1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.8867 OF 2011 1.Municipal Corporation of Gr.Mumbai having its office at Mahapalika Marg, Opp.C.S.T.Station, Fort, Mumbai 400 001. 2. The Municipal Commissioner, Municipal Corporation of Gr.Mumbai having its office at Mahapalika Marg, Opp.C.S.T.Station, Fort, Mumbai 400 001 .. Petitioners V/s Municipal Mazdoor Union, Mumbai Bal Dandavate Smruti, 237-239, N.M.Joshi Marg, Opp.Bawla Masjid, Mumbai 400 012. .. Respondents Mr.A.V.Bukhari, with Ms.U.H.Deshpande and Mr.M.O.Patil for the petitioners. Mr.S.U.Kamdar, Senior Advocate with Ms.Neeta Karnik and Mr.M.D.Nagle for the Respondents. CORAM: R.G.KETKAR, J. DATED: 2ND DECEMBER, 2011. Judgment Reserved on 9th November, 2011. Judgment pronounced on 2nd December, 2011. JUDGMENT: 1. Heard Mr.A.V.Bukhari, learned counsel for the petitioners and Mr.S.U.Kamdar, learned Senior Counsel for the Respondents at length. Rule. Mr.M.D.Nagle waives service on behalf of the 2 Respondents. By consent of the parties and in view of the order dated 26.10.2011 passed in Letter Patent Appeal, Rule is made returnable forthwith and is heard finally. 2. By this petition under Article 226 of the Constitution of India, the Municipal Corporation of Greater Mumbai (for short ‘the Corporation’) being Petitioner No.1 and the Municipal Commissioner being Petitioner No.2 have challenged the judgment and order dated 20.10.2011 passed by the learned Member, Industrial Court, Mumbai (for short ‘the Tribunal’) below Exhibit U-2 in Complaint (U.L.P.) No.326 of 2011. By that order, the Tribunal has allowed the application Exhibit U-2 made by the Municipal Mazdoor Union, Mumbai, Respondents herein (for short ‘the Union’) and directed the petitioners to pay ex- gratia amount of Rs.11000/- as per the Circular dated 15.10.2011 to the members of the Union alonwith the other allied unions and the payment of ex-gratia amount of Rs.11000/- should not be disallowed to the members of the Union on the ground that they have participated in the strike of 19th & 20th September, 2011. The relevant and material facts that are necessary for the disposal of this petition, briefly stated, are as under. 3 3. The union instituted complaint (U.L.P.) 326 of 2011 complaining of commission of unfair labour practices under section 28 (1) read with Items 5 & 9 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (for short ‘the 1971 Act’). In the complaint it is asserted that the union is registered as a trade union under the Trade Unions Act, 1926. It is claimed that the union is having largest membership of workmen employed in the Corporation as their members. The union has been recognized by the Corporation way back in the year 1957. The union has signed several settlements, agreements, MOUs with the Corporation as well as their officials. The union has been representing the workmen employed in the Corporation for the last almost five decades or so. Because of honest, sincere and bonafide efforts of the union which believes in the process of collective bargaining that the workmen employed in the Corporation could get periodical revisions in wages, allowances, leave facilities and other terms and conditions of employment from time to time. The union has challenged the action of the Corporation in issuing the circular dated 15.10.2011 and in particular clause 2 (1) thereof. By that 4 clause, the employees of the Corporation who took part in the strike of 19th and 20th September, 2011 are not eligible for payment of ex-gratia amount. The union challenged this clause on the ground that the same is arbitrary, unjustified and discriminatory and amounts to discrimination and/or unfair labour practice under Item 5 of Schedule IV of the Act. It was further averred that the ex-gratia payment is for the period of 01.04.2010 to 31.03.2011. The relevant period therefore is 01.04.2010 to 31.03.2011. However, by virtue of clause 2(1) of the said Circular, the employees who participated in the strike on 19th & 20th September, 2011 are held ineligible. The said dates are posterior to the period of financial year for which the ex-gratia is paid. There is therefore no justification in denying the payment of ex-gratia to those employees who participated in the strike of 19th & 20th September, 2011. The Corporation has thus created artificial discrimination in the matter of the payment of ex-gratia. The Union also specifically contended that there has been a long standing practice in the Corporation that whenever bonus/ ex- gratia is paid, it is paid to all the employees without discrimination. However, during certain years there was no 5 declaration of bonus/ ex-gratia and no employee of the Corporation was paid any bonus / ex-gratia. In support of this contention, the union relied upon the chart showing the years during which the employees of the Corporation were paid bonus/ ex-gratia without discrimination. Thus, the long standing practice has ripened into an agreement and the breach of this agreement amounts to unfair labour practice under Item 9 of Schedule IV of the Act. 4. During the pendency of this complaint, the Union took out an application for interim relief under section 30 (2) of the Act. The Union prayed that the petitioners herein may be directed to pay ex-gratia to all the municipal employees including the members of the Union @ Rs.11,000/- per employee. 5. On behalf of the Corporation, Mr.Makarand Narahari Mule, Dy.Chartered Accountant (Establishment-I) made an affidavit. It was contended that the payment of ex-gratia is purely a matter of grace arising out of favour or indulgence and it cannot be demanded as a matter of right. It was contended that there was no discrimination as alleged by the Union. In other words, it was contended that all the employees of the Corporation whether 6 belonging to the Union or any other Union who participated in the strike of 19th & 20th September, 2011 were held ineligible for payment of ex-gratia. It was further contended that the Corporation is under no legal obligation to pay ex-gratia as it is neither arising out of any statutory provision nor out of any agreement / settlement/ award. It was submitted that the Corporation filed complaint before the Tribunal prohibiting its employees from going on strike. By order dated 17.09.2011 the Tribunal issued injunction restraining the employees of the Corporation from going on strike. Despite this order the employees of the Corporation, some of whom are members of the Union participated in the strike. It is in these circumstances they are not entitled to payment of ex-gratia amount. The Corporation also denied that the long standing practice has ripened into an agreement and the breach of agreement amounts to unfair labour practice under Item 9 of Schedule IV of the Act. The Corporation also denied that there was hostile discrimination or favouritism or partiality and consequently denied commission of unfair labour practice under Item 5 of Schedule IV of the Act. 6. By the impugned order dated 20.10.2011 the Tribunal held that 7 the Corporation has prima-facie committed unfair labour practice under Item 5 of Schedule IV of the Act. It is against this order, the Corporation has preferred this writ petition. 7. In support of this petition, Mr.Bukhari raised the following contentions: (i) The first petitioner being a local authority is exempt from the purview of Payment of Bonus Act, 1965, by virtue of section 32 (iv) thereof. As a result of this, the employees of the Corporation in law are not entitled to get bonus from the Corporation. Thus there is no statutory and legal right vested in the employees of the Corporation to claim bonus. (ii) No award as contemplated under section 2(b) of the Industrial Disputes Act, 1947 (for short ‘the 1947 Act’) is passed by any Tribunal after adjudication for payment of bonus or ex- gratia to the employees of the Corporation. Equally there is no bilateral settlement and bilateral agreement as contemplated under section 2 (p) of the 1947 Act between the Corporation and the union in respect thereof. Thus there is no legal obligation on the Corporation to pay bonus and correspondingly there is no legal right vested in the employees of the Corporation to claim bonus/ 8 ex-gratia. The right to receive ex-gratia flows from the unilateral and voluntary action/ decision of the Corporation. (iii) The dictionary meaning of the word ‘ex-gratia’ is as under:- - “Given as favour or gratuitously where no legal obligation exists and the ex-gratia payment”. - “As a favour not compelled by legal right; ‘ex-gratia’ payments made to non striking workers”. The corporation issued circular dated 15.10.2011 which was itself unilateral and voluntary policy decision for payment of ex-gratia. By virtue of clause 2 thereof, the Corporation took conscious decision to deny ex-gratia to certain category of employees including those employees who went on strike on 19th & 20th September, 2011 in breach and violation of the Tribunal’s order dated 17.09.2011 and the said decision is perfectly legal, valid and justified. (iv) The payment of ex-gratia is neither an implied term of agreement, nor is a condition of service. In order to ascertain as to whether the same is implied agreement, the following tests are required to be complied with simultaneously; (a) Payment must be over an unbroken series of years, 9 (b) It must be for a sufficient long period, (c) The circumstances for which the payment was made should be such as to exclude the payment made out of bounty. At any rate, whether it is implied term of employment is a mixed question of fact and law and not pure question of law and the same is required to be adjudicated and determined on the basis of evidence adduced before the Tribunal. In support of this proposition, he relied upon the judgments of the Apex Court in the cases of Ispahani Limited V/s Ispahani Employees Union, AIR 1959 SC 1147 and Gaziabad Zilla Sahakari Bank Limited V/s.Additional Labour Commissioner, 2007 Lab.I.C.1525, and in particular Paragraph 69. (v) He further submitted that the payment of ex-gratia is not in the nature of customary or traditional bonus. For deciding the said issue the Tribunal will have to consider - (a) whether the payment has been over an unbroken series of years, (b) whether it has been for a sufficient long period, though length of the period might depend on the circumstances of each case, even so the period may normally have to be longer 10 to justify an inference of traditional and customary bonus .... may be the case with bonus based on an implied term of employment. (c) the circumstances 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. (d) the payments have been made at the uniform rate throughout. He submitted that this is also the mixed question of fact and law and not pure question of law, which requires proper evidence and adjudication by the Tribunal. In support of this proposition he relied upon the judgments of the Apex Court in the cases of Graham Trading Company (India Limited) V/s.Their Workmen, AIR 1959 SC 1151 and in particular Paragraph 6 thereof and Munshi Dass V/s.Mal Singh, (1977) 4 SCC 65. (vi) The action of the Corporation in excluding employees who participated in the strike on 19th & 20th September, 2011 in terms of clause 2(1) of the Circular dated 15.10.2011 does not amount to unfair labour practice within the meaning of Item 5 of Schedule IV of the 1971 Act. The said item has been interpreted by the 11 Apex Court in the case of CEAT Limited V/s.Anand Abasaheb Hawaldar, 2006 LAB. I.C. 1675. (vii) The Tribunal has not recorded any prima-facie finding about Item 9 of Schedule IV of the Act. The judgment in the case of BEST V/s.BEST Kamgar Sena, 1986 (52) FLR 39 is not applicable in the present case as the said case arose out of the decision of the Tribunal after a full fledged trial. In the present case we are concerned with the impugned order passed at the interim stage. (viii) The Tribunal was not justified in granting interim relief which is in the nature of final relief. In support of this proposition he relief upon the following judgments; (a) State of U.P. and Others V/s.Sandeep Kumar Balmiki & Ors., 2009 III CLR 550, (b) M.S.R.T.C. Nagpur V/s.Raju Mahadevrao Bhagwatkar, 2003 II CLR 797, (c) V.K.Engineering Workers Private Ltd. V/s.V.B.Gunjotikar, 1997 I CLR 1144. 8. On the other hand Mr.Kamdar raised following contentions; (i) The present case is squarely covered by the judgment of the learned Single Judge of this Court in the case of BEST V/s.BEST Kamgar Sena (supra). Relying upon this judgment, he submitted 12 that the said judgment is a binding precedent and if this Court is inclined to take a different view, the only option available is to refer the matter to a larger Bench. (ii) The payment of ex-gratia is not by way of gratis, but is a matter of right as per Part I of the Circular dated 15.10.2011. By clause 1 of Part I of the Circular the ex-gratia is admissible to all the full time employees appointed in the regular pay scale. The right to receive ex-gratia is crystalised by this clause. Clause 2(1) of the Part II of the said circular is ex-facie arbitrary, discriminatory and it amounts to an unfair labour practice covered by Item 5 of Schedule IV of the Act as it takes away the right so crystalised. (iii) Clause 2(1) of the Circular dated 15.10.2011 is in the nature of imposition of penalty, without following the due process of law. This is also contrary to sections 22, 23 and 26 of the 1947 Act, and consequently clause 2(1) of the said Circular is invalid and illegal. (iv) Clause 2 (1) of the said Circular amounts to unfair labour practice under Item 9 of Schedule IV of the 1971 Act. In the instant case, on the basis of material available on record, the 13 payment of ex-gratia amount is established as a long standing custom, usage and practice. The chart produced by the Union alongwith the complaint indicates that the payment of ex-gratia amount in lieu of bonus was made right from the year 1985 to 2010 excluding the period of three years i.e. 1999-2000, 2000-2001 and 2001-2002. During this period the amount was not paid because of the financial problem faced by the Corporation. In any case, whenever the payment of ex-gratia was made, it was made uniformly to all the employees which in itself has become a long standing practice and therefore it is now an implied term of agreement and has become a condition of service. At any rate the assertions made by the Union in that regard were not denied by the Corporation. In support of his submissions, Mr.Kamdar relied upon the following judgments; (a) BEST V/s.BEST Kamgar Sena, 1986 (52) FLR 39, (b) R.D.Gupta & Ors V/s.Lt.Governor, Delhi Administration & Ors, (1987) 4 SCC 505, (c) Premier Automobiles Ltd. V/s. Engineering Mazdoor Sabha, 1982 Lab.I.C.1759, (d) Bombay Tyres International Limited V/s.All India, Bombay, 2000 II CLR 874, (e) Tata Tea Ltd. (Bombay) Employees Union V/s. Tata Tea 14 Limited, 2007 (6) Bom.C.R.491, (f) M/s.Richardson & Cruddas 1971 Ltd. V/s.Mahadeo, 1984 Lab.I.C.1227. 9. I have considered the rival contentions raised by learned counsel appearing for the parties. I have also gone through the written sub missions submitted by them. In the instant case, it is not seriously in dispute that the employees of the Corporation are not entitled to payment of bonus under section 32 (iv) of the Payment of Bonus Act, 1965. There is also no serious dispute between the parties as regards absence of any interim or final award/ an arbitration award under section 2(b) of the 1947 Act. Equally there is no settlement/ express written agreement entered into between the parties towards payment of ex-gratia under section 2(p) of the 1947 Act. It is the case of the union that there is a long standing practice for payment of ex-gratia amount on the basis of chart indicating payment made from the year 1985 to 2010 excepting the three years. This long standing practice has become an implied agreement between the parties and is now a condition of service. 10.The question that arises in the present petition is whether this can be decided at an interim stage or whether it requires leading of 15 evidence by both sides. In order to answer this question, it is necessary to refer to the judgment of the Apex Court in the case of Ispahani Ltd. (supra). Paragraph Nos.6 & 7 of that report read as under:- “6.Puja is a special festival in Bengal and it has become usual with many firms there to give bonus before puja to their workmen. This matter came up before the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v.Mahalaxmi Cotton Mills Workers’s Union, 1952 Lab AC 370 (LATI). In that case puja bonus was claimed as a matter of right, payable by the employer at a special season of the year, namely at the time of the annual Durga Puja. This right was not based on the general principle that labour and capital should share the surplus profits available after meeting prior charges. It was held in that case that this right rested on an agreement between the employer and the the employees, and that the agreement might be either express or implied. Where the agreement was not express, circumstances might lead the tribunal to an inference of implied agreement. The following circumstances were laid down in that case as material for inferring an implied agreement: (1) The payment must be unbroken; (2) It must be for a sufficiently long period; and (3) The circumstances in which payment was made should be such as to exclude that it was paid out of bounty. The Appellate Tribunal further pointed out that it was not possible to lay down in terms what should be the length of period to justify the inference of implied agreement and that would depend upon the circumstances of each case. It also pointed out that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in coming to the conclusion that it was as a matter of obligation based on implied agreement. As to the quantum of bonus it was laid down that even if payment was not at a uniform rate 16 throughout the period, the implied agreement to pay something could be inferred and it would be for the tribunal to decide what was the reasonable amount to be paid as puja bonus. The tests laid down in that case have since been followed in a number of cases by the Industrial Tribunals and the Labour Appellate Tribunal. We do not think it necessary to refer to all those cases. It may now be taken as well settled that puja bonus in Bengal stands on a different footing from the profit bonus based on the Full bench formula evolved in Mill Owners’s Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, 1950-2 Lab LJ 1247 (FB) (LATI-Bom). The claim for puja bonus in Bengal is based on either of two grounds. It may either be a matter of implied agreement between employers and employees creating a term of employment for payment of puja bonus, or (secondly) even though no implied agreement can be inferred it may be payable as a customary bonus. In the present case we are concerned with the first category, (namely, that based on an implied agreement creating a term of employment between the employer and the employees), and so we shall confine ourselves to that category. It was this kind of bonus which was considered by the Appellate Tribunal in Mahalaxmi Cotton Mills Case, 1952 Lab AC 370 (LATI). We are of opinion that the tests laid down in that case for inferring that there was an implied agreement for grant of such a bonus are correct and it is necessary that they should all be satisfied before bonus of this type can be granted.” “7. This brings us to the two questions raised on behalf of the company, as set out above. The first question, (namely, that the Appellate Tribunal had no jurisdiction to interfere with the finding of the Industrial Tribunal that being a question of fact) can be easily disposed of. We are of opinion that the decision whether there is an implied term of employment is a mixed question of fact and law and not a pure question of fact. This is similar to the decision, for example, on a question whether a custom has been established or whether adverse possession has been proved, or whether a Hindu family has ceased to be joint as a matter of law accepting the facts proved. The Appellate Tribunal will therefore have jurisdiction to consider whether on the facts proved 17 before the Industrial Tribunal an inference in law can be drawn that an implied term of employment for grant of puja bonus has been established. The Appellate Tribunal therefore had jurisdiction to consider this matter.” 11.Mr.Kamdar, during the course of argument submitted that the claim made by the Union for payment of ex-gratia is based upon long standing practice and is not based upon the custom. The long standing practice in the matter of payment of ex-gratia is evident and established from the chart produced by the Union alongwith the complaint and no evidence is required to be adduced for that purpose. 12.I have already noted earlier that excluding the period of three years i.e.1999-2000, 2000-2001 and 2001-2002, the Corporation paid ex-gratia amount in lieu of bonus from the year 1985 to 2010. In the case of Espahani Ltd. (supra), the Apex Court was considering the tests applied by the Appellate Tribunal in inferring the implied agreement. It was observed in Paragraph 6 of that report that where an agreement was not express, the circumstances might lead the Tribunal to an inference of implied agreement. The following circumstances were laid down in that case as material for inferring an implied agreement:- (i) The payment must be unbroken; 18 (ii) It must be for a sufficiently long period; and (iii) The circumstances in which payment was made should be such as to exclude that it was paid out of bounty. The Appellate Tribunal therein, further pointed out that it was not possible to lay down in terms what should be the length of period to justify the inference of implied agreement and that it would depend upon the circumstances of each case. It was also pointed out that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in coming to the conclusion that it was as a matter of obligation based on an implied agreement. Thus, prima- facie at this stage, on the basis of judgment of the Apex Court in the case of Ispahani Ltd. (supra) it is not possible to accept the submission of the Union that it has established a long standing practice, as admittedly during the three years noted above the Corporation did not make payment of ex-gratia. 13.In the case of B.N.E. & Co.Employees Union (supra), the case of the appellants therein was that, that they were entitled to bonus as a condition of service irrespective of profit or loss. According to the appellants the bonus was always paid from 1942 to 1952. The 19 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 denied by them that these payments were paid as a condition of service or as an implied term of agreement irrespective of profit or loss. In Paragraph 5 of that