Case: Sone Valley Portland Cement Co Vs. The Workmen

this Court (see at p. 1019):" ......... it is an incentive to higher production and is in the nature of an incentive wage."Referring to Labour Law by Smith. Second Edition, p. 723, where various plans prevalent in other countries known as Incentive Wage Plans have been worked out on various bases, the Court said:"The simplest of such plans is the straight piece-rate plan where payment is made according to each piece produced, subject in some cases to a guaranteed minimum wage for so many hours work. But the straight piece-rate system cannot work where the finished product is the result of the co-operative effort of a large number of workers each holding a small part which contributes to the result. In such cases, production bonus by tonnage produced, as in this case, is given. There is a base or standard above which extra payment is made for extra production in addition to the basic wage. But whatever may be the nature of the plan the payment is effect is an extra emolument for extra effort put in by workmen over the standard that may be fixed. ............ The extra payment depends not on extra profits but on extra production. ....... Therefore, generally speaking payment of production bonus is nothing more or less than a payment of further emoluments depending upon production as an incentive to the workmen to put in more than the standard performance. Production bonus in this case also is of this nature and nothing more than additional emolument paid as an incentive for higher production."As to the initiation of such a scheme the argument before the Court was:"Whether there should be increased production in particular concern is a matter to be determined entirely by the employer and depends upon a consideration of so many complex factors, namely, the state of the market, the demand for the product, the range of prices, and so on. It is, therefore, entirely for the employer to introduce a production bonus scheme or not."On the question as to whether the Industrial Tribunal could have jurisdiction to introduce a production bonus scheme at all, the Court left the question open but took the view that whereas in the case before the Court there was a scheme of production bonus in existence, the Tribunal had jurisdiction under the Industrial Disputed Act to deal with it and make suitable amendments to it. A similar view was expressed in Burn and Co. Ltd., v. Their Employees, (1960) 3 SCR 423 = (AIR 1960 SC 896 ) and National Iron and Steel Co Ltd. v. Their Workmen, (1963) 3 SCR 660 = (AIR 1963 SC 325 ).23. It would of course always be open to the Legislature to introduce any kind of bonus not so far recognised by industrial law evolved either by tribunals or by this Court. But that must rest on a solid foundation and express words must be used to that effect. Although it is not necessary to express any final view on the subject we are inclined to think that apart from legislation an incentive bonus for increase of production, irrespective of the question as to whether the industry was making profit or not is one that must be introduced by the particular unit of industry. It would be for the management to fix what incentives should be given to different department to step up production. An Industrial Tribunal would not be justified in holding that merely because there had been augmentation in the production labour would be entitled to make a claim to bonus because of such increase. Labour would undoubtedly be entitled to revision of wage scales, dearness allowance and other terms and conditions of service as also profit bonus; but in the absence of legislation or a scheme of incentive production, industrial tribunals would not be justified in laying down a scheme themselves.24. In our view the Cement Control Order even if it offered some inducement to the producers to step up their production, the terms thereof did not entitle the Tribunal to treat it as and by way of incentive bonus in which the workmen could share. It was certainly up to the producer to intimate the workmen that under the terms of the Control Order an extra amount of money would come to the till of the company if production was increased and the producer could have settled what incentives should be offered to the workmen but merely because an extra amount of money which as we have already described, was as and by way of price would find its way into the till of the company because the production target was exceeded; the workmen did not become entitled ipso facto to lay a claim to the excess amount and the Industrial Tribunal was not entitled to take the view that because an increase in production can only come about with the co-operation of the workmen they automatically become entitled to a share thereof. It may be that they all had the benefit of the extra payment by way of profit bonus under the Labour Appellate Tribunal formula and it would appear that the claims to incentive bonus rested rather on a frail foundation in several of the companies earlier mentioned. This will hardly be a case where we should lay down a principle of such far-reaching importance viz., that workmen are entitled to an extra payment by way of incentive bonus as soon as they can establish that production in a particular year exceeded the highest figure of the three preceding years. Nor can we look at the terms of the award in Kymores case as showing the course industrial adjudication should take. An industrial court can only award that which the law allows. In the absence of legislation on the subject and in the absence of a scheme for incentive payment introduced by the management in the particular facts and circumstances of the case, we would negative such a claim on the part of the workmen.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]15. In our view being impressed by the above reasoning the Tribunal concluded that the basis of payment for each of the two years should be on a fifty fifty basis.16. Before us elaborate arguments were put up on either side, counsel on behalf of the employers contending that so far as at least the four out of the six producers were concerned, in view of the special features workmen could not claim anything over and above the usual bonus allowable under the Labour Appellant Tribunal formula or the Bonus Act.17. As against this, it was contended on behalf of the workmen that there could be no doubt that workers had played some part in raising the figure of production above the maximum of the last three years ending in 1962 and if the producers were given something by way of incentive there was no reason why the workers should be deprived of a share thereof. Mr. Ramamurty frankly concede that if it was established that substantial capital expenditure had been incurred in the case of any particular producer, that was a factor to be taken into consideration in making allocation out of the extra payments earned; but even that would not justify the total negation of the claim of the workers to some payment. He also concede that if the producer was free to raise the price by reason of conditions prevailing in the market labour could not claim any share in the increased price on the ground that it was based on the extra efforts put forwarded by them. He however argued that the extra amount chargeable was not due to any such conditions in the market and was allowed to be charged by the Government so that the producers in the conjunction with their labour could raise the level of production for the benefit of the community as a whole. It was also argued by Mr. Ramamurty that the case required a special consideration of the circumstances by the Tribunal and by this Court in appeal and the view to be adopted should be the one which is consonant with social justice.18. As against this counsel for the producers submitted that social justice was a vague concept and except in circumstances recongnised by Courts of Law as justifying the adoption of a particular course should not be allowed to influence the decision of Tribunal administering Industrial law. It is only too well known that in most of the Industries in our country the objective of a living wage will remain a distant dream for a long time to come and social justice certainly required that efforts should be made to reduce the disparity between a living wage and the actual wage but Industrial tribunals are not to consider themselves free to depart from settled principles of Industrial law by chalking out a path of their own whenever opportunity occurs.19. In our view however, it is not necessary to examine the aspect of social justice in the matter or even the special features with regard to the working of six of the above producers. We must first consider the nature of the extra payment which was received by the producers, from the State Trading Corporation i.e. was it by way of or towards the price payable, or was it unconnected with the question of price e.g. a payment by way of a tip? Mr. Ramamurty submitted that it could not be the former in which case one would expect the extra payment to be linked with the entire quantity produced and not limited to the production over and above the target fixed by Government. While it cannot be denied that the underlying object of paragraph (B) and the Schedule to the Cement Control Order of 1963 was that the producer should adopt ways and means to increase the production either with the help of Government reducing bottle-necks or the producer itself finding out and adopting devices to step up production with the help of the workmen concerned, the extra amount paid can only be treated as and by way of price offered because of the scarcity of the commodity in the country. The Cement Control Order which has been set out in some detail clearly shows that producers were not entitled to charge their own price. If they had been, we have no doubt that taking advantage of the scarcity they would have charged much more than Rupees 69-50 per ton to start with. Whatever their production each unit could only sell to the State Trading Corporation and at the price fixed. As a result of the order the Corporation was not free to offer an inducement to the producer for producing Cement in excess of the target fixed as in its turn it was not entitled to charge the actual consumers or the dealers in the market any amount in excess of the price fixed under the Control Order. The transaction between a cement producer and the State Trading Corporation can only be described as a sale and whatever was paid to the producer by the Corporation can only be described as the price.20. Mr. Ramamurty conceded that normally a workman could only share in the general prosperity of the undertaking and ask for a revision of his wage, dearness allowance etc. when the production of the employer shoots up thereby enhancing its profit-making capacity. He also agreed that in normal circumstances greater production leading to a greater amount of profit would ensure to the benefit of the labour by way of production bonus under the Labour Appellate Tribunal formula or under the Bonus Act. He however contended that the facts in this case must be treated as justifying the claim of workmen to something like an incentive bonus though it was not to be treated in the way such bonus is usually claimed or awarded. In other words his submission was that but for the inducement of extra payment the target figure would not have been exceeded and that as the efforts of workmen must to some extent be held to have contributed to the increase in production they must have a share of such payment de hors the question of any profit. We find ourselves unable to accept this proposition. There is nothing in law which prevents a buyer and seller from agreeing that whatever the seller can offer up to certain quantity will be paid for at a particular rate and any quantity over and above that figure will be paid for at a higher rate. The total amount which the seller would receive can only be called price even if the contract of sale was so worded as to show that the excess amount was to be treated as an incentive payment. Between the buyer and the seller the amount which changes hands i. e. the consideration for the thing sold, can only be described in legal terminology as price. In some cases in ordinary commercial transactions, the seller allows the buyer a certain amount of commission in case the buyer takes delivery of a quantity over and above a particular figure fixed. This will only mean that the buyer was allowing a reduction in price in the particular circumstances of that case. What has taken place under the Cement Control Order is that the terms of sale are fixed by Government under the Order, the parties i.e. the producers and the Corporation not being allowed to discuss and settle the terms themselves.21. Government recognised that unless it held out an inducement to the producers by allowing them to charge a price over and above that fixed under the Schedule to paragraph (A) there was little chance of the shortage of the commodity in the market being reduced. It however realised at the same time that a general increase of price on the whole outturn of the produce would make it difficult for the State Corporation to function properly unless it allowed the Corporation to charge a higher price to the consumer. It was only because Government did not want the consumer to have to pay more that it adopted the device of the extra amount being chargeable only In respect of this additional quantity over the figure of production up to 1962.22. There is however another aspect of the matter. Assuming that the extra payment was to be treated and described as an incentive payment, it is difficult to see how to employees can under the Industrial Law which this Court has so far expounded have any claim to any share of such payment. In New Maneck Chowk Spg. and Wvg. Co. Ltd. v. Textile Association, (1961) 3 SCR 1     at p. 9 = (AIR 1961 SC 867  ) this Court examined the concept of bonus as involved in industrial law of this country by Industrial Tribunal and by the decisions of this Court. It took the view that there are four types of bonus which had been evolved under the industrial law, namely, (1) production bonus or incentive wage, (2) bonus as an implied term of contract between the parties, (3) customary bonus in connection with some festival and (4) profit bonus evolved by the Labour Appellate Tribunal in Millowners Association Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, (1950) 2 Lab LJ 1247 (FB) (L. A. T. I. - Bom.). An incentive bonus for increased production partakes of the nature of a production bonus.It would of course always be open to the Legislature to introduce any kind of bonus not so far recognised by industrial law evolved either by tribunals or by this Court. But that must rest on a solid foundation and express words must be used to that effect. Although it is not necessary to express any final view on the subject we are inclined to think that apart from legislation an incentive bonus for increase of production, irrespective of the question as to whether the industry was making profit or not is one that must be introduced by the particular unit of industry. It would be for the management to fix what incentives should be given to different department to step up production. An Industrial Tribunal would not be justified in holding that merely because there had been augmentation in the production labour would be entitled to make a claim to bonus because of such increase. Labour would undoubtedly be entitled to revision of wage scales, dearness allowance and other terms and conditions of service as also profit bonus; but in the absence of legislation or a scheme of incentive production, industrial tribunals would not be justified in laying down a scheme themselves.24. In our view the Cement Control Order even if it offered some inducement to the producers to step up their production, the terms thereof did not entitle the Tribunal to treat it as and by way of incentive bonus in which the workmen could share. It was certainly up to the producer to intimate the workmen that under the terms of the Control Order an extra amount of money would come to the till of the company if production was increased and the producer could have settled what incentives should be offered to the workmen but merely because an extra amount of money which as we have already described, was as and by way of price would find its way into the till of the company because the production target was exceeded; the workmen did not become entitled ipso facto to lay a claim to the excess amount and the Industrial Tribunal was not entitled to take the view that because an increase in production can only come about with the co-operation of the workmen they automatically become entitled to a share thereof. It may be that they all had the benefit of the extra payment by way of profit bonus under the Labour Appellate Tribunal formula and it would appear that the claims to incentive bonus rested rather on a frail foundation in several of the companies earlier mentioned. This will hardly be a case where we should lay down a principle of such far-reaching importance viz., that workmen are entitled to an extra payment by way of incentive bonus as soon as they can establish that production in a particular year exceeded the highest figure of the three preceding years. Nor can we look at the terms of the award in Kymores case as showing the course industrial adjudication should take. An industrial court can only award that which the law allows. In the absence of legislation on the subject and in the absence of a scheme for incentive payment introduced by the management in the particular facts and circumstances of the case, we would negative such a claim on the part of the workmen.