was its only concern. The Act, substantially modelled
on these proposals, has adopted a blueprint essentially
worked out on profit. The presiding idea being a simplified
version of bonus linked to profits over a period, shedding
the complex calculations in the Full Bench Formula, the
statute did not cover other independent species like
customary or contractual bonus which had become an economic
reality and received judicial recognition. There were
marginal references to and accommodation
607
of other brands of bonus but they were for better
effectuating the spirit and substance of profit-based bonus.
The question then is: Was the Bonus Act only a simpler
reincarnation of the Full Bench formula, as argued by Sri
Tarkunde, or was it, going by the provisions and precedents,
a full codification of multiform bonuses, thus giving a
knock-down blow to any customary but illegitimate demand for
bonus falling outside the statute, as contended by Sri Pai ?
Indeed, we were taken through the well-known categories of
bonus vis a vis the statutory provisions with impressive and
knowledgeable thoroughness by Shri Pai with a view to
strengthen his perspective that the Act encompassed the
whole law and left nothing outside its scope.
“To begin with, the history of the Act, the Full Bench
formula which was its judicial ancestor, the Commission
Report which was its immediate progenitor and the statutory
milieu as also the majuscule pattern of bonus prevalent in
the Indian industrial world, converge to the point that the
paramount purpose of the Payment of Bonus Act was to
regulate profit bonus, with incidental incursions into other
allied claims like customary or attendance bonus. If such be
the design of the statute, its scheme cannot be stretched to
supersede what it never meant to touch or tackle.
The objects and reasons of the Bonus Act indicate that
the subject matter of the statute is ‘the question of
payment of bonus based on profit to employees employed in
establishments’. The Report of the Commission is also
referred to in the objects and reasons and the tenor is the
same. The long title of the Act is non-committal, but the
concept of ‘profit’ as the basis for bonus oozes through the
various provisions. For instance, the idea of accounting
year, gross profit and the computation thereof, the
methodology of arriving at the available surplus and the
items deductible from gross profits, have intimate relevance
to profit bonus-and may even be irrelevant to customary or
traditional bonus or contractual bonus. Similarly, the
provision for set on and set off of allocable surplus and
the like are pertinent to profit-based bonus. Schematically
speaking, statutory bonus is profit bonus. Nevertheless,
there is provision for avoidance of unduly heavy burden
under different heads of bonus. For this reason it is
provided in s. 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 s. 17, on
the other hand, indicates the independent existence of
customary bonus although, to some extent, its quantum is
adjustable towards statutory bonus. Again, s. 34 provides
for giving affect to the Bonus Act thus:
“Notwithstanding anything inconsistent therewith
contained in any other law …. or in the terms of any
award,
608
agreement, settlement or contract of service made
before 29th May, 1965″.
This does not mean that there cannot be contractual bonus or
other species of bonus. This provision only emphasises the
importance of the obligation of the employer, in every case,
to pay the statutory bonus. The other sub-sections of s. 34
also do not destroy the survival of other types of bonus
than provided by the Bonus Act. Shri G. B. Pai used the
provisions of the Coal Mines Provident Fund and Bonus Scheme
Act, 1948, referred to in s. 35 of the Bonus Act, for the
purpose of making good his thesis that the Bonus Act has
comprehensive coverage except where it expressly saves any
other scheme of bonus. Our understanding of s. 35 is
different. Coal mines are extremely hazardous undertakings
and they are largely located in agrarian areas where the
agricultural workers absent themselves for long periods to
attend to agricultural work and do not report themselves for
mining work. Coal mines have many peculiarities and the
workmen employed there have to be treated separately from
the point of view of incentive for attendance. Therefore,
attendance bonus for a miner is a separate subject attended
with peculiarities deserving of special treatment and has
been expressly saved from the Bonus Act. This does not mean
that whatever has not been expressly saved is, by necessary
implication, included in the Bonus Act. Of course, there are
provisions for exemptions and exclusions in the Bonus Act
itself, particularly, vis-a-vis small establishments and
public sector undertakings. There is also marginal reference
in s. 2(21) to s. 2(21) (iv) to other kinds of bonus,
including incentive, production and attendance bonus. The
heart of the statute, painly read from its object and
provisions, reveals that Act has no sweep wider than profit
bonus.
There was reference to the payment of Bonus (Amendment)
Ordinance, 1975 by counsel on both sides. We find that the
long title has been expanded and now covers bonus.
“on the basis of profit or on the basis of
production or productivity”.
This amendment itself implies that formerly a narrower
species of bonus, namely, that based on profit had alone
been dealt with. The limits on contractual bonus also tends
to feed our conclusions. The implications of the ceiling set
by the recent amendment to the law falls outside our scope
and we keep away from determining it. Sufficient unto the
day is the evil thereof.
It is clear further from the long title of the Bonus
Act of 1965 that it seeks to provide for bonus to persons
employed ‘in certain establishments’-not in all
establishments. Moreover, customary bonus does not require
calculation of profits, available surplus, because it is a
payment founded on long usage and justified often by
spending on festivals and the Act gives no guidance to fix
the quantum of festival bonus; nor does it expressly wish
such a usage. The conclusion seems to be fairly clear,
unless we strain judicial sympathy contrarywise, that the
Bonus Act dealt with only profit bonus and matters connected
therewith and did not govern customary, traditional or
contractual bonus.
609
The end product of our study of the anatomy and other
related factors is that the Bonus Act spreads the canvas
wide to exhaust profit-based bonus but beyond its frontiers
is not void but other cousin claims bearing the caste name
‘bonus’ flourish-miniatures of other colours! The Act is
neither proscriptive nor predicative of other existences.
The trump card of Sri G. B. Pai is the ruling in Ghewar
Chand. If the ratio there is understood the way Shri Pai
would have it the workmen have no case to present. For,
establishments employing less than 20 workers are excluded
from the benignant campus of the Act and the appellants fall
outside the grace of the statute for that reason alone. Does
the decision exhaust the branch of jurisprudence on every
kind of bonus or merely lays down that profit-based bonus-
the most common one and complicated in working out on the
mathematics of the full Bench Formula-has been picked out
for total statutory treatment and for that pattern of bonus
the Act operates as a complete Code? The Tribunal understood
the former way and followed it up with a rejection, on the
ground of a legal bar, of the admittedly non-profit-based
claim for bonus. Shri Tarkunde argues the reasoning to be a
misunderstanding of the meaning of the ruling. We hold that
the Bonus Act speaks, and speaks as a whole Code, on the
sole subject of profit-based bonus but is silent on, and
cannot therefore annihilate by implication, other distinct
and different kinds of bonus such as the one oriented on
custom. We confess that the gravitational pull on judicial
construction of Part IV of the Constitution has, to some
extent influenced our choice.
It is trite, going by Anglophonic principles, that a
ruling of a superior court is binding law. It is not of
scriptural sanctity but is an of ratio-wise luminosity
within the edifice of facts where the judicial lamp plays
the legal flame. Beyond those walls and de hors the milieu
we cannot impart eternal vernal value to the decision,
exalting the doctrine of precedents into a prison-house of
bigotry; regardless of varying circumstances and myriad
developments. Realism dictates that a judgment has to be
read, subject to the facts directly presented for
consideration and not affecting those matters which may lurk
in the record. Whatever be the position of subordinate
courts’ casual observations, generalisations and sub
silentio determinations must be judiciously read by courts
of coordinate jurisdiction and, so viewed, we are able to
discern no impediment in reading Ghewar Chand as confined to
profit-bonus, leaving room for non-statutory play of
customary bonus. The case dealt with a bonus claim by two
sets of workmen, based on profit of the business but the
workmen fell outside the ambit of the legislation by express
exclusion or exemption. Nothing relating to any other type
of bonus arose and cannot be impliedly held to have been
decided. The governing principle we have to appreciate as a
key to the understanding of Ghewar Chand is that it relates
to a case of profit bonus urged under the Industrial
Disputes Act by two sets of workmen, employed by
establishments which are either excluded or exempted from
the Bonus Act. The major inarticulate premise of the statute
is that it deals with-and only
610
with-profit-based bonus as has been explained at some length
earlier. There is no categorical provision in the Bonus Act
nullifying all other kinds of bonus, nor does such a
conclusion arise by necessary implication. The ruling
undoubtedly lays down the law thus:
“Considering the history of the legislation, the
back ground 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 or that
Parliament still left it open to those to whom the Act
does not apply by reason of its provisions either as to
exclusion or exemption to raise a dispute with regard
to bonus through industrial adjudication under the
Industrial Disputes Act or other corresponding law.”
But this statement, contextually construed, means that
profit-bonus not founded on the provisions of the Bonus Act
and by resort to an adventure in industrial dispute under
the Industrial Disputes Act is no longer permissible. When
Parliament has expressly excluded or exempted certain
categories from the Bonus Act, they are bowled out so far as
profit-based bonus is concerned. You cannot resurrect
profit-bonus by a back-door method, viz. resort to the
machinery of the industrial Disputes Act. The pertinence of
the following observations of Shelat J., becomes self-
evident, understood in this setting:
“We are not impressed by the argument that
Parliament in excluding such petty establishments could
not have intended that employees therein who were
getting bonus under the full Bench formula should lose
that benefit. As aforesaid, Parliament was evolving for
the first time a statutory formula in regard to bonus
and laying down a legislative policy in regard thereto
as to the classes of persons who would be entitled to
bonus thereunder. It laid down the definition of an
’employee’ far more wider than the definition of an
‘workman’ in the Industrial Disputes Act and the other
corresponding Acts. If, while doing so, it expressly
excluded as a matter of policy certain petty
establishments in view of the recommendation of the
Commission in that regard, viz., that the application
of the Act would lead to harassment of petty
proprietors and disharmony between them and their
employees, it cannot be said that Parliament did not
intend or was not aware of the result of exclusion of
employees of such petty establishments.”
Likewise, reference to agreements and settlements providing
for bonus being exempted from the applicability of the Act
does not militate against the survival of contractual bonus
(we are not referring to the impact of the latest amendment
by Ordinance of 1975). Viewed thus and in the light of the
observations earlier extracted, the following passage fits
into the perspective we have outlined:
“Section 32(vii) exempts from the applicability of
the Act (the Bonus Act) those employees who have
entered
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before May 29, 1965 into an agreement or settlement
with their employers for payment of bonus linked with
production or productivity in lieu of bonus based on
profits and who may enter after that date into such
agreement or settlement for the period for which such
agreement or settlement is in operation. Can it be said
that in cases where there is such an agreement or
settlement in operation, though this clause expressly
excludes such employees from claiming bonus under the
Act during such period, the employees in such cases can
still resort to the Industrial Disputes Act, and claim
bonus on the basis of the Full Bench Formula? The
answer is obviously in the negative for the object in
enacting cl. (vii) is to let the parties work out such
an agreement or settlement. It cannot be that despite
this position, Parliament intended that those employees
had still the option of throwing aside such an
agreement or settlement, raise a dispute under the
Industrial Disputes Act and claim bonus under the Full
Bench Formula. The contention, therefore, that the
exemption under s. 32 excludes those employees from
claiming bonus under the Act only and not from claiming
bonus under the Industrial Disputes Act or such other
Act is not correct.”
The core question about the policy of the Parliament
that was agitated in that case turned on the availability of
the Industrial Disputes Act as an independent method of
claiming profit bonus de hors the Bonus Act and the Court
took the view that it would be subversive of the scheme of
the Act to allow an invasion from the flank in that manner.
The following observations strengthen this approach:
“Surely, Parliament could not have intended to
exempt these establishments from the burden of bonus
payable under the Act and yet have left the door open
for their employees to raise industrial disputes and
get bonus under the Full Bench formula which it has
rejected by laying down a different statutory formula
in the Act. For instance, is it to be contemplated that
though the Act by s. 32 exempts institutions such as
the Universities or the Indian Red Cross Society or
hospitals, or any of the establishments set out in cl.
(ix) of that section, they would still be liable to pay
bonus if the employees of those institutions were to
raise a dispute under the Industrial Disputes Act and
claim bonus in accordance with the Full Bench Formula.
The legislature would in that case be giving exemption
by one hand and taking it away by the other, thus
frustrating the very object of s. 32. Where, on the
other hand,, Parliament intended to retain a previous
provision of law under which bonus was payable, or was
being paid it has expressly saved such provision. Thus,
under s. 35 the Coal Mines Provident Fund and Bonus
Schemes Act, 1946 and any scheme made thereunder are
saved. If, therefore, Parliament wanted to retain the
right to claim bonus by way of industrial adjudication
for those who are either excluded or exempted from the
Act, it would have made an express
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saving provision to that effect as it has done for
employees in Coal Mines.”
A discerning and concrete analysis of the scheme of the Act
and the reasoning of the Court leaves us in no doubt that it
leaves untouched customary bonus.
The plea of constructive res judicata is based on the
‘might and ought’ doctrine. Shri Pai’s argument is that
before the Arbitration Board no case of customary or
contract bonus was urged for the year 1965 and so, in later
years, such a ground is barred by the general principles of
res judicata. Sections 10A, 18 and 19(3) of the Industrial
Disputes Act were pressed before us to demonstrate the prior
award was binding on the workers and reading it in the light
of Pandurang the bar was spelt out. It is clear law, so long
as the above ruling stands, that industrial litigation is no
exception to the general principle underlying the doctrine
of res judicata. We do entertain doubt about the extension
of the sophisticated doctrine of constructive res judicata
to industrial law which is governed by special methodology
of conciliation, adjudication and considerations of peaceful
industrial relations, where collective bargaining and
pragmatic justice claim precedence over formalised rules of
decision based on individual contests, specific causes of
action and findings on particular issues, but we are
convinced that Pandurang(1) does not apply at all to our
case. There overtime wages were claimed earlier under the
Factories Act and the case was rejected by the Tribunal.
After this rebuff, a like claim was repeated but sustaining
it on the Bombay Shops and Establishments Act. This new
ground to support the same claim was held to be barred
because the workmen could and ought to have raised the issue
that the Factories Act failing, the Shops Act was available
to them to back up their demand. The fallacy in invoking
this decision lies in the fact that as early as 1950 there
was a binding award of the Industrial Tribunal relating to
the claim, which had not been put an end to, and so this
Court took the view that so long as that award stood, the
same claim under a different guise (the Shops Act) could be
subversive of the rule of res judicata. The decisive
circumstance which distinguishes that case is contained in
the observation:
“If the workers are dissatisfied with any of the
items in respect of which their claim has been rejected
it is open to them to raise a fresh industrial
dispute.”
That is to say, if a fresh dispute had been raised, after
terminating the prior award, no bar of res judicata could
have been urged. Here, the Arbitration Board dealt with one
dispute; the Industrial Tribunal, with a fresh dispute. The
Board enquired into one cause of action based on profit
bonus; the Tribunal was called upon by the terms of
reference, to go into a different claim. This basic
difference was lost sight of by the Tribunal and so he
slipped into an error. The dangers of constructive res
judicata in the area of suits vis a vis writ petitions under
Art. 226 and as between proceedings under Art. 226 and Art.
32 are such as to warrant a closer study. To an extent the
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Law Commission of India in its Report(1) has touched on this
topic. Industrial disputes are an a fortiori case.
Dispute-processing is not by Court litigation alone.
Industrial peace best flourishes where non-litigative
mechanisms come into cheerful play before tensions develop
or disputes brew. Speaking generally, alternatives to the
longish litigative process is a joyous challenge to the
Indian activist jurist and no field is in need of the role
of avoidance as a means of ending or pre-empting disputes as
industrial life. Litigation, whoever wins or loses, is often
the funeral of both. We are a developing country and need
techniques of maximising mediatory methodology as potent
processes even where litigation has erupted. This socially
compulsive impulse prompted the setting in motion of a
statesman-like effort by the senior counsel on both sides,
with helpful promptings from the Bench, to advise their
clients into a conciliatory mood. Should we have at all
hinted to the advocates to resolve by negotiation or stick
to our traditional function of litigative adjudication? In
certain spheres, ‘judicious irreverence’ to judicialised
argumentation is a better homage to justice ! Regrettably,
the exercise proved futile and we have to follow up our
conclusions with necessary directions.
The findings we have reached may now be formally set
down. We hold that the Bonus Act (as it stood in 1965) does
not bar claims to customary bonus or those based on
conditions of service. Secondly we repel the plea of res
judicata. There is no merit in the view that the Industrial
Tribunal has no jurisdiction to try the dispute referred to
it. We set aside the award and direct the Tribunal to decide
on the merits the subject-matter of the dispute referred to
it by the State Government. The appeal is hereby allowed
but, having regard to the over-all circumstances, the
parties will bear their costs.
P.B.R. Appeal allowed.
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