Case: The New Maneck Chowk Spinning And Weaving Co., Ltd Vs. The Textile Labour Association,Ahmedabad

Wanchoo, J. (on behalf of himself, Gajendragadkar, Sarkar and Mudholkar, JJ.): 1. These eighteen appeals by special leave raise a common question and will be dealt with by this judgment. The appellants are certain cotton textile mills in Ahmedabad while the respondent in each appeal is the Textile Labour Association, Ahmedabad, which is a representative union of the cotton textile workers in Ahmedabad. The total number of cotton textile mills in Ahmedabad is 66; therefore, 66 references under S. 73-A of the Bombay Industrial Relations Act, No. XI of 1947 (hereinafter called the Act), were made to the industrial court for arbitration of disputes arising out of notices of change given by the respondent making a demand for bonus for employees of textile mills in Ahmedabad. It appears that there was an agreement between the Textile Labour Association and the Ahmedabad Mill owners Association representing the member-mills on June 27, 1955 (hereinafter referred to as the Agreement), with respect to payment of bonus by the mills to their employees. The Agreement was to remain in force for a period of five years, beginning with January 1, 1953, and ending with December 31, 1957, and related to bonus for the five calendar years from 1953 to 1957 (both inclusive). When the Agreement came to an end disputes arose about bonus for the year 1958. The Agreement was not extended and a notice of change under S. 42 of the Act was given by the Textile Labour Association to the Ahmedabad Mill-owners Association on July 21, 1959, claiming that all the employees employed during the year 1958 in the member-mills be paid an adequate amount of bonus having regard to the volume of profits, if any, or some bonus irrespective of profits to fill the gap between the existing wage and the living wage so as to avoid unrest among the employees. It further appears that notice in the same terms was given to individual mills about the same time. As no agreement was arrived at between the parties, 66 references with respect to the sixty-six mills were made to the industrial court as already mentioned above. The industrial court considered all the sixty-six references together and came to the conclusion that the Agreement of 1955 had worked fairly to both sides and was substantially in accord with the long-standing practice in the industry in Ahmedabad even before the Agreement and that its extension for one year was essential for keeping industrial peace. It therefore ordered the extension of the Agreement for the year 1958 and directed the parties to file within six weeks from the date of the award calculations of bonus payable for the year 1958 in the light of the decision and thereafter the court would proceed to award appropriate bonus in the case of each individual mill. Thereupon there were fifty-two applications for special leave to appeal to this Court in which special leave was granted. Thirty-four of the appeals arising out of the special leave petitions have been withdrawn and only eighteen now remain for decision. It appears that the remaining fourteen mills accepted the decision of the industrial court, so that now forty-eight mills are out of the picture and only eighteen are before the Court. 2. The main contention of the appellants before the industrial court was that in view of the law laid down as to bonus by this Court is Associated Cement Companies Ltd. v. The Workmen, 1959 SCR 925 : (AIR 1959 SC 967 ), it was not open to it to extend the Agreement for the year1958 as that would be against the concept of bonus as understood in industrial law. The same point is being urged before us and the question that falls for decision is whether the industrial court was right in law in extending the Agreement for another year. 3. In order to appreciate the dispute between the parties with respect to the extension of the Agreement we may refer to the salient terms of the Agreement. Before we do so, we may mention that the Agreement was "without renouncing the general principles enunciated in decisions and awards of the arbitration boards, the industrial court, the Labour Appellate Tribunal and the Supreme court in respect of bonus or the rights and privilages created thereunder. It was entered into only with a view to creating goodwill among workers and for the purpose of maintaining peace in the industry and without creating a precedent for the future. The Agreement in the first place provided that the claim of the employees for bonus would only arise if there is an available surplus of profit after making provision for all the prior charges. These prior charges were : (i) statutory depreciation and the development rebate; (ii) taxes; (iii) reserve for rehabilitation, replacement and modernisation of block as calculated by the industrial court (basic year 1947); (iv) six per centum return on paid-up capital including bonus shares; and (v) two per cent, return on reserves employed as working capital. After the available surplus was determined thus, a mill having an available surplus of profit had to pay to its employees bonus which would in no case be less than an amount equivalent to 4.8% of basic wages earned during the year; nor was it to exceed an amount equivalent to 25% of the basic wages earned during the year. It was also provided that in case the available surplus was more than sufficient for granting bonus at a higher figure than the ceiling of twenty-five per centum of basic wages earned during the year and the maximum bonus of 25 per centum was paid, such a mill would be deemed to have set aside a part of the residue of available surplus after grant of maximum bonus not exceeding 25 per cent, of the basic wages earned during the year as a reserve for bonus for purposes of "set on (adjustment) in subsequent years. Secondly it was provided that where in the case of a mill, the available surplus was not more than the ceiling of 25 per cent, of basic wages fixed for bonus, the bonus would be fixed after deducting at least Rs. 10,000/- from the available surplus. Further it was provided that if a mill had an available surplus of profits which would suffice to pay bonus at a rate lower than the minimum of 4.8 per cent, it would pay the minimum and would be entitled to set off the excess amount thus paid against the available surplus in a subsequent year or years and there were provisions how this set-off would be worked out, Lastly it was provided that if the profits of a mill were not sufficient to provide for all prior charges as mentioned above, though it had made profits, or where the mill had actually suffered a loss, such a mill would as a special case for creating goodwill among its workers and for continuing peace in the industry but without creating a precedent pay to its employees the minimum bonus equivalent to 4.8 per cent, of the basic wages but would be entitled to set off this amount towards any available surplus in any subsequent years, subject, however, always to a payment of a minimum bonus at the rate of 4.8 per cent, of basic wages earned during the year. 4. It has been contended on behalf of the appellants that the formula under the Agreement departs in some vital aspects from what is known as the Full Bench formula evolved by the Labour Appellate Tribunal in Mill-owners Association, Bombay v. Rashtriya Mill Mazdoor Sangh, 1950-2 Lab LJ 1247 which has been approved by this Court in the Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) and is thus the law of the land so far as bonus is concerned. It is urged therefore that inasmuch as the formula under the Agreement departs from the Full Bench formula which is now the law of the land, it was not open to the industrial court to extend the Agreement in the face of the decision of this Court in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) and in so far as the industrial court has done so it has gone against the law relating to bonus and therefore the award should be set aside. 5. Two questions immediately arise in this connection: the first relates to the jurisdiction of the industrial court to impose new obligations upon the parties and the second is whether if the industrial court has jurisdiction to impose new obligations it could do so in a matter of this kind considering the concept of bonus as laid down by the decisions of this Court. 6. So far as the first question is concerned (namely, the general power of an industrial court to impose new obligations upon the parties), the matter is now well settled by the decisions of the Federal Court and also of this Court. It was held by the Federal Court in Western India Automobile Association v. Industrial Tribunal, Bombay, 1949 FCR 321: (AIR 1949 FC 111) that- "adjudication does not in our opinion mean adjudication according to the strict law of master and servant. The award of the tribunal may contain provisions for settlement of a dispute which no court could order if it was bound by ordinary law, but the tribunal is not fettered in any way by these limitations. The Federal Court also approved the view of Ludwig Teller that- "industrial arbitration may involve the extension of an agreement or the making of a new one, or in general the creation of new obligations or modification of old ones while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements (see p. 345 (of FCR) ): (at p. 120 of AIR). This Court also in Rohtas Industrials Ltd. v. Brijnandan Pandey, 1956 SCR 800 : ( (S) AIR 1957 SC 1 ) held that- "a court of law proceeds on the footing that no power exists in the courts to make contracts for the people; and the parties must make their own contracts. The Court reach their limit of power when they enforce contracts which the parties have made. An industrial tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice and/or victimisation (see p. 810 (of SCR) ) : (at p. 6 of AIR). In Patna Electric Supply Co. v. Patna Electric Supply Workers Union, AIR 1959 SC 1035 , this Court held that- "there is no doubt that in appropriate cases industrial adjudication may impose new obligations on the employer in the interest of social justice and with the object of securing peace and harmony between the employer and his workmen and full co-operation between them (see p. 1038) and approved of the decision of the Federal Court in Western India Automobile Associations case, 1949 FCR 321: (AIR 1949 FC 111).There is no doubt therefore that it is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending existing agreement or making a new one. This, however, does not mean that an industrial court can do anything and everything when dealing with an industrial dispute. This power is conditioned by the subject-matter with which it is dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it to overlook the industrial law relating to that matter as laid down by the legislature or by this Court. 7. This brings us to the second question, which is the real question in dispute in this case, namely, when dealing with a bonus case, like the present, was it open to the industrial court to overlook the law laid down by this Court in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) and make an award extending the Agreement for a further period of one year? 8. In order to determine this question, we have to look at the concept of bonus as evolved in the industrial law of this country by industrial tribunals and now by the decision of this Court. So far as we can see, there are four types of bonus which have been evolved under the industrial law as laid down by this Court. Firstly, there is what is called a production bonus or incentive wage (see Titaghur Paper Mills v. Its Workmen, AIR 1959 SC 1095 ); the second is bonus as an implied term of contract between the parties (see Ispahani Ltd. v. Ispahani Employees Union, 1960-1 SCR 24 : (AIR 1959 SC 1147 )); the third is customary bonus in connection with some festival (see Grahams Trading Co v. Its Workmen, 1960-1 SCR 107 : (AIR 1959 SC 1151 ) and the fourth is profit bonus which was evolved by the Labour Appellate Tribunal in 1950-2 Lab LJ 1247 and which has been considered by this Court fully in two cases. We are in the present case dealing with bonus of the fourth kind, namely, profit bonus and what we say subsequently refers only to this kind of bonus. 9. What is the concept of profit bonus with which we are concerned in this case, for it is this concept which will determine whether it was open to the industrial court in this case to extend the Agreement for 1958? In Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, 1955-1 SCR 991 : ( (S) AIR 1955 SC 170 ) this Court pointed out that- "There are two conditions, which have to be satisfied before a demand for bonus can be justified and they are: (1) when wages fall short of the living standard, and (2) industry makes huge profits part of which are due to the contribution which the workmen make in increasing production. The demand for bonus becomes an industrial claim.......The basis for the claim is that labour and capital both contribute to the earning of the industrial concern and it is fair that labour should derive some benefit, if there is a surplus after meeting prior or necessary charges ....... The surplus that remained after meeting the aforesaid prior charges would be available for distribution as bonus. The matter was again considered by this Court in the Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) where the Full Bench formula evolved by the Labour Appellate Tribunal was gone into at length. The workmen contended in that case that the formula required revision as the employers were becoming increasingly more rehabilitation-conscious and their appetite for the provision for rehabilitation was fast growing with the result that in most cases, after allowing for rehabilitation, there was no surplus left for the purpose of bonus and the main object of the formula was thus frustrated. It was further contended for the workmen that the whole of rehabilitation expenses should not be provided for out of trading profits and that the claim for rehabilitation should be fixed at a reasonable amount and the industry should be required to find the balance from other sources. It was there held that- "though there may be some force in the plea made for the revision of the Full Bench formula, the problem raised by the said plea is of such a character that it can appropriately be considered only by a high powered commission and not by this Court, while hearing the present group of appeals. This Court also held that- "the Full Bench formula had on the whole worked fairly satisfactorily in a large number of industries all over the country, and the claim for bonus should be decided by the Tribunals on the basis of this formula without attempting to revise it. The formula was elastic enough to meet reasonably the claims of the industry and labour for fairplay and justice.........It was based on two considerations: first, that labour was entitled to claim a share in the trading profits of the industry, because it had partially contributed to the same; and second, that labour was entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up. The Full Bench formula provided for arriving at the available surplus after meeting prior charges, namely, (i) depreciation, (ii) taxes, (iii) return on paid-up capital, (iv) return on working capital and (v) rehabilitation, The formula further dealt with the claim for bonus on the basis that the relevant year is a self-sufficient unit and appropriate accounts have to be made in respect of the said year. Finally, it was pointed out that it was only after all the prior charges had thus been determined and deduced from the gross profits that the available surplus could be ascertained for payment of bonus, and that when the available surplus had been ascertained, there were three parties entitled to claim shares therein, namely, (i) labours claim for bonus, (ii) industrys claim for the purpose of expansion and other needs, and (iii) the shareholders claim for additional return on the capital invested by them; the ratio of distribution would necessarily depend on several factors. It would thus be clear that the essential concept of profit bonus is that there should be an available surplus determined according to the principles laid down in the cases mentioned above for distribution. If there is no such available surplus for distribution, there can be no case for payment of profit bonus. This is the industrial law as laid down by this Court Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ). It would in our opinion be not open to an industrial court or tribunal to ignore this law as to bonus and to extend an agreement for payment of bonus, which is against the basic concept of bonus as laid down by the decisions of this Court on the ground that an industrial court has power generally to extend agreements or to create new obligations. As already pointed out, that power has to be exercised keeping in view the subject-matter before the tribunal and the law laid down by the legislature or by the decisions of this Court, with respect to that subject-matter. The industrial court in this case was not unaware of this position, viz., that it was departing from the law laid down in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) and other bonus cases; but it held that this Court was dealing in those cases with individual units, and not with a case where there were numerous concerns in an industry at one centre, with its particular historical background, where previous awards had been on an industry-wise basis. It therefore held that the decisions of this Court could not apply in their entirety to the dispute before it and that this Court could not have intended that in a case where there was the additional circumstance that the parties had themselves voluntarily modified the bonus formula in some respects by a long term agreement, that could not be extended by an industrial court. It is the correctness of this view which has been strongly disputed before us by the appellants. 10. Before we deal with this matter, we should like to point out that the fact that there are numerous concerns in a particular place can have no relevance in considering the question whether the Full Bench formula can apply to cases like the present. Even though this Court was dealing with the case of one concern, namely, the Associated Cement Companies, it pointed out that the Full Bench formula had worked fairly satisfactorily all over the country and should continue to be applied without revision till such time as a high-powered commission went into the question. There is in our opinion no question of industry-cum-region approach in the matter of a bonus dispute of this kind. There is no doubt that in many matters, like wages, conditions of service, overtime allowance, dearness allowance, gratuity, nd so on, industry-cum-region approach has been made by industrial courts in this country and, rightly so. But there is, in our opinion, no scope for an approach of this kind in the case of bonus, the basic concept of which is that payment depends on surplus of profits available according to some formula in the case of each industrial concern. Nor can it be said that the Agreement in this case is dealing with bonus in what is known as industry-cum-region basis. Its salient terms as set out above will show that it deals with bonus according to available surplus of each mill, so that bonus paid by each mill depends on its own available surplus and the sixty-six mills situate in Ahmedabad may pay different amounts of bonus varying from a minimum of 4.8 percent, of the basic wages to 25 per cent, of the basic wages. Similar differences will arise if the Full Bench formula is applied to the sixty-six mills in Ahmedabad. Thus the Agreement which has been extended, is not based on industry-cum-region approach, as it is understood. That approach, say, with respect to wages means that wages of all concerns situate in a particular area engaged in a particular industry should be the same. On that approach the bonus of all these sixty-six mills should also be the same percentage for each mill in that area; but that is not the basis on which the Agreement was arrived at. The basis of the Agreement is that each individual mill is treated as a separate unit and its available surplus worked out according to the formula in the Agreement itself. This is also the basis of the Full Bench formula and the available surplus of each unit is worked out according to that formula, though the result of the application of the two formula in each case may not be the same. There is in our opinion therefore no justification for the view that the Full Bench formula approved by this Court in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 )can have no application where there are numerous concerns of one nature at one centre. Some bonus awards were brought to our notice to show that they were on industry-cum-region basis, namely, Sugar Mills of Bihar v. Their Workmen, 195-1 Lab LJ 469 (LATI-Cal) and Sugar Mills, Uttar Pradesh v. Their Workmen, 1952-1 Lab LJ 615 (LATI-Cal.). These awards related to sugar industry in Uttar Pradesh and in Bihar. As we read these decisions, we do not find real industry-cum-region approach which would result in uniform bonus for all the mills dealt with by these two awards. What we find is that a different formula was worked out for awarding profit bonus linked with production on the basis that there were profits; but when the formula is worked for each mill the bonus would differ from mill to mill according to its production. Further, we find that in the Uttar Pradesh case there were certain exemptions granted to certain factories, presumably on the ground that they were not in a position to pay bonus for want of sufficient profits. It is true that in the Bihar case it was said that the question of bonus could be considered on industry-wise and not on unit-wise basis, but that only meant that one formula was evolved for the whole of Bihar and applied to every mill in that area. That is what exactly the Full Bench formula also has done, for it is the same formula which applies to all industrial concerns all over the country now after the decision of this Court. In the Bihar case, an argument was addressed to apply the Full Bench formula, but that was not accepted on the ground that balance-sheets and profit and loss accounts were not reliable and therefore bonus was linked with production. In the Bihar case also some factories were exempted from paying bonus presumably on the ground that they were unable to do so not having made profits. These cases therefore are not instances of real industry-cu-region approach. Reference was also made to Textile Mills in Coimbatore District v. Their Workmen, 1950-2 Lab LJ 1203 (Ind. Tribunal Coimbatore) relating to Coimbatore textile mills. In that case the industrial court considered whether bonus at a flat rate for all the mills should be awarded or whether a distinction should be made between mills and mills. It held that the mills themselves when they paid bonus observed or maintained no distinction; therefore in the peculiar circumstances of that case a uniform rate of 33-1/3 per cent, was awarded for all the mills as specially all the mills had without exception made unique profits. As we have said already the basic concept of profit bonus, as it appears from the judgments of this Court, is that there should be an available surplus of profits in a particular concern in a particular year, to which the bonus relates and on this basic concept there is no scope for an approach on the basis of industry-cum-region in the matter of bonus in the sense that every mill in a region should pay the same bonus. There is therefore no question of industry-cum-region approach in the present case, and even the formula in the Agreement is not on a real industry-cum-region approach and has to be worked out from mill to mill, which is like the Full Bench formula. The reasons therefore which led the industrial court in this case to distinguish and depart from the decision of this Court in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) do not appear to us to be substantial and there was therefore no ground for departing from that decision for those reasons. 11. This brings us to a consideration of the formula as provided in the Agreement and the Full Bench formula as approved by this Court. It was urged on behalf of the respondent that the two formulae were basically the same; both provided for prior charges and in both bonus was to be paid on the availability of surplus profits, though it was admitted that in certain respects there were differences. Now if these differences were merely of detail and did not affect some of the vital aspects of the Full Bench formula it might be said that there was no ignoring of the law as laid down by this Court and therefore the tribunal was not unjustified in extending the Agreement for a year. But a comparison of the formula in the Agreement with the Full Bench formula shows differences in three vital aspects. In the first place, rehabilitation provided in the Agreement differs vitally from rehabilitation as explained in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ). In the second place, the formula in the Agreement provides for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual loss. Thirdly, while the Full-Bench formula as approved by this Court treats a particular year as a self-sufficient unit, there is provision for set-off and set-on in the formula in the Agreement. Can it therefore be said that the formula in the Agreement which departs in these vital particulars from the Full Bench formula in the matter of bonus could be extended for another year by the industrial court in the face of the decisions of this Court laying down the law as to what profit bonus is and how it should be worked out? The tribunal therefore when it extended the formula in the Agreement which departed from the Full Bench formula in certain vital aspects was undoubtedly ignoring the industrial law as laid down by this Court and going against it. It was its duty when dealing with the question of profit bonus to apply the Full Bench formula, as approved by this Court and then arrive at the quantum of bonus to be awarded in the case of each mill. In particular by extending the Agreement the tribunal made it possible for payment of a minimum bonus even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss; the tribunal was thus definitely going against the industrial law relating to bonus as laid down by this Court. It had in our opinion no power to do so and the reasons which it gave for departing from the law laid down by this Court are unsubstantial and do not commend themselves to us. In these circumstances the order of the tribunal extending the Agreement for a year cannot be upheld. 12. Further it was urged that in any case the Agreement contemplates payment of bonus out of profits of the industry at Ahmedabad as a whole and that is why it has provided for set-off and set on. Whatever may be said about this provision on a long term basis, the tribunals jurisdiction was limited by its terms of reference. There was not one reference before the tribunal on industry-cum-region basis but sixty-six separate references, one relating to each mill. It was required to consider the question of bonus for each mill for the year 1958 only and thus had nothing to do with set-off and set-on or the profits of industry as a whole at Ahmedabad. The tribunal was only concerned with 1958 and no consideration as to what happened before that year or what may happened after 1958 could enter into its decision of the question of bonus for the year 1958. The principle of set-off and set-on therefore to be found in the Agreement could not convert payment of bonus for 1958, say, by a loss making mill into profit bonus as laid down by the decisions of this Court. The tribunals award in this case therefore would clearly be against the law as to bonus laid down by this Court, for its jurisdiction was confined only to the year 1958 and no more. 13. It was however urged on behalf of the respondent that there is a fifth kind of bonus, namely, goodwill bonus and that the Agreement when it provides for a minimum bonus irrespective of availability of profits provides for such bonus in the interest of industrial peace. It is enough to say that so far as what is called goodwill bonus is concerned it pre-supposes that it is given by the employer out of his own free will without any conclusion by an industrial court. As its very name implies it is a bonus which is given by the employer out of his free consent in order that there may be goodwill between him and his workmen; but there can be no question of imposing a goodwill bonus by industrial courts, as imposition of such a bonus is a contradiction of its very concept. We have already referred to four kinds of bonus which prevail in the industrial law in India and which can in certain circumstances be imposed by industrial tribunals; but there can be no question of the imposition of the so-called goodwill bonus, for that bonus depends upon the goodwill of the parties and on their free consent. In the absence of such free consent, there can be no question of any goodwill bonus. 14. Before we part with these appeals, however, we must briefly advert to the general considerations which have been pressed before us very strongly by Mr. Vasavada for the respondents and Mr. Ambekar for the intervening parties. It has been urged before us that we should be reluctant to interfere with the agreement because it has worked satisfactorily in Ahmedabad, and the reversal of the award under appeal may lead to discontent in a very important centre of textile industry in this country. It has also been strenuously argued that the Agreement offers a very reasonable solution to the vexed problem of bonus and the pattern set by it has been copied in Bombay, Madhya Pradesh and Coimbatore. If the pattern thus set for determining the textile employees claim for bonus has been adopted by a substantial part of the textile industry in this country, the Court should desist from disturbing the smooth working of the said pattern unless it is compelled to do so. It may be conceded that some features of the Agreement are undoubtedly very reasonable and in the interest of the industry as a whole. The agreement has put a ceiling on bonus and that is a term very much in favour of the employer, because in some cases where the available surplus is very large, then under the working of the Full Bench formula the employees are tempted to claim, and industrial tribunals are justified in awarding, a proportionately substantial amount as bonus reaching or even exceeding in some cases the level of basic wages of even 8 or 9 months. This trend has been controlled by the Agreement. It is true that the Agreement requires the payment of the minimum bonus but this provision is intended to work as a part of the larger agreement spreading over some years and the employer has agreed to pay the minimum bonus even though in a particular year he may have no available surplus, because he and his employees expect or anticipate that the employer may have available surplus in the succeeding year. The working of the Agreement is really intended to spread over a number of year and the account between the employers and the employees in that behalf is conceived as a continuing and running account. These features of the Agreement may be regarded as commendable. 15. The problem of rehabilitation which has assumed a complex form has also been attempted to be solved by the Agreement in a practical way. the solution adopted by the Agreement in that behalf, it is claimed, is based on the historical and factual genesis of the original formula evolved by the Full Bench of the Labour Appellate Tribunal when it dealt with the problem of the textile industry in Bombay. The argument is that until 1962, the Agreement should be allowed to work when the position may be reviewed at length. Since this Court delivered its judgment in the case of Associated Cement Companies, 1959 SCR 925 : (AIR 1959 SC 967 ) it has come to our notice that in cases where the employer claims an exaggerated amount for rehabilitation, or where a reasonable claim made by the employer in that behalf is unreasonably challenged by the employees, the dispute is protracted. The trial of the issue tends to become complicated, and that leads to bitterness between the parties. It has been urged before us that time has now come when the industrial courts will have to face the problem of radically changing the formula. It is argued that modern economic thought does not encourage the theory that the whole of the rehabilitation amount must come from the current profits of the industry and it was stated before us that Government may have gradually to step in to assist the industry by advancing sufficient loans on reasonable terms to enable the industry to meet the demand of its rehabilitation. However, as we pointed out in our decision in the case of Associated Cement Companies, 1959 SCR 925 : (AIR 1959 SC 967 ) these matters can be properly and effectively decided by an industrial court if the major representative industries in the country and their employees are brought before it with a proper reference, or it can be tackled more appropriately by a high-power commission appointed in that behalf. We were told that the Government of India has taken a decision to appoint such a commission, and that it would soon resolve this problem on a more rational and scientific basis. During the course of the hearing of these appeals we suggested to the parties that in view of the pending appointment of the commission, parties may settle the present dispute amicably and that the appellant-mills may fall in line with the rest of the mills in Ahmedabad, but despite their best efforts the parties could not settle the dispute and wanted a decision from his court on the points of law raised in the present appeals; that is why we have had to decide the points of law, and in doing so inevitably general considerations to which we have just adverted cannot play a material part. 16. In the course of the argument reference was made by Mr. Ambekar to the concept of goodwill bonus that again is a matter which may be evolved by agreement between the parties or decided by a high power commission. If the matter has to be decided according to law as has been laid down by this Court then the conclusion would be inevitable that on essential points the Agreement departs from the Full Bench formula, and however commendable it may be on the whole it can continue only by agreement and cannot be enforced by industrial adjudication against the will of any of the parties;

Decision reasoning: 1[ds]There is no doubt therefore that it is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending existing agreement or making a new one. This, however, does not mean that an industrial court can do anything and everything when dealing with an industrial dispute. This power is conditioned by the subject-matter with which it is dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it to overlook the industrial law relating to that matter as laid down by the legislature or by this CourtWe are in the present case dealing with bonus of the fourth kind, namely, profit bonus and what we say subsequently refers only to this kind of bonusIt would thus be clear that the essential concept of profit bonus is that there should be an available surplus determined according to the principles laid down in the cases mentioned above for distribution. If there is no such available surplus for distribution, there can be no case for payment of profit bonus. This is the industrial law as laid down by this Court Companies case, 1959 SCR 925  : (AIR 1959 SC 967  ). It would in our opinion be not open to an industrial court or tribunal to ignore this law as to bonus and to extend an agreement for payment of bonus, which is against the basic concept of bonus as laid down by the decisions of this Court on the ground that an industrial court has power generally to extend agreements or to create new obligations. As already pointed out, that power has to be exercised keeping in view the subject-matter before the tribunal and the law laid down by the legislature or by the decisions of this Court, with respect to that subject-matter. The industrial court in this case was not unaware of this position, viz., that it was departing from the law laid down in Associated Cement Companies case, 1959 SCR 925  : (AIR 1959 SC 967  ) and other bonus cases; but it held that this Court was dealing in those cases with individual units, and not with a case where there were numerous concerns in an industry at one centre, with its particular historical background, where previous awards had been on an industry-wise basis. It therefore held that the decisions of this Court could not apply in their entirety to the dispute before it and that this Court could not have intended that in a case where there was the additional circumstance that the parties had themselves voluntarily modified the bonus formula in some respects by a long term agreement, that could not be extended by an industrial court. It is the correctness of this view which has been strongly disputed before us by the appellantsNow if these differences were merely of detail and did not affect some of the vital aspects of the Full Bench formula it might be said that there was no ignoring of the law as laid down by this Court and therefore the tribunal was not unjustified in extending the Agreement for a year. But a comparison of the formula in the Agreement with the Full Bench formula shows differences in three vital aspects. In the first place, rehabilitation provided in the Agreement differs vitally from rehabilitation as explained in Associated Cement Companies case, 1959 SCR 925  : (AIR 1959 SC 967  ). In the second place, the formula in the Agreement provides for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual loss. Thirdly, while the Full-Bench formula as approved by this Court treats a particular year as a self-sufficient unit, there is provision for set-off and set-on in the formula in the AgreementThe tribunal therefore when it extended the formula in the Agreement which departed from the Full Bench formula in certain vital aspects was undoubtedly ignoring the industrial law as laid down by this Court and going against it. It was its duty when dealing with the question of profit bonus to apply the Full Bench formula, as approved by this Court and then arrive at the quantum of bonus to be awarded in the case of each mill. In particular by extending the Agreement the tribunal made it possible for payment of a minimum bonus even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss; the tribunal was thus definitely going against the industrial law relating to bonus as laid down by this Court. It had in our opinion no power to do so and the reasons which it gave for departing from the law laid down by this Court are unsubstantial and do not commend themselves to us. In these circumstances the order of the tribunal extending the Agreement for a year cannot be upheldWhatever may be said about this provision on a long term basis, the tribunals jurisdiction was limited by its terms of reference. There was not one reference before the tribunal on industry-cum-region basis but sixty-six separate references, one relating to each mill. It was required to consider the question of bonus for each mill for the year 1958 only and thus had nothing to do with set-off and set-on or the profits of industry as a whole at Ahmedabad. The tribunal was only concerned with 1958 and no consideration as to what happened before that year or what may happened after 1958 could enter into its decision of the question of bonus for the year 1958. The principle of set-off and set-on therefore to be found in the Agreement could not convert payment of bonus for 1958, say, by a loss making mill into profit bonus as laid down by the decisions of this Court. The tribunals award in this case therefore would clearly be against the law as to bonus laid down by this Court, for its jurisdiction was confined only to the year 1958 and no moreIt is enough to say that so far as what is called goodwill bonus is concerned it pre-supposes that it is given by the employer out of his own free will without any conclusion by an industrial court. As its very name implies it is a bonus which is given by the employer out of his free consent in order that there may be goodwill between him and his workmen; but there can be no question of imposing a goodwill bonus by industrial courts, as imposition of such a bonus is a contradiction of its very concept. We have already referred to four kinds of bonus which prevail in the industrial law in India and which can in certain circumstances be imposed by industrial tribunals; but there can be no question of the imposition of the so-called goodwill bonus, for that bonus depends upon the goodwill of the parties and on their free consent. In the absence of such free consent, there can be no question of any goodwill bonusIf the pattern thus set for determining the textile employees claim for bonus has been adopted by a substantial part of the textile industry in this country, the Court should desist from disturbing the smooth working of the said pattern unless it is compelled to do so. It may be conceded that some features of the Agreement are undoubtedly very reasonable and in the interest of the industry as a whole. The agreement has put a ceiling on bonus and that is a term very much in favour of the employer, because in some cases where the available surplus is very large, then under the working of the Full Bench formula the employees are tempted to claim, and industrial tribunals are justified in awarding, a proportionately substantial amount as bonus reaching or even exceeding in some cases the level of basic wages of even 8 or 9 months. This trend has been controlled by the Agreement. It is true that the Agreement requires the payment of the minimum bonus but this provision is intended to work as a part of the larger agreement spreading over some years and the employer has agreed to pay the minimum bonus even though in a particular year he may have no available surplus, because he and his employees expect or anticipate that the employer may have available surplus in the succeeding year. The working of the Agreement is really intended to spread over a number of year and the account between the employers and the employees in that behalf is conceived as a continuing and running account. These features of the Agreement may be regarded as commendable15. The problem of rehabilitation which has assumed a complex form has also been attempted to be solved by the Agreement in a practical way. the solution adopted by the Agreement in that behalf, it is claimed, is based on the historical and factual genesis of the original formula evolved by the Full Bench of the Labour Appellate Tribunal when it dealt with the problem of the textile industry in BombayHowever, as we pointed out in our decision in the case of Associated Cement Companies, 1959 SCR 925   : (AIR 1959 SC 967  ) these matters can be properly and effectively decided by an industrial court if the major representative industries in the country and their employees are brought before it with a proper reference, or it can be tackled more appropriately by a high-power commission appointed in that behalf. We were told that the Government of India has taken a decision to appoint such a commission, and that it would soon resolve this problem on a more rational and scientific basis. During the course of the hearing of these appeals we suggested to the parties that in view of the pending appointment of the commission, parties may settle the present dispute amicably and that the appellant-mills may fall in line with the rest of the mills in Ahmedabad, but despite their best efforts the parties could not settle the dispute and wanted a decision from his court on the points of law raised in the present appeals; that is why we have had to decide the points of law, and in doing so inevitably general considerations to which we have just adverted cannot play a material part. Since this Court delivered its judgment in the case of Associated Cement Companies, 1959 SCR 925   : (AIR 1959 SC 967  ) it has come to our notice that in cases where the employer claims an exaggerated amount for rehabilitation, or where a reasonable claim made by the employer in that behalf is unreasonably challenged by the employees, the dispute is protracted. The trial of the issue tends to become complicated, and that leads to bitterness between the partiesIf the matter has to be decided according to law as has been laid down by this Court then the conclusion would be inevitable that on essential points the Agreement departs from the Full Bench formula, and however commendable it may be on the whole it can continue only by agreement and cannot be enforced by industrial adjudication against the will of any of the parties;Even though this Court was dealing with the case of one concern, namely, the Associated Cement Companies, it pointed out that the Full Bench formula had worked fairly satisfactorily all over the country and should continue to be applied without revision till such time as a high-powered commission went into the question. There is in our opinion no question of industry-cum-region approach in the matter of a bonus dispute of this kind. There is no doubt that in many matters, like wages, conditions of service, overtime allowance, dearness allowance, gratuity, nd so on, industry-cum-region approach has been made by industrial courts in this country and, rightly so. But there is, in our opinion, no scope for an approach of this kind in the case of bonus, the basic concept of which is that payment depends on surplus of profits available according to some formula in the case of each industrial concern. Nor can it be said that the Agreement in this case is dealing with bonus in what is known as industry-cum-region basisAs we have said already the basic concept of profit bonus, as it appears from the judgments of this Court, is that there should be an available surplus of profits in a particular concern in a particular year, to which the bonus relates and on this basic concept there is no scope for an approach on the basis of industry-cum-region in the matter of bonus in the sense that every mill in a region should pay the same bonus. There is therefore no question of industry-cum-region approach in the present case, and even the formula in the Agreement is not on a real industry-cum-region approach and has to be worked out from mill to mill, which is like the Full Bench formula. The reasons therefore which led the industrial court in this case to distinguish and depart from the decision of this Court in Associated Cement Companies case, 1959 SCR 925  : (AIR 1959 SC 967  ) do not appear to us to be substantial and there was therefore no ground for departing from that decision for those reasonsAs we read these decisions, we do not find real industry-cum-region approach which would result in uniform bonus for all the mills dealt with by these two awards. What we find is that a different formula was worked out for awarding profit bonus linked with production on the basis that there were profits; but when the formula is worked for each mill the bonus would differ from mill to mill according to its productionIts salient terms as set out above will show that it deals with bonus according to available surplus of each mill, so that bonus paid by each mill depends on its own available surplus and the sixty-six mills situate in Ahmedabad may pay different amounts of bonus varying from a minimum of 4.8 percent, of the basic wages to 25 per cent, of the basic wages. Similar differences will arise if the Full Bench formula is applied to the sixty-six mills in Ahmedabad. Thus the Agreement which has been extended, is not based on industry-cum-region approach, as it is understood. That approach, say, with respect to wages means that wages of all concerns situate in a particular area engaged in a particular industry should be the same. On that approach the bonus of all these sixty-six mills should also be the same percentage for each mill in that area; but that is not the basis on which the Agreement was arrived at. The basis of the Agreement is that each individual mill is treated as a separate unit and its available surplus worked out according to the formula in the Agreement itself. This is also the basis of the Full Bench formula and the available surplus of each unit is worked out according to that formula, though the result of the application of the two formula in each case may not be the same.