Case: Rashtriya Mill Mazdoor Sangh, Nagpur Vs. The Model Mills, Nagpur And Anr

Bonus has a tantalizing influence on industrial workers. They look forward to it with a craving, the degree of which is immeasurable. And for the employers any form of bonus has such a tremendous attraction that the sharing formula to fill in the gap between the fair wage and the living wage in the case of industrial workmen has been for all practical purposes displaced by the Payment of Bonus Act and bonus telescoping into Government service where there being no production and therefore it cannot be an incentive for higher production. And yet the management of The Model Mills, Nagpur (Employer for short) has most successfully thwarted the meagre expectation of minimum bonus to its workmen for full two decades.2. Rashtriya Mill Mazdoor Sangh, appellant herein (Union for short), as an approved Union made independent references under S.73A ofthe Bombay Industrial Relations Act, 1946 (Act for short) against Model Mills, Nagpur for grant of bonus for the period 1964-65 to 1067-68. A separate reference was made in respect of each accounting year. The union as representative union of the employees served a notice of change making the demand for bonus. The matter was taken into conciliation. The Conciliation Officer recorded a failure on 23rd June, 1969 and issued a certificate under S.73A of the Act certifying that the dispute was not capable of being settled by conciliation. Armed with the power of an approved Union, the Union made the aforementioned four references to the Industrial Court. The Union demanded bonus for each of the four accounting periods according to the provisions ofthe Payment of Bonus Act, 1965 (Bonus Act for short). The Union could not make a specific demand for bonus calculated at a certain percentage of the salary alleging that as it has not got the requisite information about financial position and balance sheet of the Employer, the Industrial Court should compute the bonus which becomes payable under the Bonus Act, and award the same to the workmen of the Employer.3. The employer resisted the references on diverse grounds. It was contended that once a notified order is issued under S.18A of the Industries (Development and Regulation) Act 1951 (IDR Act for short) appointing an authorized controller in respect of an industrial undertaking it is run by the authorised controller under the authority of a Department of the Central Government and therefore, in view of the provision contained in S.32 (IV) of the Bonus Act its employees are excluded from the application of Bonus Act and the references must accordingly be rejected4. This contention found favour with the Industrial Court. The learned Member with the consent of the parties directed that the issue with regard to the application of the Bonus Act may be tried as a preliminary issue. The learned Member upheld the contention on behalf of the employer observing that having regard to the provision contained in S.32(IV) of the Bonus Act read with S.18A of the IDR Act, the workmen employed by the employer are excluded from the operation of the Bonus Act as it is not applicable to the employer. The learned Member rejected the alternative contention that even if the workmen employed by the employer are not entitled to bonus under the Bonus Act, they are yet entitled to claim bonus apart from the Bonus Act as a norm of industrial relation observing that as the demand was made for bonus under the Bonus Act and the alternative demand was not made before the conciliator the scope of the reference cannot be extended to cover the same. Accordingly, all the four references were rejected. Hence, these appeals by special leave.

Court's reasoning:
19. A different note was sounded by the Bombay High Court in D. P. Kelkar, Amalner v. Ambadas Keshav Bajaj & Ors. A.I.R. 1971 Bom 124.   In that case the employees of the India United Mills Ltd. approached the authority under the Payment of Wages Act for directing the employer to pay minimum bonus under the Bonus Act. It was contended on behalf of the employer that the employer-mill was managed by an authorised controller appointed under S.18-A of the IDR Act and therefore, the workmen of the employer are employees employed by an establishment engaged in an industry carried on under the authority of the Central Government and consequently they were excluded from the operation of the Bonus Act in view of the provision contained in S. 32(iv). The authority under the Payment of Wages Act negatived the contention. The matter came up before the High Court in two writ petitions under Art. 226 of the Constitution. The High Court rejected the construction canvassed before it that the expression carried on by or under the authority of any department of the Central Government qualified the expression industry and not an establishment engaged in an industry. After rejecting this plain grammatical construction for reasons which do not commend to us, the High Court held that where the Central Government appointed an authorised Controller under the IDR Act, the industrial undertaking could be said to be engaged in an industry carried on under the authority of the Central Government. The High Court distinguished the decision of this Court in Heavy Engineering Mazdoor Union (supra) observing that in the facts before the Supreme Court, the company was one registered under the Companies Act and that it being an incorporated company, it has an dependent existence while where the authorised controller is appointed, the management is taken over by the Central Government. We are unable to appreciate this view of the High Court for the reason that the High Court completely overlooked the purpose and intendment of appointing an authorised controller, its effect on the continued existence of the industrial undertaking and the deeming fiction enacted in S. 18-B and the limitation on the powers of the shareholders placed by S. 18-E. The High Court failed to notice the provision contained in sub-s. (2) of S. 18-E which clearly provides that subject to the provisions contained in sub-s.(1) and to the other provision contained in the Act and subject to such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the Indian Companies Act, 1913 shall continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under S. 18-A. This very important provision which gives the clue to the expression carried on under the authority of the Central Government was not taken note of by the High Court. Therefore, the said view of the Bombay High Court does not commend to us and must be overruled.20. If on the issue of a notified order appointing an authorised controller under S. 18-A, the management of the industrial undertaking undergoes a change, yet it does not become an establishment engaged in an industry carried by the department of the Central Government, its employees would not be excluded from the operations of the Bonus Act as provided in S. 32(4).21. The Tribunal therefore, was clearly in error in rejecting the reference holding that the workmen of the respondent were excluded from the operations of the Bonus Act. The Award of the Tribunal rejecting the references will have to be quashed and set aside and the matter remitted to the Industrial Tribunal for disposing of the same on merits.22. An incident argument was that the National Textile Corporation which has taken over the respondent-Company would not be liable for the period when the authorised controller was in charge of the management of the respondent-company. This contention has merely to be stated to the rejected. S.5(1) of the Sick Textile Undertaking (Nationalisation) Act, 1974 provides that every liability, other than the liability specified in sub-s. (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textiles Corporation. Sub-clause (c) of sub-s. (2) of S. 5 provides that wages, salaries and other dues of employees of the Sick Textile Undertaking, in respect of any period after the management of such undertaking had been taken over by the Central Government, shall, on and from the appointed day, be the liability of the Central Government and shall be discharged, for and on behalf of that Government, by the National Textile Corporation as and when payment of such loans or amounts becomes due or as and when such wages, salaries or other dues become due and payable. The appointed day has been specified as the 1st day of April, 1974. The expression wages, salaries and other dues of the employees would without a doubt include statutory bonus payable under the Bonus Act. This liability arose for the period after the management of the undertaking had been taken over by the Central Government by appointing an authorised controller under S. 18-A. Therefore, the liability to pay the bonus if awarded would be of the National Textile Corporation. The contention of the National Textile Corporation that it is not liable to pay bonus must be rejected.The Tribunal therefore, was clearly in error in rejecting the reference holding that the workmen of the respondent were excluded from the operations of the Bonus Act. The Award of the Tribunal rejecting the references will have to be quashed and set aside and the matter remitted to the Industrial Tribunal for disposing of the same on merits.