Case: Sanghi Jeevaraj Ghewar Chand &amp; Ors Vs. Secretary, Madras Chillies, Grains Kirana Merchants

1. In Civil Appeal No. 1630 of 1967, workmen engaged by certain chillies and kirana shops in Madras and who were members of the respondent Union made a demand on December 13, 1965 for bonus for the year 1964-65 equivalent to four months wages. Conciliation proceedings having failed, the dispute was referred to the Industrial Tribunal, Madras. In Civil Appeal No. 1721 of 1967, the appellant company is admittedly an establishment in public sector to which Section 20 of the Payment of Bonus Act, 21 of 1965 (hereinafter referred to as the Act) does not apply. In both these cases, the Tribunals held that though the Act did not apply, in the first case by reason of Section 1 (3) and in the other by reason of Section 32 (x), the employees were entitled to claim bonus and awarded their claims in C. A. No. 1630 of 1967. These appeals by special leave challenge the correctness of the view taken by the Tribunals as to the scope and nature of the Act.

Court's reasoning:
Though, the words in force in a State after the words or any corresponding law relating to investigation and settlement of industrial disputes appear to qualify the words any corresponding lawand not the Industrial Disputes Act, the Industrial Disputes Act is primarily a law relating to investigation and settlement of industrial disputes and provides machinery therefor. Therefore the distinction there made between that Act and the other laws does not seem to be of much point.It is thus clear that by providing in Section 39 that the provisions of this Act shall be in addition to and not in derogation of those Acts, Parliament wanted to avail of those Acts for investigation and settlement of disputes which may arise under this Act. The distinction between Section 22 and Section 39, therefore, is that whereas Section 22 by fiction makes the disputes referred to therein industrial disputes and applies the provisions of the Industrial Disputes Act and other corresponding laws for the investigation and settlement thereof, Section 39 makes available for the rest of the disputes the machinery provided in that Act and other corresponding laws for adjudication of disputes arising under this Act. Therefore, there is no question of a right to bonus under the Industrial Disputes Act or other corresponding Acts having been retained or saved by Section 39. Neither the Industrial Disputes Act nor any of the other corresponding laws provides for a right to bonus. Item 5 in Schedule 3 to the Industrial Disputes Act deals with jurisdiction of tribunals set up under Sections 7, 7-A and 7-B of that Act, but does not provide for any right to bonus. Such a right is statutorily provided for the first time by this Act7. It is true that the preamble states that the Act is to provide for payment of bonus to persons employed in certain establishments and Section 1(3) provides that the Act is to apply, save as otherwise provided therein, to factories and every other establishment in which 20 or more persons are employed. Sub-section (4) of Section 1, also provides that the Act is to have effect in relation to such factories and establishments from the accounting year commencing on any day in 1964 and every subsequent accounting year.But these provisions do not, for that reason, necessarily mean that the Act was not intended to be a comprehensive and exhaustive law dealing with the entire subject of bonus and the persons to whom it should apply. Even where an act deals comprehensively with a particular subject-matter, the legislature can surely provide that it shall apply to particular persons or groups of persons or to specified institutions only. Therefore, the fact that the preamble states that the Act shall apply to certain establishments does not necessarily mean that it was not intended to be a comprehensive provision dealing with the subject-matter of bonus. While dealing with the subject-matter of bonus the legislautre can lay down as a matter of policy that it will exclude from its application certain types of establishments and also provide for exemption of certain other types of establishments even though such establishments would otherwise fall within the scope of the Act. The exclusion of establishments where less than 20 persons are employed in Section 1 (3) therefore it is not a criterion suggesting that Parliament has not dealt with the subject-matter of bonus comprehensively in the Act10. Though Section 1 (3) excludes an establishment other than a factory having less than 20 employees from the application of the Act, establishments which are factories irrespective of the number of persons employed therein and all establishments which are not factories but are having 20 or more employees are covered by the Act. Thereore, only small establishments having less than 20 employees and which are not factories are excluded. Even in such cases if any establishment were to have 20 or more persons employed therein on any day in any accounting year, the Act would apply to such an establishment. It is, therefore, clear that Parliament by enacting Section 1 (3) excluded only petty establishments12. It is true that the construction canvassed on behalf of the appellants leads, as argued by counsel for the respondents, to employees in public sector concerns being deprived of bonus which they would be getting by raising a dispute under the Industrial Disputes Act and other corresponding statutes. But such a result occurs in consequence of the exemption of establishments in public sector from the Act, though such establishments but for Section 32 (x) would have otherwise fallen within the purview of the Act.It appears to us at the exemption is enacted with a deliberate object, viz., not to subject such establishments to the burden of bonus which are conducted without any profit motive and are run for public benefit. The exemption in Sec. 32 (x) is, however, a limited one, for, under Section 20 if a public sector establishment were in any accounting year to sell goods produced or manufactured by it in competition with an establishment in private sector and the income from such sale is not less than the 20 per cent of its gross income, it would be liable to pay bonus under the Act. Once again it is clear that in exempting public sector establishments, Parliament had a definite policy in mind15. Besides, the construction suggested on behalf of the respondents, if accepted, would result in certain anomalies. Take two establishments in the same trade or industry, one engaging 20 or more persons and the other less than 20. The Act would be applicable to the former but not to the latter. If the respondents were to be right in their contention the employer in the former case would be liable to pay bonus at the rates laid down by the Act, i. e. , at the rate of 4 per cent minimum and 20 per cent maximum, but in the latter case the Act would not apply and though his establishment is a smaller one, on the basis of the Full Bench Formula there would be a possibility of his having to pay bonus at a higher rate than 20 per cent, depending upon the quantum of profit made in that particular accounting year17. We are also not impressed by the contention that the fact that Section 39 provides that the provisions of this Act are in addition to and not in derogation of the Industrial Disputes Act or any other corresponding law shows that Parliament did not wish to do away with the right to payment of bonus altogether to those who cannot either by reason of exclusion or exemption from the Act claim bonus under the Act. Such a construction is fallacious on two grounds. Firstly because it assumes wrongly that the Industrial Disputes Act or any other law corresponding to it provided for a statutory right to payment of bonus. All that those Acts provided for, apart from rights in respect of lay out, retrenchment etc., a machinery for investigation and settlement of disputes arising between workmen and their employers. It is, therefore, incorrect to say that the right to bonus under this Act is in addition to and not in derogation of any right to bonus under those Acts. Secondly, Section 39 became necessary because the Act does not provide any machinery or procedure for investigation and settlement of disputes which may raise between employers and employees. In the absence of any such provision Parliament intended that the machinery and procedure under those Acts should be made available for the adjudication of disputes arising under or in the operation of the Act. If, for instance, there is a dispute as to the computation of allocable surplus or as to quantum of bonus, or as to whether in view of Section 20 an establishment in public sector is liable to pay bonus, such a dispute is to be adjudicated under the machinery provided by the Industrial Disputes Act or other corresponding Acts18.Considering the history of the legislation, the background and the circumstances in which the Act was enacted, the object of the Act and its scheme, it is not possible to accept the construction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing comprehensively with the subject-matter of bonus in all its aspects or that Parliament still left it open to those to whom the Act does not apply by reason of its provisions either, as to exclusion or exemption to raise a dispute with regard to bonus through industrial adjudication under the Industrial Disputes Act or other corresponding law.