Case: Poona Electric Supply Company Limited, Poona Vs. S Industrial Tribunal (S. Taki Bilgrami)

PALEKAR, J. ( 1 ) THIS petition under Arts. 226 and 227 of the Constitution questions the legality of the order passed by respondent 1 in a reference under the Industrial Disputes Act, 1947. The petitioner is the Poona Electric Supply Company, Ltd. , and respondents 2 and 3 are the trade unions representing the workmen employed by the petitioner. On 24 August 1962, respondent 2 gave a strike notice calling upon the petitioner to concede some of their demands which included a demand for bonus. They claimed that every worker should be paid bonus equal to 50 per cent of his total earnings during the year 1961-62. As the petitioner is a public utility service, the matter came before the conciliation officer who, after holding conciliation meetings brought the parties to an agreement. A settlement was arrived at and the demand for bonus made on behalf of the workers was as follows :-"every worker should be paid bonus for the year ending 31 March, 1962 equal to 50 per cent of his total earnings (pay inclusive of allowances) In the year 1962. "( 2 ) ACCORDINGLY, the Deputy Commissioner for Labour (Administration), who has been duly authorized in this behalf by the State Government referred the dispute to respondent 1 (industrial tribunal) under S. 10 (2) of the Industrial Disputes Act, 1947. When the parties were called upon to file their statements of claim, respondent 2 union, on 14 November 1962, informed the industrial tribunal as follows :-"demand 6 - Bonus.- The financial position of the company is quite sound and as such it can afford to bear the burden on account of grant of bonus to be extent demanded. The demand does not need further clarifications. "( 3 ) THE petitioner filed its written statement on 17 October 1962, and with regard to demand 6, it stated that it was not ready with its profit and loss account and the balance sheet for the year 1961-62 and that it should be permitted to submit the statement in due course. On 14 January 1963 the petitioner filed a statement with regard to the calculation of bonus and pointed out that there was no surplus available. After this the case was adjourned for hearing. On 6 February 1963 respondent 2 union made an application for an award of interim bonus for three months, alleging that there was an unbroken and continuous practice and custom of paying three months bonus for every year since 1950 and that payment of three months bonus was a term of the service of contract of all the workmen. An amendment in the statement of claim was made accordingly. This was opposed by the petitioner. The petitioner company contended that the demand for bonus made by the union was on the surplus profit basis and not on any customary basis and since an agreed reference had been made for bonus calculated on the basis of the Full bench formula, the case now made out by the amendment was a new case and therefore, the tribunal had no jurisdiction to entertain it. This contention has been rejected by the tribunal by its order dated 27 June 1963. The tribunal held that the respondent-unions merely wanted to add another ground for claiming bonus and since the nature of the claim was not changed and the terms of the joint consent reference had not been affected, there was no justification for rejecting the amendment. It is from this order that the petitioner has come to this Court. ( 4 ) AT the outset, it must be stated that the petitioner came to this Court from an interim order passed by the tribunal. Ordinarily we would not have been disposed to interfere in this matter at this stage, but since lengthy arguments have been addressed to us, we think it is necessary to deal with them. The demand for bonus for the year 1961-62, is still under investigation and it is always in the interest of the parties that a dispute of this should be settled as early as possible. ( 5 ) SRI Ramaswami, counsel for the petitioner, contended that the order passed by the tribunal is in excess of its jurisdiction. A reference by consent had been made to the tribunal under sub-section (2) of S. 10 of the Industrial Disputes Act, 1947, and it was not open to the tribunal to travel beyond the terms of that reference. In his submission, the terms of reference clearly went to show that the tribunal had to decide the demand for bonus on the basis of surplus profits, i. e. , the Full Bench formula, but by the amendment it was sought to be converted into a demand on the basis of an implied contract of service. This in his submission, it was not competent for the tribunal to do. The real question in this case, therefore, is whether the demand, as made in the reference, is a demand restricted to the basis of the Full Bench formula. ( 6 ) IT is not disputed that since about 1948 when the present management took over the Poona electric Supply company, Ltd. , bonus is being paid to the workers practically throughout. As stated by the petitioner, for the first four years from, 1984 to 1951 bonus was paid at the rate of two months basic salary. Thereafter, from 1952 to 1961 it is being paid at the rate of three months basic salary. The petitioner has stated that this bonus was being paid on consideration of its financial position. It has also been admitted in the application which the petitioner made, contesting the amendment, that the company had paid bonus equal to three months basic wages from 1953 to 1961 because of the financial results in each year, though not strictly taking into account the several prior charges according to the Labour Appellate Tribunal formula which the company was entitled to take. In this context, it may also be noted that the profit and loss account and the balance sheet were not ready before the end of 1962 and this dispute has been raised by the unions on 24 August 1962 for the first time when the strike-notice was given. It cannot, therefore, be said that when the demand for bonus was made, that was made on the basis of the profit and loss account and the balance sheet for the year 1961-62. It is the contention of the unions that, no doubt, bonus was being paid for the previous years; but for the year 1961-62 they wanted to claim a higher bonus and this they had made clear even at the time of the conciliation. The justification for demand 6 before the conciliation officer was as follows :"demand 6.- Although the company is paying bonus to the workers the same is paid only on the basic wages. The cost of living bag gone very high and the dearness allowance is quite insufficient to neutralize the difference in the costs and the earnings. The company is in a position to pay better bonus every year. We have therefore demanded only revision of the present system of bonus. "( 7 ) THE background against which this enhanced bonus is being claimed is therefore, clear. ( 8 ) BUT what we are immediately concerned with is the reference itself. There can be hardly any dispute that the tribunal cannot travel beyond the terms of the reference. Therefore, in the first instance, we must see what the reference is Exhibit A is the memorandum of settlement, which is the basis of the reference. Therein the bonus demand is described as follows : "demand 6 - Bonus for the year 1961-62.- This demand shall be referred to the industrial tribunal under S. 10 (2) of the Industrial Disputes Act, 1974. "( 9 ) IT is necessary to note that the claim for bonus for the year 1961-62 is not qualified by any particular form or description. It is not stated whether it is incentive bonus, or customary bonus or implied contract bonus or the Full Bench formula bonus, the last one being also known popular as the surplus profit-bonus. It is agreed before us that demand 6, as stated in the memorandum of settlement, should be read along with the bonus demand as mentioned in the petition, which reads as follows : "every worker should be paid bonus for the year ending 31 March 1962 equal to 50 per cent of his total earnings (pay inclusive of allowances) in the year 1962. "( 10 ) THE unions were asked to file their written statements. Respondent 3 stated that "every worker should be given bonus for the year 1961-62 equivalent to three months basic wages in a year. "( 11 ) BUT respondent 2 by its statement dated 14 November 1962 stated as follows :"demand 6 - Bonus.- The financial position of the company is quite sound and as such it can afford to bear the burden on account of grant of bonus to the extent demanded. The demand does not need further clarification. "( 12 ) THIS would go to show that respondent 2 union reiterated the claim for bonus equal to 50 per cent of the total earnings, i. e. , six months total earnings. It is to be seen whether, as contended by Sri Ramaswami, this claim for bonus, as made in the reference, can be described as one under the Full Bench formula alone or it can also denote a claim on the basis of an implied term of employment. If it is capable of being understood in either sense, it is clear that the amendment which has been made later on can be only by way of clarification and nothing more. There is nothing in the demand itself, as found in the reference, to warrant the inference that it has been claimed on surplus profit basis, that is to say, the Full Bench formula. The context in which that demand has been made has been already referred to. The company was paying three months bonus every year heretofore. The unions were demanding an enhanced rate in view of the financial prosperity of the company, Instead of three months bonus, they were now demanding six months bonus. There might have been some substance in the argument of Sri Ramaswami if the claim for interim relief had been made on the customary basis, that is to say, bonus payable at a uniform rate at certain festivals, as, for example, the Pooja or Diwali bonus. In such a case, the basic for the claim in the reference would have been inconsistent with the basis for the interim claim, because on the customary basis, the workers could never have asked for more than three months wage which they were receiving as bonus in past years.( 13 ) THE distinction between the various types of bonus has now been well-established. In New Maneck Chowk Spinning and Weaving Company, Ltd. v. Textile Labour Association [1961 - I l. L. J. 521 at 526] it has been pointed out that so far there are only four types of bonus which have been evolved under the industrial law as laid down by the Supreme Court. It is observed as follows :"firstly, there is what is called a production bonus or incentive wage [see Titaghar Paper Mills v. Their workmen (1959 - II L. L. J. 9); the second is bonus as an implied term of contract between the parties [see Ispahani, Ltd. v. Ispahani Employees Union (1959 - II L. L. J)]; the third is customary bonus in connexion with some festival [see Grahams Trading Company v. Their workman (1959 - II L. L. J. 393)]; and the fourth is profit-bonus which was evolved by the Labour appellate Tribunal in Millowners Association, Bombay v. Rashtriya Mill Mazdoor Sangh, bombay [1950 L. L. J. 1247], and which has been considered by this Court fully in two cases. "( 14 ) AT one stage there was some confusion about the "customary" bonus. That term was promiscuously used for what is now really customary bonus paid in connexion with a festival as also for what is paid as an implied term of contract of service. The difference between the two forms of bonus has been brought out in Grahams Trading Company v. Their workmen [1959 - II l. L. J. 393] (vide supra ). One of the four circumstances which went to show whether a bonus was a customary bonus or not was to see whether the payment has been made at a uniform rate throughout. In the case of bonus paid as a term of implied contract, the bonus is not uniform; it can be variable [see also Ispahani, Ltd. v. Ispahani Employees Union (1959 - II L. L. J. 4) (vide supra)]. Therefore, when a claim for bonus is made on the basis that it was an implied term of contract, it was always open for the respondent-unions to contend that though till now they were paid bonus equivalent to three months wages, they were entitled to be paid a higher bonus in view of the increased financial prosperity of the company. Sri Ramaswami wants to construe the demand as a demand based entirely on the Full Bench formula. We do not think that there is any justification for such a restricted construction upon the demand actually made and referred to above. Sri Ramaswami referred to a decision of the Supreme Court in Bridge and Roof Company (India), Ltd. v. Union of India [1962 - II L. L. J. 490] for supporting his contention that as soon as you demand bonus for a particular year, it must reference to the individual year, it must necessarily imply the application of the Full Bench formula. We do not think there is anything in this report to justify this conclusion. That case deals with the word "bonus" found in the definition of the expression basic wages" in S. 2 (b) (ii) of the Employees Provident Fund Act, 1952. We cannot read this decision as an authority for the proposition that when a demand is made by a party for bonus being paid for any given year, that is equivalent to demanding it on the basis of the Full Bench formula. In these circumstances, therefore, when on 6 February 1963 the respondents made a claim for an interim award of bonus for three months as a term of service contract, that cannot be regarded as in any way inconsistent with the demand made in the reference itself. The demand in the reference is reference as much to the full Bench formula as to the term of service contract. In the application dated 6 February 1963 respondent 2 union stated as follows :-" (2) That payment of three months bonus is a term of service contract of all the workmen. (3) That there is an implied contract of service that the workers are entitled to payment of three months bonus per year. (4) It is therefore prayed that three moths bonus should be awarded as interim bonus immediately. "( 15 ) WHAT follows is important, viz.-" (5) The union reserves its right to submit the bonus calculations and the justification of the same at a later date. "( 16 ) IN other words, the demand made in the reference is referable both to the terms of contract and the Full Bench formula. Since the company had paid bonus for a number of years prior to 1961-62, the respondent unions, apparently, made an application for the award of an interim bonus at least at that rate pending the adjudication with regard to the demand already made. In our view, the tribunal was perfectly justified in considering that though the claim for bonus was one, it was claimed on two different grounds, and it was open to the tribunal to consider both the grounds without feeling it necessary to exclude one by the other. In our opinion, there is no good reason for interfering with the order passed by the tribunal.

Decision reasoning: 0[ds]( 14 ) AT one stage there was some confusion about the "customary" bonus. That term was promiscuously used for what is now really customary bonus paid in connexion with a festival as also for what is paid as an implied term of contract of service. The difference between the two forms of bonus has been brought out in Grahams Trading Company v. Their workmen [1959II l. L. J. 393] (vide supra ). One of the four circumstances which went to show whether a bonus was a customary bonus or not was to see whether the payment has been made at a uniform rate throughout. In the case of bonus paid as a term of implied contract, the bonus is not uniform; it can be variable [see also Ispahani, Ltd. v. Ispahani Employees Union (1959II L. L. J. 4) (vide supra)]. Therefore, when a claim for bonus is made on the basis that it was an implied term of contract, it was always open for theto contend that though till now they were paid bonus equivalent to three months wages, they were entitled to be paid a higher bonus in view of the increased financial prosperity of the company. Sri Ramaswami wants to construe the demand as a demand based entirely on the Full Bench formula. We do not think that there is any justification for such a restricted construction upon the demand actually made and referred to above. Sri Ramaswami referred to a decision of the Supreme Court in Bridge and Roof Company (India), Ltd. v. Union of India [1962II L. L. J. 490] for supporting his contention that as soon as you demand bonus for a particular year, it must reference to the individual year, it must necessarily imply the application of the Full Bench formula. We do not think there is anything in this report to justify this conclusion. That case deals with the word "bonus" found in the definition of the expression basic wages" in S. 2 (b) (ii) of the Employees Provident Fund Act, 1952. We cannot read this decision as an authority for the proposition that when a demand is made by a party for bonus being paid for any given year, that is equivalent to demanding it on the basis of the Full Bench formula. In these circumstances, therefore, when on 6 February 1963 the respondents made a claim for an interim award of bonus for three months as a term of service contract, that cannot be regarded as in any way inconsistent with the demand made in the reference itself. The demand in the reference is reference as much to the full Bench formula as to the term of service contract. In the application dated 6 February 1963 respondent 2 union stated as follows(2) That payment of three months bonus is a term of service contract of all the workmen. (3) That there is an implied contract of service that the workers are entitled to payment of three months bonus per year. (4) It is therefore prayed that three moths bonus should be awarded as interim bonus immediately. "( 15 ) WHAT follows is important,(5) The union reserves its right to submit the bonus calculations and the justification of the same at a later date. "( 16 ) IN other words, the demand made in the reference is referable both to the terms of contract and the Full Bench formula. Since the company had paid bonus for a number of years prior tothe respondent unions, apparently, made an application for the award of an interim bonus at least at that rate pending the adjudication with regard to the demand already made. In our view, the tribunal was perfectly justified in considering that though the claim for bonus was one, it was claimed on two different grounds, and it was open to the tribunal to consider both the grounds without feeling it necessary to exclude one by the other. In our opinion, there is no good reason for interfering with the order passed by the tribunal.