Case: Indian Standard Wagon Company Limited Vs. First Industrial Tribunal & Others

Vaidialingam, J.1. This appeal by certificate, is against the judgment and order dated March 7, 1968, of the Calcutta High Court in Appeal No. 24 of 1964,* holding that the Industrial Tribunal has to calculate the claim for bonus made by the workmen according to the Full Bench Formula, as explained by this Court. The proceedings between the parties had a very chequered career, as will be noted from the facts mentioned later. The dispute between the parties relates to a claim for additional bonus for the years 1957-58 and 1958-59 and for payment of bonus for the years 1959-60 and 1960-61.2. By order dated December 7, 1946, the Government of West Bengal referred a dispute between the appellant and its workmen for adjudication under Rule 81-A of the Defence of India Rules to the Honble Mr. Justice William Mccormick Sharpe. One of the questions that were referred and which has relevance to the present proceedings, was whether a profit sharing bonus scheme should be introduced in all any of the factories mentioned in the order of reference and, if so, on what basis such a scheme be framed. The parties were able to reach an agreement during the proceedings before the Adjudicator and accordingly the same was incorporated in the award dated March 3, 1947. As per the agreement, the workmen were declared entitled to a profit sharing bonus at the rate of two days basic wages for every 1% dividend declared after February 1, 1947, and paid to the ordinary share-holders of the company, Bonus at this rate had to be paid to both the labour and uncovenanted staff. The Government of Bengal by its order dated March 4, 1947, directed that the said award should remain in force and bind the parties for a period of four months and should also continue to be in force thereafter as long as Rule 81-A of the Defence of Indian Rules continued to be in force. This award of Mr. Justice Sharpe will be hereinafter referred to as the McSharpe award.3. The McSharpe award ceased to be in force after the expiry at the Defence of India Rules. But an Industrial Tribunal, consisting of three Adjudicators, to whom the question of annual bonus along with other matters was referred by the order dated October 31, 1947, of the State Government, gave an award on April 1, 1948, to the effect that the McSharpe award on the basis of the agreement between the parties will continue to govern the question of bonus. This Tribunal rejected the claim of the workmen for an annual profit bonus equal to three months basic wages. In the certified Standing Orders of the company, it was provided in clause 17 that the profit sharing bonus is based on dividends paid to ordinary shareholders of the company and payments are made in accordance with the rules which have been separately published.4. Later on, the appellant issued bonus shares and this resulted in an increase in the ordinary share capital from Rupees 9.74,625/- in 1947-48 to Rs. 38.98.500/- in 1958-59. The workmen in consequence demanded bonus equivalent to eight days wages for each 1% dividend declared by the company on its ordinary shares. As the appellant was not agreeable to this demand, the State Government by its order dated July 6, 1961, referred to the First Industrial Tribunal for adjudication on the issue relating to "additional bonus for 1957-58 and 1958-59 and bonus for 1959-60 and 1960-61";. The union in its written statement claimed that it is entitled to claim six months wages as bonus for each of these years on a proper working out of the percentage at the rate given in the McSharpe award or by applying the Full Bench Formula of the Labour Appellate Tribunal. Accordingly it claimed 118 days pay as additional bonus for the years 1957-58 and 1958-59, after giving credit to the 65 days wages already paid by the appellant. It claimed for the years 1959-60 and 1960-61 six months or 180 days pay as bonus.5. The appellant contested the claim of the union on the ground that according to the McSharpe award, the claim was totally unjustified. It pleaded that the McSharpe award was dead and gone and the claim for bonus should be adjudicated on the basis of the principles laid down by this Court. Even applying the Full Bench Formula, it was the contention of the appellant that no bonus was payable to its workmen.6. The union made a request to the Tribunal to pass an interim award regarding bonus for the years 1959-60 and 1960-61. They required that 67 1/2 days pays for 1959-60 and 64 days pay for 1960-61, as originally offered by the appellant, should be directed to be paid under the interim award. The appellant opposed the request of the workmen for passing an interim award. In particular, the appellant requested the Tribunal to call upon the union to state categorically whether it is agreeable to be governed by the McSharpe award or it required an adjudication of the bonus claimed as according to the law applicable to the same. The union filed a statement on September 6, 1961, that to enable the Tribunal to pass an interim award, it does not press its case on the Full Bench Formula and that it will confine its case to McSharpe award subject to certain modifications because of the issue of bonus shares by the appellant.7. The Tribunal passed an interim award based upon the original principle laid down by the agreement in the McSharpe award without any modification. The appellant filed a Writ Petition in the High Court and prayed for stay of further proceedings before the Industrial Tribunal. The High Court by its order dated September 27, 1961, ordered stay of proceedings and have certain directions as to how the payments made under the interim award are to be finally adjusted. In its final order on the Writ Petition, the High Court held that the workmen have made an unwise choice by giving up their legal rights under the Full Bench Formula and that they have to face the situation before the Tribunal. The High Court declined to interfere with the interim award but gave a direction that the amounts paid under the interim award will have to be adjusted towards any bonus that may be declared by the company in future.8. When the matter was taken up by the Tribunal, after the order of stay was cancelled by the High Court, it framed an issue on the question whether the workmen have repudiated the McSharpe award and whether they have also given up their claim under the Full Bench Formula. In its order dated September 18, 1963, the Tribunal held that the union is not entitled to claim additional bonus or full bonus by a modification of the terms of the McSharpe award. It, however, held that it has got jurisdiction to consider the claim for bonus on the basis of the Full Bench Formula.9. Against this order, the company again filed a Writ Petition before the High Court. Its contentions appear to have been that the workmen have repudiated the agreement under the McSharpe award and that they have also declared that they are not claiming under the Full Bench Formula. Therefore, the Union was not entitled to any bonus at all for these years. The High Court, however, rejected both these contentions of the appellant and held that the claim of the workmen for bonus will have to be considered in terms of the Full Bench Formula, even though they may have repudiated the agreement on the basis of which the McSharpe award was given. The appellant again carried the matter in appeal before a Division Bench. By the judgment under attack, the Division Bench also held that the calculation of bonus will have to be made according to the Full Bench Formula, as explained by this Court. The appellant challenges this decision of the High Court.10. Mr. Sen, learned Counsel for the appellant, urged that the view of the High Court that the claim of the Workmen is to be on the basis of the Full Bench Formula, is erroneous in view of the fact that the union itself had stated before the Tribunal at the time of the interim award that they are not relying on the Full Bench Formula. He also urged that the union cannot make any claim on the basis of the McSharpe award with certain modifications. The point stressed much by Mr. Sen was that when the union itself stated that they are not claiming bonus under the Full Bench Formula, it amounted to a representation by the union that there was no available surplus for purposes of profit sharing bonus. On this basis, he urged that the order of the High Court directing bonus to be calculated by applying this Formula, was erroneous, Though before the High Court the appellant took up the position that no claim for bonus at all remains to be investigated because the Full Bench Formula has not been relied on by the union and the McSharpe award has also been repudiated, Mr. Sen was prepared to proceed on the basis that the claim of the workmen for bonus can be adjudicated upon on the basis of the agreement which had been incorporated in the McSharpe award. Mr. Sen Gupta, learned Counsel for the union, also indicated that the workmen may be willing to have the claim adjudicated on the basis of the McSharpe award but subject to the modifications indicated by them.11. During the course of the arguments, it became clear that the parties have been unnecessarily fighting a litigation over the years in the various courts regarding the claim for bonus. Whether one or other of the contentions is ultimately accepted by us, the matter will have to go back to the Tribunal for adjudicating upon the amounts that may be due as bonus for the four years beginning from 1957-58. For this purpose, the parties will be again put to considerable expense and trouble by adducing evidence before the Tribunal. If it is held that the claim is to be adjudicated on the basis of the Full Bench Formula, the proceedings before the Tribunal will take considerable time.12. In view of the above circumstances, we indicated that it will be to the interest of both the parties that the matter is closed here itself, instead of allowing it to drag on. Mr. Sen, learned Counsel, indicated that over and above the bonus paid for the years 1957-58 and 1958-59, his clients will be willing to increase the quantum still further and also pay at the same increased rate for the subsequent years, 1959-60 and 1960-61. Though the unions claim was for payment of six months wages as bonus, Mr. Sen Gupta, learned Counsel, also indicated that he is prepared to restrict the claim to three months wages for each year.The manner in which both the counsel approached the problem clearly, indicated that the parties were anxious that this litigation relating to bonus for the periods in question should be terminated here itself.

Decision reasoning: 1[ds]11. During the course of the arguments, it became clear that the parties have been unnecessarily fighting a litigation over the years in the various courts regarding the claim for bonus. Whether one or other of the contentions is ultimately accepted by us, the matter will have to go back to the Tribunal for adjudicating upon the amounts that may be due as bonus for the four years beginning fromFor this purpose, the parties will be again put to considerable expense and trouble by adducing evidence before the Tribunal. If it is held that the claim is to be adjudicated on the basis of the Full Bench Formula, the proceedings before the Tribunal will take considerable time.12. In view of the above circumstances, we indicated that it will be to the interest of both the parties that the matter is closed here itself, instead of allowing it to drag on. Mr. Sen, learned Counsel, indicated that over and above the bonus paid for the years9, his clients will be willing to increase the quantum still further and also pay at the same increased rate for the subsequent years,1. Though the unions claim was for payment of six months wages as bonus, Mr. Sen Gupta, learned Counsel, also indicated that he is prepared to restrict the claim to three months wages for each year.The manner in which both the counsel approached the problem clearly, indicated that the parties were anxious that this litigation relating to bonus for the periods in question should be terminated here itself.