Appeal No 121 of 1959
Appeal by special leave from the Award dated June 3 1957 of the Second Industrial Tribunal West Bengal
N C Chatterjee D L Sen Gupta and Dipak Datta Choudhri for the appellants
C K Daphtary Solicitor General of India H N Sanyal Additional Solicitor General of India and section N Mukherjee for the respondents
March 24
The Judgment of the Court was delivered by WANCHOO J
This appeal by special leave raises the question of bonus
There was a dispute between the workmen of B N Elias  Co Ltd hereinafter called the appellants and their employers B N Elias and Co Ltd and others hereinafter called the respondents with respect to bonus for the years 1954 1955 and 1956
The case of the appellants was that they were entitled to bonus as a condition of service irrespective of profit or loss on the following scale I Clerical staff
1 month s basic pay as bonus in April 1 month s basic pay as bonus in August 1 month s basic pay as bonus in December
II Subordinate staff
1 month s basic wages as bonus in April 1 month s basic wages as bonus in August 1 month s basic wages as bonus at Puja time 1 month s basic wages as bonus in December
According to the appellants this bonus was always paid from 1942 to 1952
Later as there were some disputes between the appellants and the respondents the respondents wanted to stop the payment of bonus from 1953 though something less was paid that year in 1954 the amount of bonus was further reduced
Consequently a dispute was raised which was referred by the Government of West Bengal in May 1956
Subsequently another dispute was raised with respect to the bonus for the years 1955 and 1956 and this time it was claimed as a customary bonus or as a condition of service payable at regular intervals of four 384 months and at a uniform rate
Thereupon a consolidated reference was made by the Government of West Bengal in September 1956 with respect to all the three years i e 1954 1955 and 1956 to the same tribunal
When the matter came up before the tribunal the respondents contended that they were not in a prosperous condition and were unable to pay any further bonus besides what had already been paid for the years in dispute
It was admitted that since about 1942 the respondents had been making ex gratia payments to their employees in addition to wages and salaries
These payments were made at the rate of one month s basic wage each time but their number in the course of one year used to vary
At one time four ex gratia payments were made to clerical and subordinate staff but later the number of ex gratia payments was reduced for the clerical staff to three per year but it remained at four for the subordinate staff until the year 1952
As however the trading result in 1952 deteriorated as compared with the previous years the respondents made only two ex gratia pay ments to clerical staff and three to subordinate staff for the year 1953
A dispute was then raised by the workmen with regard to that year but the Government refused to make a reference to the tribunal
In 1954 and 1955 two ex gratia payments were made to clerical staff and two to the subordinate staff
In 1956 no ex gratia payments were made at all
The respondents denied that these payments were made as a condition of service or as an implied term of agreement irrespective of profit or loss
They also denied that these were customary payments irrespective of profit and loss
It was alleged that they were truly and strictly ex gratia payments made by the respondents voluntarily out of goodwill in circumstances in which no tribunal would award a bonus
The respondents therefore resisted the claim for any further payment as bonus for these three years
Before the tribunal the appellants abandoned their claim for bonus on the basis of the Full Bench formula
They however pressed their claim on the 385 ground that bonus was payable as An implied condition of service and had also acquired the status of customary bonus
The tribunal however negatived the contention that the payment of bonus as claimed had become an implied condition of service
It also held that the case of the employees based on custom was not tenable
In consequence it refused to grant any further bonus for the years 1954 and 1955 beyond what the appellants had been already paid and reject ed the claim for 1956 altogether
Shri N C Chatterjee for the appellants has mainly pressed the claim for bonus on the ground that it is a customary bonus and relies on The Graham Trading Co India Ltd vs Its Workmen 1
Before we deal with this aspect of the matter we may shortly dispose of the claim based on an implied agreement or condition of service
The evidence shows that though payment was made uninterruptedly from 1942 to 1952 three times a year to the clerical staff and four times a year to the subordinate staff it was made clear every time the payment was made that it was an ex gratia payment
Further the receipts given by the employees a sample of which was produced show that the bonus was accepted as ex gratia bonus
As is pointed in The Graham Trading Co 1 it would not be possible to imply a term of service on the basis of an implied agreement when the payment was clearly made ex gratia and had even been accepted as such as in this case
Therefore the contention of the appellants that the bonus claimed by them has become an implied term of agreement or a condition of service must fail
Our attention in this connection was drawn to a letter of appointment issued to one C V Thomas in which under the head  other allowance  the following appears  Equivalent to a month s salary every 4th month will be allowed after your confirmation in employment
 That is however an express term in the contract between the National Tobacco Company of India Limited which is one of the respondents before us 1  386 and Thomas and cannot be a basis for a finding of an implied term of agreement to give bonus three times a year
Thomas may have a claim on the basis of this term of agreement between him and the company about which we say nothing
Another letter of appointment also of National Tobacco Co of India Limited with respect to one Ram Shankar Misra was referred to
In that letter however among the terms we find a term relating to bonus at the rate of Rs 15 per month after confirmation
That is again an e press term between that employee and the National Tobacco Co of India Limited and cannot support the case of an in lied term of agreement by which a month s bonus is paid thrice a year in April August and December
The tribunal was therefore right in rejecting the contention based on the implied term of agreement or condition of service
Turning now to the case of customary bonus which has been pressed before us on the authority of The Graham Heading Co 1 we may point out that that was a case of a customary and traditional bonus payable at Puja which was a special festival of particular importance in Bengal
That case cannot be held to have laid down that there can be customary bonus as such unconnected with some festival
It is difficult to introduce a customary payment of bonus between employer and employee where terms of service are governed by contract express or implied except where the bonus may be connected with a festival whether Puja in Bengal or some other equally important festival in any other part of the country
The principles laid down in that case for governing customary and traditional bonus connected with a festival cannot in our opinion be extended to what may be called a customary bonus unconnected with any festival
We are therefore of opinion that the appellants having failed to prove except in one matter with which we shall deal presently that there was an implied agreement or condition of service for payment of bonus they cannot ask for payment of any bonus on the basis of any customary payment unconnected with any festival
1  387 This brings us to one of the payments to subordinate staff which was  one month s basic wages as bonus at Puja time 
It will be noticed that this payment to the subordinate staff at Puja time is in addition to the other payments which are common between the clerical and the subordinate staff
This payment of one month s basic wage as bonus at Puja appears to have continued uninterrupted from the time it started in 1942 or thereabout upto the time the dispute arose in 1954
The payment was invariably of one month s basic wage and it appears that it was paid even in a year of loss vide exhibit E We are therefore of opinion that the principles laid down in The Graham Trading Co 1 apply to one month s Puja bonus payable to the subordinate staff and it should be held that this payment has become customary and traditional in the respondents  concerns when the dispute was raised for the first time in 1954
We have no doubt that if the judgment in The Graham Trading Co 1 was available to the tribunal it would have held that one month s basic wage as bonus at Puja time to subordinate staff had become customary and traditional in the respondents  concerns
We therefore partly allow the appeal and hold that one month s basic wage as Puja bonus to the subordinate staff has become customary and traditional in the respondents  concerns and we order the respondents to pay that for the year 1956 for which no bonus whatsoever has been paid
The rest of the appeal fails and is hereby dismissed
In the circumstances we order the parties to bear their own costs
Appeal allowed in part


Summary:
One S was employed by the appellant as a secretary and one of the terms of employment was that the appointment may be terminated on one month s notice on either side
The appel lant was thoroughly dissatisfied with the work of S and dis approved of her conduct in joining the union
Purporting to act under the contract the appellant terminated the services of S and gave her one month s pay in lieu of notice
No enquiry was held by the appellant before terminating the services of section The industrial tribunal held that the termination of services amounted to a dismissal for misconduct and since no enquiry was held it was illegal and unjustified and it passed an order for the reinstatement of section The appellant contended that as the termination was strictly in accordance with the terms of the contract it could not be challenged before an industrial tribunal that even if no enquiry was held the order of discharge was justified as the evidence led before the tribunal established the misconduct of S and that at the highest it was a case for awarding compensation and not for reinstatement Held that the discharge amounted to punishment for alleged misconduct and was unjustified in the absence of a proper enquiry
Even where the discharge was in exercise of the power under the contract it was competent for the tribunal to enquire whether the discharge had been effected in the bona fide exercise of that power
If the tribunal found that the purported exercise of the power was in fact the result of the misconduct alleged then it would be justified in dealing with the dispute on the basis that the order of discharge was in effect an order of dismissal
Western India Automobile Association vs Industrial Tribunal Bombay  followed
458 Held further that in the circumstances of the present case compensation and not reinstatement was the appropriate relief that should have been awarded
The normal rule was that in cases of wrongful dismissal the dismissed employee was entitled to reinstatement but there could be cases where it would not be expedient to follow the normal rule
In the present case the appellant s office was a small one and S occupied a position of some confidence
The appellant was dissatisfied with the work of S and had lost confidence in her
In such a case it would not be fair either to the employer or the employee to direct reinstatement