Case: Mathurdas Kanji &amp; Others Vs. Labour Appellate Tribunal &amp; Others

The appellants were Government contractors for clearing and transporting of imported foodgrains. They entered into three agreements with the Governmentthe first and the second appellants onand the third appellant onfor clearing the cargo at prescribed rates. The three agreements contained similar terms. The said agreements provided that if the rate of discharge on a ship exceeded 1,500 tons per 24 hours and no shed demurrage was incurred, the Government was liable to pay to the appellants remuneration at the prescribed rates plus a bonus of As. 4/per ton, and if the rate of discharge fell below 900 tons per 24 hours or shed demurrage was incurred Government was liable to pay to the appellants remuneration at the prescribed rates less As 8/per ton. The appellants, for the purpose of carrying out their part of the contracts, employed workmen through muccadums (i.e., gang leaders) on piece rate basis for the purpose of clearing, filing and handling foodgrains, flour and other foodstuffs and loading the same for transport. The total number of workmen employed for the said purpose aggregated to about 2,500 and the appellants carried out the work in three shifts. In March 1952, disputes arose between the appellants 1 and 2 and the workmen employed by them. The second and the third respondents, two unions representing the workmen, demanded for an increase in wages and also put forward a claim for payment of bonus of As. 4/per ton which the appellants might receive from the Government. Ona settlement was arrived at between the appellants 1 and 2 and the workmen, in and by which the said appellants agreed to pay to the workmen, with effect fromwages which were considerably higher than the wages which the appellants 1 and 2 were paying before. Though the third appellants were not a party to the said settlement, they also paid the increased wages to the workmen employed by them. The settlement, however did not cover the claim of the workers to the bonus of As. 4 per ton. As the dispute to that extent was not settled, the Central Government, holding that an Industrial Dispute existed between the appellants and the respondents regarding payment of incentive bonus, referred the said dispute for adjudication to the Industrial Tribunal consisting of Shri S. H. Naik as the sole member. The Industrial Tribunal held, mainly on the basis of a letter written by the Government in September, 1951, that the intention of the Government in granting a bonus of As. 4/per ton to the appellants was that they should pass it on to the labour. It also sustained the claim on equitable considerations, namely, that the employees, who were all temporary workmen, not entitled to gratuity, Provident Fund and other benefits, should get incentive bonus, when dock workers in the Port Trust and stevedore workers under the Dock Labour Board were getting it. On those grounds, among others, the Tribunal directed the appellants to pay to the workmen concerned incentive bonus referred to in Clause 7(2) of the agreements with effect from 1st November, 1951, and further directed that the arrears should be paid within two months from the date on which the award became enforceable. The appellants carried the matter by way of appeal to the Labour Appellate Tribunal of India. The said Appellate Tribunal, on the materials placed before them, held that in the agreements entered into between the Government and the appellants there was no term to the effect that the bonus of As 4/per ton was to be passed on to the labour concerned in the work. But, having regard to all the circumstances of the case they were of the view that whatever might have been the strict legal rights of the workmen to the said incentive bonus of As 4 per ton, it was an addition which they in justice ought to share with the labour, provided the labour had helped them in earning the incentive bonus. They expressed the view that the workmen could claim 45 per cent. of the incentive bonus received by the appellants from the Government, but that was subject to the deduction of such penalties as the Government, might have imposed or might impose on the contractors for which penalties the workmen was directly responsible. They also evolved a procedure for the disbursement of the employees share of the bonus in the following manner :(i) "Notice shall be given by advertisement calling upon the workmen who claim to be entitled to this bonus to submit their claims with all available evidence within three months of the date of the advertisement. The claims are to be sent to the Conciliation Officer, Central, at his address at Bombay".(ii) "The Conciliation Officer after receiving such applications will decide after hearing both the parties, upon the individual claims, and will come to a conclusion as to whether the applicant is entitled to bonus, and if so, as to his earnings during the relevant period for the purpose of ascertaining his pro rata share of bonus."(iii) "After the Conciliation Officer has decided as to who are entitled to the bonus and has ascertained the individual earnings, he shall work out pro rata the amount of bonus payable, and the contractors shall pay the amounts so found by the Conciliation Officer."(iv) "All the applications received by the Conciliation Officer after the period of three months shall be barred from consideration." In this appeal the appellants question the correctness of the said Order.

Court's reasoning:
In the circumstances, on the construction of the express terms of the contract, we have no hesitation to hold that the bonus of annas 4 mentioned in Note 2 of the agreement was part of an integrated scheme of additional remunerationto the appellants in case they complied with the conditions laid down in the agreement and the workmen employed by the appellants had no right to the same. As we have already pointed out, the other two agreements entered into by the Central Government with the second and the third appellants were similar in terms and what we have stated about the first agreement would equally apply to the construction of the terms of the said two agreements. If so, it follows that the workmen were not entitled either to the bonus under Note 2 to the agreement or to any share therein.The first question is whether in the case of workmen engaged on piece rate basis, there is any scope for awarding incentivethe wages of the workmen were fixed and paid on piece rate basis, they would earn more if they worked more and therefore, the argument proceeded, that it was neither just nor equitable to award payment of any further incentive bonus to workmen.7. Though the incentive to work may be implicit in the system of piece rate work, it may be contended that other devices or adventitious aids may be conceived and implemented to speed up the pace and to induce the labour to put up extra effort. We do not propose to express our opinion in this case on the said question, as, even if payment of incentive bonus was legally permissible in the case of piece rate work, the workmen would be entitled to it only if the appellants made profits in the business. But in this case the contesting respondents did not claim incentive bonus linking it with profits. There was no allegation at any stage of the proceeding that the appellants made profits due to the contribution which the workmen made in increasing the production. There was also no evidence placed before the Tribunals or before us to prove that the appellants earned profits. In the circumstances, the workmen were not entitled to incentive bonus claimed by them.