Case: Prakash Cotton Mills Limited Vs. The State of Bombay

There was an industrial dispute between the Rashtriya Mill Mazdoor Sangh and the Textile Mills on the question of bonus, and a reference was made to the Industrial Court under Section 73a. Petitioner No. 1 company, which was also a party to that dispute, represented to the Tribunal that its case should be separately considered from the case of other mills inasmuch as it has been making losses from 1950 onwards, and as far as it was concerned no question of paying bonus to the employees could arise. The reference, therefore, was separated with regard to petitioner No. 1 company. While the reference was pending, the Rashtriya Mill Mazdoor Sangh and the Mill Owners Association entered into an agreement and they fixed the basis of the bonus that was to be paid to the employees, and in this award there was a reference to those mills which had been making loss and the provision was that with a view to creating better relations between the workers and the industry and for continuing peace in the industry but without creating a precedent, the mills which fell in that category should pay to their employees a minimum bonus equivalent8 per cent, of the basic wages earned by them during the year. Petitioner No. 1 company was not a party to this agreement, and an award was passed in terms of the agreement under Section 115a and it became binding upon those mills which had subscribed to thatTHE Government subsequently proceeded under Section 114 (2) of the Act and gave notice to petitioner No. 1 company, and after hearing the company directed that the award shall be binding upon the various mill companies among which was petitioner No. 1 company. This was done by a Notification of July 81, 1936. The result of this Notification was that petitioner No. 1 company was as much bound by the award as the mill companies which were parties to the agreement, and further the important consequence that flowed from this notification issued by the Government was that petitioner No. 1 company became liable to pay bonus to its employees in terms of the agreement, to which a reference has just been made. This Notification was challenged by petitioner No. 1 company before Mr. Justice Tendolkar on various grounds. The learned Judge dismissed the petition and the petitioners have now come in appeal before us.

Court's reasoning:
The basis of the award, in our opinion, is the agreement arrived at between the employer and the employee and there is no law which we are aware of which prevents the employer from saying that he would pay to the employee bonus notwithstanding that he made no trading profits. If, therefore, the agreement entered into between an employer and an employee was a valid agreement, then legal effect must be given to that agreement under Section 115a. The provisions of Section 115a are mandatory, and unless the agreement is in contravention of any of the provisions of the Act or is vitiated by those factors which vitiate a contract, there is no option left in the Industrial Court except to give effect to the agreement and pass an award in terms of thecan well imagine a case where the Court may have no jurisdiction to pass a decree or order in invitum and yet the Court would be in a position to pass a decree or order or indeed it may be compelled to pass a decree or order if parties sui juris went to the Court and submitted to the Court an agreement upon which they have arrived. Therefore, this is a case where a judgment or an award is passed by an Industrial Tribunal as a result of a valid agreement arrived at between two parties who are capable of contracting and where an agreement is arrived at which is not vitiated by any factors which would vitiate a contract. Therefore, to say that this award stands on the same footing as the award which the Supreme Court was considering is to try and equate two decisions which have no resemblance to eachis no argument to suggest that petitioner No. 1 company was not a party to the agreement, that it was not bound by the award and the State Government has compelled it by its direction under Section 114 (2) to pay bonus which it was not in a position to pay and which it was not bound to pay. The very purpose of Section 114 (2) is to compel employers like petitioner No. 1 company to fall into line with the industrial policy which in the opinion of the Government is a policy conducive to publicis again a misapprehension as to the principle underlying Section 114 and the powers and jurisdiction of an Industrial Tribunal. We have already pointed out that now it is settled law in view of the judgment of the Supreme Court in Muir Mills case that an Industrial Court has no jurisdiction to award bonus when an employer has made no trading profits. But when the State Government acts under Section 114 (2), it is not acting in the same capacity as the Industrial Tribunals are acting under the Act, The powers of the State Government are distinct and separate. They have been expressly conferred because the Legislature felt that the State Government should be armed with such powers, and it is difficult to understand how the decision of the Supreme Court can come in the way of the Government taking the view that a valid agreement arrived at between the employer and employees with regard to the payment of bonus is an agreement so conducive to the interest of industrial economy that not only the employers who are parties to that agreement but also those employers who have not subscribed to that agreement should be bound by it. Therefore, in our opinion, the decision of the Supreme Court in no way limits or controls the powers of the State Government under Section 114is difficult to understand how this proviso supports the argument which has been advanced. Government may want to know the opinion of the Industrial Court with regard to any industrial dispute and power is given to the Government to obtain such opinion. But that power can be exercised whether a reference is pending or not pending and that power has no relation whatever to the pendency of a reference or otherwise. Therefore, in our opinion, on the clear plain language used by the Legislature in Section 114 (2) the power of the State Government is in no way trammelled by the pendency of a reference before an Industrialmust not forget that we are no longer living in the age of laissez faire and the relations between employer and employees are no longer solely governed by the principles of contract. Contractual rights and liabilities are now subject to the principles of industrial law and also the principles of social justice. It is true that social justice is an imponderable and Mr. Bhatt asked us not to introduce the principles of social justice in construing legislation which comes for interpretation before us. In our opinion, no labour legislation, no social legislation, no economic legislation can be considered by a Court without applying the principles of social justice in interpreting the provisions of thesethis is not a case where untrammelled absolute discretion is conferred upon an individual or an officer. Discretion is conferred upon the State Government, which is in the best position to decide what is the proper thing to do in the interest of economy and industrial progress and industrial peace. It may be that in a particular specific case by giving effect to the provisions of Section 114 (2), the State Government may be guilty of discrimination. That would be administrative discrimination, and when such a case arises, it may be that the party affected by it may challenge the decision in Court. But it is not suggested in this case that petitioner No. 1 company has been singled out for special treatment leaving other mills similarly situated unaffected by the Notification issued by the Government. What is suggested is not administrative discrimination but legislative discrimination, and we see nothing in Section 114 (3) which leads us to the conclusion that there is any discrimination which would offend the principles underlying Articleif the Government can really achieve a result which may seem to be based upon reasons different from those which proved acceptable to the Supreme Court, the State Government is perfectly entitled to do so. It is open to the State Government to take the view that the decision of the Supreme Court with, regard to the payment of bonus was not conducive to the industrial peace and industrial progress. If it takes that view and if in law it can give effect to its own view, it is difficult to understand how the question of mala fides can arise. It is not suggested that the State Government has any grudge against either petitioner No. 1 company or other companies which are affected by the Notification in question.