Case: Workmen Of M/S Bata Shoe Co., (P) Ltd Vs. M/S Bata Shoe Co. (P) Ltd

ny is a fairly prosperous concern and one of the biggest of its kind in Asia. It has factories at Batanagar in West Bengal, Faridabad in the present Haryana State, Digha and Mokamehghat in Bihar and Administrative Offices in Calcutta. It has Central Repair Shops in Calcutta and other places and a purchasing Depot in Kerala. It has about 900 shops for retail sale scattered throughout the country besides the wholesale agents. Its branches have a wide market both in this country as well as abroad. It employs a very large number of workmen in its factory, Administrative Office and Central Repair Shops. The company and the appellants, represented by its unions, have been entering into various agreements from time to time, the last of which was on August 30, 1962, Ext.. As per Ext., the respondent paid bonus for the year 1964 at the rates mentioned therein. The appellants demanded that they should be paid the profit bonus as per the Act in addition to what has been paid as per Ext.. The company declined to accede to the demand of the workmen on the ground that the general bonus paid under Ext.5 was an amount paid as production bonus or incentive wages. The company also pleaded S. 32(vii)(a) as a bar to the workmen making a claim for payment of bonus under the Act. During the conciliation proceedings the union and the company agreed to have the dispute referred for adjudication to the Industrial Tribunal. Accordingly, the State Government on June 25, 1966, referred to the Third Industrial Tribunal, West Bengal, for adjudication of the following dispute :"Whether the employees of the company represented by Bata Mazdoor Union are entitled to bonus for the year, 1964 under the Payment of Bonus Act, 1965, in addition to the bonus paid to them and whether in view of the agreement, dated the August 30, 1962, between the union and the company for payment of bonus, the Payment of Bonus Act, 1965, is applicable to such employees."3. Before the Tribunal the appellants plea was that the amount paid under the agreement Ext.5 is an ad hoc or an ex gratia payment made out of charity and as a supplement to the wages and that it was not a bonus, linked with production or productivity. It was not an annual payment, nor was it paid in lieu of bonus based on profits. The workmen accepted the position that the general bonus paid under the agreement was neither customary nor a profit bonus nor a bonus as an implied term of contract. On all these grounds the workmen pleaded that S. 32(vii)(a) is no bar to their claim for bonus under the Act4. The company on the other hand, after a reference to the various prior agreements, under which the amounts have been paid as bonus, though under different names, pleaded that the general bonus paid under the agreement Ext.5 was an amount paid as production bonus or incentive wages. The company placed considerable reliance on the minutes of the discussions that took place between the union and the company whenever demands were raised and the agreements arrived at between the parties, which were later on incorporated as formal settlements from time to time. These proceedings were relied on by the company for the purpose of showing that the demands for payment of bonus were as production bonus and that what was ultimately paid under the various agreements including the one in question, namely, Ext., were all understood by all parties as production bonus or incentive wages. As the necessary conditions required under S. 32(vii)(a) were present in this case, according to the company, the claim for profit bonus under the Act is not sustainable5. The Industrial Tribunal, after a fairly elaborate consideration of the various agreements as well as the record of the proceedings leading up to those agreements and the other materials on record has held in its award that the general bonus that was being paid by the company including the payment of bonus under the agreement Ext.5 was not a profit sharing bonus. The Tribunal has found that the general bonus paid under the agreement of 1962 was annual bonus linked with production or productivity and that it was paid in lieu of bonus based on profits. The mere circumstance that the payment of bonus was made quarterly, according to the Tribunal, does not take it away from the nature of an annual payment. The Tribunal ultimately held that in view of the agreement Ext.5 the workmen are not entitled to claim bonus for the year 1964 under the Act.

Court's reasoning:
In the case before us, from the award it is seen that the union conceded that the amount paid as general bonus under the agreement was neither customary, nor profit bonus, nor bonus as an implied term of contract. In the nature of things the union has not raised the plea that amount paid under the agreement is a profit bonus. Equally, the company could not also take up such a plea as their attempt was to show that it is a payment as production bonus or incentive wages16. A mere reading of Art. VI relating to general bonus will not by itself throw much light on the character of such payment. But, it is clear that the payment is to be made at the end of each quarter at the percentage mentioned therein of the total salary or wages which does not include dearness allowance. The said Article also provides for the period of service necessary for qualifying to get the higher or lower percentage of bonus as the case may be. The emphasis is also laid on the workmen giving regular and approved service during the quarter to which the payment of bonus is available17. Normally, it is the agreement Ext.5 which has to be looked into for the purpose of ascertaining the rights and liabilities of the employer and employees. That is, the agreement will have to be looked into for the purpose of ascertaining the nature and character of the general bonus payable under Art. VI, provided that clause gives a full and clear indication regarding the character of such payment. But, a mere reading of Art. VI does not give any indication regarding the character of such payment. The other clauses in the agreement also do not throw much light on this aspect. But it is not as if that agreement Ext.5 has been entered into between the parties for the first time. The expression "General Bonus" occurs, as we will show presently, in certain previous agreements. Under those circumstances, in our opinion, in order to properly appreciate the character and nature of the payment that was being made originally and that was continued under Art. VI of the agreement of 1962, it is not only relevant but also necessary to consider the various settlements and agreements that took place between the parties on prior occasions18. We are not inclined to agree with the contention of Mr. Mookerjee that the Tribunal has committed a very serious error in law when it tried to interpret the nature of the payment under Ext.5 by reference to the previous settlements and discussions that took place between the parties. The Tribunal was perfectly justified in considering those agreements as they, in our opinion, give a complete and clear picture of the nature of the claims made by the union, the stand taken by the company and the nature of the agreement ultimately arrived at between the parties regarding the payment of the amount in question32. We have very exhaustively dealt with the various demands made by the workmen, the minutes recording the discussion that took place between the parties regarding the demands, the conclusions arrived at therein as well as the final agreements entered into on different dates between the parties, as they furnish the background, so to say, for the agreement under consideration Ext.. It will be seen that originally in 1946 the payment was made as production or special bonus. Specific demand was made by the union on March 6, 1947 to increase "production bonus". The company did not agree to this request. On the other hand, Ext. C, the agreement clearly shows that there would be no increase in production bonus. But an additional amount was given as attendance bonus. In 1948 what was originally characterised as production bonus was termed "ex gratia" payment of bonus. The union specifically desired in 1951 to substitute "ex gratia bonus" by "general bonus" and to abolish attendance bonus. The demand also was for general bonus to be paid at a flat rate every quarter. For the first time the expression "general bonus" occurs in the demand made by the union on May 15, 1951, and in the agreed minutes of October 3, 1951. The same was incorporated in the final agreement of November 22, 1951. The union made a demand on March 11, 1954, for increase in the rate of general bonus so as to provide an incentive to the employees. This was accepted and embodied finally in the agreement dated February 18, 1955. In Ext., the union made a specific demand for further increase of the rate of general bonus and wanted half the amount to be paid quarterly as at present and the balance at the time of pooja. Though, the minutes of the discussion in respect of this demands shows, that the chairman of the company wanted to alter what was given as incentive to greater efficiency in production to one on profit basis, the union preferred the payment to be continued as was being done on a fixed percentage basis. The pattern of bonus paid sometimes called production bonus, later on called ex gratia payment, but from 1951 called as general bonus, was being paid quarterly at a particular percentage based on the salary excluding dearness allowance. Having this background in mind, it is clear that what was being paid under Art. VI of Ext.5 was a payment linked with production or productivity. The principal emphasis is that the amount is being paid as an incentive to production and, therefore, it is paid as production bonus or as a wage incentive. That it is an incentive payment in order to secure greater efficiency in production is clear from Exts. D,, and. We have already referred to the contents of these exhibits in great detail. Even the workmen in Ext.3 required the rate of general bonus to be increased in view of the necessity of giving incentive to the employees. But a more important point emerges from the minutes of discussion recorded on October 6, 1958 in Ext.. The chairman of the company emphasised that what was being paid as general bonus was as an incentive to greater efficiency in production. The chairman specifically wanted this method of payment to be changed and suggested that the bonus payment be linked with the generally accepted formula, namely, of profit bonus and that the payment on a fixed percentage be abolished. But this suggestion to alter the nature of the payment from a fixed percentage as a production bonus for providing an incentive to greater efficiency in production was not accepted by the union, which wanted the fixed percentage basis to be continued. That is the union was not prepared to receive bonus on the basis of profits, but wanted to continue the existing arrangement of payment at a fixed percentage as an incentive to efficiency in production. That is, the union wanted the character of the payment as production bonus being continued. Therefore, these circumstances clearly lead to the conclusion that the payment that was being made and continued in the agreement Ext.5 was payment of bonus linked with production or productivity. It is also clear that the said payment was made in lieu of bonus based on profits because the union itself did not agree to the suggestion of the chairman as contained in Ext.2 to alter the character of payment to one of profit sharing bonus. Therefore, this also shows that the payment under Ext.5 was in lieu of bonus based on profits. The expressions used in S. 32(vii)(a) are "linked with production or productivity" and that test is satisfied in respect of the payment made under Ext.. It is not the case of the union that the character of payment which was designated as an incentive to greater efficiency in productions even as early as 1951 (vide Ext. D) has been altered either in the subsequent agreements or in the agreement Ext.. If so, it follows that the payment of general bonus in Ext.5 retains the same character as a payment by way of an incentive to greater efficiency in production33. As the minutes of the discussion that took place between the parties have been recorded then and there, they are items of evidence which are more valuable and useful than the oral evidence adduced by the parties. For instance, P.W. 1, secretary of the union, had deposed that the payment in Ext.5 is not linked with production. On the other hand, the Labour Officer of the company as P.W. 1 has stated that the said payment is linked with production. This type of evidence does not lead us anywhere. That is why we have placed more emphasis and reliance on the documentary evidence adduced by the parties, more especially when there is no controversy that the record of the meetings do not represent the actual facts34. Then the question is whether the bonus paid is an annual bonus, which is another requirement of S. 32(vii)(a) of the Act.That bonus has been paid at the end of every quarter, at any rate from 1948, is clear from the various settlements and agreements referred to earlier. That the union itself required that bonus should be continued to be paid quarterly, is clear from the letters written by the union, particularly Ext.5 dated December 24, 1957. We have already referred to the various agreements which no doubt prescribe the normal duration of the period of the agreement, which extends to over a year. There is also a further provision to the effect that even after the date of expiry mentioned therein, the agreement will continue to be in force till a notice is given in the manner provided for in the agreement. Therefore, it will be seen that it is not as if that bonus is paid for one quarter and does not ensure for a succeeding quarter. On the other hand, the amounts payable are not restricted to one particular quarter and the intention is made clear in the agreement that it has to operate throughout the year and also continue from year to year. It is not possible to accept the contention of Mr. Mookerjee that it is only when a payment is made at the end of the year, it can be considered to be an annual bonus. The essential test to be satisfied is that the payment should enure throughout the year and it should also be continued from year to year. As observed by Lord Maugham in Moss Empires Ltd. v. Inland Revenue Commissioners, (1937) 3 All E.R. 381, the expression "annual" must be taken to have the quality of being recurrent or being capable of recurrence. Adopting this test, the payments in the case before us were to continue the whole of the year and also were to be paid from year to year not only during the period of agreement but also for the succeeding year till the required notice was given under the agreement. Even then there is a provision in the agreement to the effect that the agreement will continue to have force notwithstanding the notice till a fresh agreement or settlement is entered into. Therefore, it is clear that the payment of general bonus is "annual bonus" as contemplated by S. 32(vii)(a) of the Act. The Court of Appeal in Smith v. Smith (1923) P.D. 191 had to consider whether a payment to be made weekly during the lifetime of a person was an "annual payment". It was held as follows :"It is no doubt payable weekly, but that fact does not prevent it from being an annual payment if the weekly payments may extend beyond a year."35. The position, as pointed out by us earlier, in the case before us, is also the same36. It follows from the discussion above that the general bonus paid under Article VI of theagreement, datedAugust 30, 1962, Ext., is a payment of annual bonus linked with production or productivity in lieu of bonus based on profits. It further follows that as the agreement has been entered into before May 29, 1965, the employees cannot claim any additional bonus under the Act for the period for which the agreement is in operation. It is the case of all parties that the agreement Ext.5 at the relevant time was in operation. If so, it follows that the view of the Tribunal that S. 32(vii)(a) of the Act is a bar to claim any additional bonus under the Act is correct.