Appeal No 531 of 1959
Appeal by special leave from the Award dated October 21 1957 of the Central Government Industrial Tribunal Dhanbad in Reference No 6 of 1957
N Dutta Mazumdar G N Bhattacharjee and B P Maheshwari for the appellants
M C Setalvad Attorney General of India and R Gopalakrishnan for the respondent
December 7
The Judgment of the Court was delivered by GAJFNDRAGADKAR J
The short question of law which falls to be decided in the present appeal is whether a dispute raised by the employees of a General Insurance Company against their employer for payment of bonus in any particular year can be referred for adjudication by an Industrial Tribunal under section 101 of the XIV of 1947
This question arises in this way
The workmen of the Hercules Insurance Co Ltd are the appellants and the Insurance Company is the respondent before us
On April 11 1957 the Central Government referred the appellants  claim for bonus for the years 1954 and 1955 for adjudication to the Industrial Tribunal Dhanbad constituted under section 7A of the  and this reference has been made under section 101d of the Act
Before the Tribunal the respondent urged a preliminary objection against the validity of the reference itself
Its case was that the payment of bonus by an Insurance Company is conditioned entirely by the relevant provisions of the IV of 1938 and that the said provisions did not justify the reference of a dispute in that behalf for adjudication by any Industrial Tribunal
This preliminary objection was based on the provisions of section 31A1 and proviso vii of the 997 
It was also urged by the respondent that having regard to the limitations imposed on the General Insurance Companies by section 40C of the the claim for bonus made by the appellants could not be sustained
The Tribunal has upheld the preliminary objection thus raised by the respondent and held that the reference is invalid
Incidentally it has also considered the plea raised under section 40C and has observed that the said plea is also well founded In the result the Tribunal refused to entertain the reference and dismissed it accordingly
It is against this order of the Tribunal that the appellants have come to this Court by special leave
It is common ground that the respondent has paid the appellants bonus equivalent to two months  basic wages for each of the two years 1954 and 1955
The appellants claim two months  basic wages as additional bonus for each of the two years under reference
It is their case that if the trading profits made by the respondent are ascertained from the respondent s balance sheet and the Full Bench formula is applied it would appear that the respondent has in its hands a substantial amount of available surplus from which the additional bonus claimed by them can be awarded
Since the reference has been rejected on the preliminary ground the Tribunal has naturally not considered this aspect of the problem
The preliminary objection raised by the respondent is founded on the relevant provisions of section 31A of the hereafter called the Act and so we must now turn to the said provisions
Section 31A1c of the Act provides inter alia that notwithstanding anything to the contrary contained in the Indian Companies Act 1913 or in the articles of association of the insurer if a company or in any contract or agreement no insurer shall after the expiry of one year from the commencement of the Insurance Amendment Act 1950 be directed or managed by or employ as manager or officer or in any capacity any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the 126 998 general insurance business of the insurer
Thus looking section at 31A1c by itself without the proviso the position is absolutely at clear
The respondent cannot be directed to employ the appellants in any capacity so as to include in their remuneration a liability to pay bonus in respect of the general insurance business of the respondent
Bonus under the is not a part of wages but the right to claim bonus which has been universally recognised by industrial adjudication in cases of employment falling under the said Act has now attained the status of a legal right
Bonus can be claimed as a matter of right provided of course by the application of the Full Bench formula it is shown that for the relevant year the employer has sufficient available surplus in hand
Therefore a claim for bonus made by the appellants in the present proceedings is a claim in respect of the general insurance business of the respondent and if allowed it would add to the remuneration payable to them
In other words bonus claimed by the appellants if awarded would for the purpose of section 31A 1c be a part of their remuneration and that is precisely what is prohibited by the said provision
There are however certain exceptions to this general prohibition and it is to one of these exceptions that we must now turn
Proviso vii to section 31A 1c lays down that nothing in this subsection shall be deemed to prohibit the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration such bonus in the case of any employee not exceeding in amount the equivalent of his salary for a period which in the opinion of the Central Government is reasonable having regard to the circumstances of the case
 This provision which constitutes an exception to the rule prescribed by section 31A1c allows the payment of bonus to the employees of Insurance Companies subject to the condition specified by it
Bonus intended to be paid to such employees must not exceed in amount the equivalent of their salary for a period which the Central Government regards as reasonable
999 The result of this provision appears to be that the Central Government has to consider the circumstances of each insurer and then decide whether any bonus should be paid by the insurer to its employees
If the financial position of the insurer is sufficiently satisfactory the Central Government may decide to allow the insurer to pay bonus to its employees and in that context the Central Government would prescribe the maximum within which the payment should be made
In no case can payment exceed the maximum prescribed by the Central Government and in all cases the matter has to be considered by the Central Government and no other authority
Having regard to the scheme of the Act which purports to supervise and regulate the working of Insurance Companies the legislature thought that the payment of bonus by the Insurance Companies to their employees should normally be prohibited and its payment should be permitted subject to the over riding control of the Central Government to prescribe the maximum in that behalf
If the Central Government decides that no bonus should be paid no bonus can be paid by the insurer
If the Central Government decides that bonus should be paid but not beyond specified limit the insurer cannot exceed that limit
That in our opinion is the effect of proviso vii to section 31A1
It is however urged that proviso vii merely enables the Central Government to prescribe the maximum
It does not take away the Central Government s authority to refer an industrial dispute in respect of bonus for adjudication under section 10 of the 
In this connection it is urged by Mr Mazumdar that in some cases the Central Government may take the view that the financial position of the insurer justified the payment of bonus but the quantum may be better left to the Industrial Tribunal
In such a case the Central Government should have authority to make the reference
Similarly it is urged that the Central Government may decide that within the maximum prescribed by it bonus should be paid by an insurer but the insurer 1000 may not comply with the Central Government s decision and in that case the only way to make the Central Government s decision effective is to refer the matter to adjudication and enable the employees to obtain an award which can be executed
That is why the appellants contend that the enabling provision contained in proviso vii should not be construed to constitute a bar against the Central Government s power to act under section 101 of the 
We are not impressed by this argument
In our opinion the policy of the relevant clause of the proviso is absolutely clear
Payment of bonus by insurers was intended by the legislature to be conditioned by the provisions contained in the said clause and we feel no doubt or difficulty in reaching the conclusion that the intervention of the Industrial Tribunals was intended to be excluded and the matter was intended to be kept within the discretion of the Central Government so far as the payment of bonus by the insurers is concerned
Then as to the argument that the Government directive issued under proviso vii may not be obeyed by any insurer we do not think that such an event is likely to happen but theoretically it is conceivable that an insurer may refuse to comply with the decision of the Government
In that case all we can say is that there is a lacuna left and the legislature may consider whether it is necessary to provide adequate remedy for making the Government decision binding and final
Having regard to the unqualified and absolute prohibition contained in section 31A1c it seems to us difficult to hold that the payment of bonus to the employees of Insurance Companies is not absolutely conditioned by proviso vii
In the absence of the said provision no bonus could have been claimed by Insurance employees and so the effect of the said provision must be to limit the said right to the conditions prescribed by it
That is why we think that the Tribunal was right in coming to the conclusion that the reference made by the Central Government is invalid
The fact that the Central Government took the view that it could make such a reference 1001 is hardly relevant in determining the scope and effect of the relevant provisions of the Act
This question must be considered on what we regard to be the fair construction of the relevant statutory provision and as we have just indicated the construction of the relevant provision clearly supports the view taken by the Tribunal
Incidentally it may be pointed out that in its award the Tribunal has referred to several other decisions of Industrial Tribunals which have taken the same view though there are one or two decisions which have upheld the validity of the reference without duly considering the effect of section 31A1
In this connection we may refer to the decision of this court in The Central Bank of India vs Their Workmen 1 where a similar question has been considered
In that case the Court had to consider the effect of section 10 of the Banking Companies Act 1949 prior to its amendment in 1956
The said section according to that decision prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in the profits of a banking company
In dealing with the character of bonus in relation to remuneration specified by section 10 section K Das J who spoke for the Court observed that bonus in the industrial sense as understood in our country does come out of the available surplus gap wholly or in the actual wage
id it fills the wage and age in that sense whether it be called contingent or supplementary
None the less it is labour s share in the profits and as it is a remuneration which takes the form of a share in profits it comes within the mischief of section 10 of the Banking Companies Act
Section 10 of the Banking Companies Act is comparable to section 31A of the  and so this decision supports the view that we have taken about the effect of section 31A1c
We have already held that the payment of bonus would be an additional remuneration to the employees of Insurance Companies and it would be 1  1002 bonus in respect of the general insurance business of the insurer
In view of our conclusion that the Tribunal was right in upholding the preliminary objection we do not propose to consider the other argument which had been urged by the respondent before the Tribunal under section 40C of the Act and which the Tribunal has incidentally considered and accepted
The result is that the appeal fails and is dismissed
There will be no order as to costs
Appeal dismissed


Summary:
In view of the unqualified and absolute prohibition contain ed in section 31A1c of the  against payment of bonus to the employees in general insurance business the exception made by proviso vii to that section must be strictly confined to the limits prescribed by the said proviso
The policy underlying the proviso clearly is to exclude the intervention of Industrial Tribunals and leave the question of payment of such bonus entirely to the discretion of the Central Government
Consequently where the workmen in general insurance business claimed bonus and the Central Government referred the dispute for adjudication to the Industrial Tribunal under section 101 of the  and the Tribunal on a preliminary objection under section 31A1c of the  read with proviso vii thereof held that the reference was invalid 1  996 Held the decision of the Tribunal was correct and must be upheld
The Central Bank of India vs Their Workmen 1960 1 SCR 200 relied on