Case: B.N. Elias & Company Limited, Employees' Union & Others Vs. B.N. Elias & Company Limited & Others

Wanchoo, J.1. This appeal by special leave raises the question of bonus. There was a dispute between the workmen of B. N. Elias and 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 months basic pay as bonus in April,1 months basic pay as bonus in August,1 months basic pay as bonus in December,II- Subordinate staff.1 months basic wages as bonus in April,1 months basic wages as bonus in August,1 months basic wages as bonus at Puja time,1 months basic wages as bonus in December.2. 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 from1953, 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 this time it was claimed as a customary bonus or as a condition of service payable at regular intervals of four 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.3. 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 months basic wages 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 payments 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 respondent 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.4. 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 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 rejected the claim for 1956 altogether.5. 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 Grahams Trading Co. (India) Ltd. v. Their Workmen, AIR 1959 SC 1151 . 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 Messrs Grahams Trading Co., AIR 1959 SC 1151 (supra), 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.6. 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 months 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) 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 Company 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 conformation. That is again an express term between that employee and the National Tobacco Company of India Limited and cannot support the case of an implied term of agreement by which a months 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.7. Turning now to the case of customary bonus which has been pressed before us on the authority of Messrs. Grahams Trading Company, AIR 1959 SC 1151 (Supra), 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) the 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.8. This brings us to one of the payments to subordinate staff which was "one months 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 months 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 months basic wage and it appears that it was paid even in a year of loss, vide Ex. E.We are therefore of opinion that the principles laid down in Messrs. Grahams Trading Company, AIR 1959 SC 1151 (supra), apply to one months 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 Messrs. Grahams Trading Company, AIR 1959 SC 1151 (supra), was available to the tribunal it would have held that one months basic wage as bonus at Puja time to subordinate staff and become customary and traditional in the respondents concerns.

Decision reasoning: 1[ds]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 Messrs Grahams Trading Co., AIR 1959 SC 1151  (supra), 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 mustis, however, an express term in the contract between the National Tobacco Company of India Limited (which is one of the respondents before us) 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 Company 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 conformation. That is again an express term between that employee and the National Tobacco Company of India Limited and cannot support the case of an implied term of agreement by which a months 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 ofare therefore of opinion that the appellants having failed to prove (except in one matter with which we shall deal presently) the 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 anypayment of one months 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 months basic wage and it appears that it was paid even in a year of loss, vide Ex. E.We are therefore of opinion that the principles laid down in Messrs. Grahams Trading Company, AIR 1959 SC 1151  (supra), apply to one months 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 Messrs. Grahams Trading Company, AIR 1959 SC 1151  (supra), was available to the tribunal it would have held that one months basic wage as bonus at Puja time to subordinate staff and become customary and traditional in the respondents concerns.