1997 Supreme(SC) 1520

1997(10) Supreme 324
Supreme court of India
(From Madras High Court)
S.B. Majmudar & M. Jagannadha Rao, JJ.
State of Tamil Nadu represented by Secretary, Housing Deptt., Madras —Appellant
verus
K. Sabanayagam & Anr. etc. —Respondents
Civil Appeal No. 4559 of 1989
With
Civil Appeal Nos. 28/90, 2463-65/91
Civil Appeal 8274-75 of 1997
(Arising out of SLP (C) No. 19795-96 of 1991) and
Civil Appeal Nos. 8276-78 of 1997
(Arising out of SLP (C) Nos. 17684-86 of 1991)
Decided on 25.11.1997
Counsels for the Parties :
For the Appellant : R. Mohan, Sr. Advocate, A. Mariarputham and Mrs. Aruna Mathur, Advocates.
For the Respondents : Ambrish Kumar, Advocate.

Important Point
Before an appropriate Government, which is approached by an establish­ment or a class of establishments for exempting them from the relevant provisions of the Payment of Bonus Act for a given accounting Year, arrives at any opinion for exercise of such power u/s 36 of the Act, it must take into consideration the rival version and material evi­dence in rebuttal furnished by the class of employees who are likely to be affected by such exercise of power.

Headnote:(i) Payment of Bonus Act, 1965—Sections 32 and 36—Power of exemp­tion—Exemption order dated 23.11.1982—Challenged as bad inasmuch as it seeks to retrospectively apply to earlier accounting years 1978-79, 1979-80, 1980-81 and 1981-82—Held, notification is not illegal as exemption was granted from 23.11.1982 onwards—The notification had no retrospective effect—State of Tamil Nadu while issuing the notifica­tion had thought it fit not to cover earlier accounting years from 1978-79 to 1981-82—Question whether purported retrospective effect given by the notification to the claim of exemption for earlier ac­counting years was totally permissible u/s 36 or not, not answared.

       Held : that the State of Tamil Nadu while issuing the notification of 23rd November 1982, for reasons best known to it, had thought it fit not to cover the earlier accounting years from 1978-79 to 1981-82 inspite of the fact that the earlier notification under Section 36 of the Act had ceased to operate on the expiry of the accounting year 1977-78 as seen from the express wording of the earlier notification dated 31st Octo­ber 1979. (Para 9)

       Further held that the ultimate decision of the High Court that the notification dated 23rd November 1982 had no re­trospective effect, is justified but we express­ no opinion on the question whether the purported retrospective effect given by the notification to claim of exemption for the earlier accounting years was legally permissible under Section 36 or not. This wider question is kept open. Point No. 1 is, therefore, answered in the negative for the aforesaid reasons which are different from those which appealed to the High Court. (Para 10)

       (ii) Payment of Bonus Act, 1965—Sections 32 and 36—Claim for statu­tory exemption u/s 32—Question of applicability of provisions of the Act to the Housing Board in view of Section 32(v)(c) of the Act—Bonus Act will not apply to employees employed by the establishment estab­lished not for purposes of profit—Claim for statutory exemption u/s 32(v)(c) of the Act cannot stand if power of exemption of State Gov­ernment u/s 36 is invoked—Both the provisions could not be simultane­ously resorted to—Tamil Nadu Housing Board had sought exemption from operation of the Act u/s 36 from time to time—Housing Board admitted non-existence of relevant factual data for invoking powers u/s 32(v)(c) of the Act—It had waived its objections regarding non ap­pli­cability of the Act u/s 32(v)(c)—It would amount to estoppel on facts—On principle of waiver and estoppel. Held, provisions of the Bonus Act are applicable to the Tamil Nadu Housing Board.

       Held : It was an admitted position on behalf of the Housing Board during the relevant accounting years with which we are concerned that it is governed by the provisions of the Act and but for exemption under Section 36 of the Act it would be bound to pay the minimum statutory bonus as laid down by the Act to its employees. On the basis of this admitted position and stand on behalf of the Housing Board the High Court was quite justified in observing that the Housing Board had waived its objections regarding non-applicability of the Act under Section 32(v)(c) of the Act in the present cases. There is no question of any estoppel against Statute as tried to be submitted by learned senior counsel for the appellants in this connection. On factual aspects if a consistent stand is taken by the Housing Board to the effect that it is governed by the Act, implicit in the stand is the admission on facts that statutory exemption under Section 32(v)(c) of the Act factually is not earned by the Board. When on facts the Hous­ing Board has not thought it fit to raise such a factual dispute or contention for the relevant accounting years its stand admitting the non-existence of the rele­vant data for invoking Section 32(v)(c) of the Act must be held binding to the Housing Board. It is obvious that facts which are admitted need not be proved. The Housing Board itself by its conduct admitted non-existence of relevant factual data for invoking the powers under Section 32(v)(c) of the Act. Therefore, it can certainly be held to be bound by its admissions on these facts and it can at least to the lowest be said to have waived its contention in this connection for the rele­vant accounting years. It would amount to estoppel on facts and not on law and would also certainly amount to a conscious giving up of its claim for statutory exemption under the said provision. Thus on the principle of waiver and estoppel the second contention of the appellants has to be repelled as has been rightly done by the High Court. (Para 13)

       (iii) Payment of Bonus Act, 1965—Section 36—Power of exemption—Nature of power—It is a piece of conditional legislation—Before an appropriate Government can form its opinion regarding grant of partial or full exemption—Some factual conditions must be found to have exis­ted at relevant time to enable dele­gate to exercise its powers under the Act—It should form its opinion on objective facts furnished not only by the establishment claiming such exemption but also by employees likely to be affected by exercise of such power—Objective assessment of rele­vant data furnished by rival classes of persons not ruled out—Principle of fair play or consulta­tion or natural justice not totally excluded—Held, on facts, deci­sions rendered by High Court that impugned exemption notifications issued from time to time by State of Tamil Nadu u/s 36 were not legal—Sustainable.

       Held : In the setting of the Section, therefore, and the way it will work, as discussed earlier, implicit in the Section is the direction to the appropriate Government by the Legislature that it should form its opinion on objective facts furnished not only by the establishment or a class of establishments claiming such exemption but also by the employees who are likely to be affected by the exercise of such power and who should necessarily get an opportunity to submit their material in rebuttal. If this requirement is not read in the Section the exercise of power of exemption qua the establishment or a class of establishments which will have a direct pernicious adverse effect on the employees who would otherwise earn statutory benefit of the provisions of the Act would always remain a truncated, inchoate, half-baked and a still-born exercise of power and only on remand by competent court the exercise would become an informed one. Thus the submission of learned senior counsel for the appellants would make the exercise under Section 36 of the Act one in futility. To instill life in such an exercise and to make it comprehensive and kicking it has to be held that before an appropriate Government, which is approached by an establishment or a class of establishments for exempting them from the relevant provisions of the Act for a given accounting year, arrives at any opinion for exercise of such power it must take into consideration the rival version and material evidence in rebuttal furnished by the class of employees who are likely to be affected by such exercise of power and thereafter if such an opinion is arrived at by the appropriate Govern­ment on a comprehensive consideration of the rival versions and then the power is exercised, such an exercise would not become vulnerable on the ground of non-application of mind on relevant facts and subject to the challenge of such exercise on the ground that it was a mala fide or colourable exercise of power or conditions precedent were not satisfied such an exercise of power would not be likely to be found fault with by any competent court before which such an order under Section 36 is brought on the anvil of scrutiny. Therefore, in the aforesaid third category of cases even though the delegate is said to be exercising conditional legislative power it cannot be said to be entrusted by the Legislature with the function of a purely subjective nature based on its sole discretion, nor can it be said to be exercis­ing such power for binding uniformly the whole class of persons without benefiting one class at the cost of the other class of per­sons who are subjected to the exercise of such exemption power. It must, therefore, be held that in such third category of cases of exercise of power of conditional legislation objective assessment of relevant data furnished by rival classes of persons likely to be affected by such an exercise cannot be said to be ruled out or a taboo to such an exercise of power. It is also necessary to keep in view that in such category of cases the delegate exercising power of conditi­onal legislation does not lay down a uniform course of conduct to be followed by the entire class of persons covered by the sweep of such an exercise but lays down a favourable course of conduct for a smaller class of persons at the cost of rival large category of persons cov­ered by the very same exercise of power. In the case before us the legislation has prescribed objective standards and has permitted the delegate to grant exemption and to withdraw the benefit of the statute which is being enjoyed by the persons and in our opinion, in such a situation, principles of fair play or consultation or natural justice cannot be totally excluded. (Para 19)

       Further held : On the aforesaid conclusion of ours we cannot find fault with the decision rendered by the High Court that the impugned exemption noti­fication issued from time to time by the State of Tamil Nadu under Section 36 of the Act were not legal and valid and they were issued without giving any opportunity whatsoever to the employees of the Housing Board to have their say when they were necessarily adversely affected by the exercise of such power even though it was an exercise of conditional legislative power. Such an exercise of power did not fall within any of the first two categories of delegated legislations but squarely fell within the third category of such an exercise of power. (Para 21)

       The other relevant circumstances as mentioned in Section 36 will have to be read with the financial position of the claimant establishments themselves and their other circumstances have to be seen on the touchstone of public interest to enable the appropriate Government to form its opinion under Section 36 qua the claims of such existing establishments. (Para 27)

       (iv) Payment of Bonus Act, 1965 —Section 36—Power of exemption under—Conditional legislation—Requirement of objective assessment of relevant data furnished by rival classes of persons—Procedure to be followed by appropriate Government in such cases when moved by any establishment for exemption u/s 36.

       Held : When such applications are received by the appropriate Government which necessarily have to be supported by relevant data by the claimants, the receipt of such applications has to be brought to the notice of the employees likely to be affected by grant of such appli­cations and for that purpose notices can be suitably got affixed by the appropriate Government on the notice boards of the concerns or factory premises of the establishments where the workmen are working mentioning the dates on which such applications are received and the grounds on which such exemptions are claimed under such applications.

       Suitable public notice in newspapers having circulation in the area of operation of such establishments can be got published and for that purpose suitable expenses can be required to be reimbursed by the claimants to the appro­priate Government.

       The concerned employees through their representative unions may, under these circumstances, be permitted to file their written repre­sentations with relevant data for rebutting the material furnished by the claimants so that the rival version put forward by the employees also will become available to the appropriate Government before it forms its opinion. For that purpose the public notice and the notice to be affixed on the notice boards of the concerns should indicate as to within what reasonable time such representations may be furnished with relevant data by the representative unions of the employees concerned.

       Though it is not necessary for the appropriate Government before forming its opinion under Section 36 of the Act on the basis of the data furnished by the rival parties to give any personal hearing either to the claimant-establishment or to the representative union of the employees, it may be still open in appropriate cases for the Government, if so thought fit, to give opportunity of personal hearing to the representatives of the establishments as well as of the employees if any elucidation is required in this connection.

       For making the aforesaid exercise effective if the concerned employees through their representative unions seek an opportunity to look into the material supplied by the establishments in support of their claims for exemption, inspection of such material can be made available to the unions of employees to enable them to file their representations and to furnish the data in rebuttal for opposing such claims.

       Strict time schedule can be fixed by the appropriate Government within which the entire exercise can get completed so that the pro­ceedings may not drag on for indefinite number of months. Under the circumstances, therefore, it would always be open to the appropriate Government on receipt of such applications for exemption under Section 36 to fix the time schedule of four to six weeks from the data of publication of such notices about receipt of applications for exemption as aforesaid within which the employees through their representative unions, if so advised, may file their representations and within the same time they may be given an opportunity, if so required, to have inspection of the material furnished by the claimant-establishments in support of their claim applications. Once such time schedule is followed no written representations would ulti­mately be required to be entertained after the time limit fixed for receipt of such representations from the employees’ unions likely to be affected by the grant of such exemption so that within a short time thereafter as expeditiously as possible the appropriate Government can form its opinion, if any, and complete the exercise if it is of the opinion that all the requisite conditions for exercise of the power under Section 36 of the Act have been found to have existed qua the claimant-establishment or class of establishments for an appropriate period for which such exemption is to be granted. (Para 24)

       The aforesaid procedural steps are illustrative and not exhaus­tive. But they have to be read in Section 36 of the Act so as to make the Section workable and the exercise of power can be insulated against attack on the ground of irrational exercise of power. (Para 25)

       Further held that the ultimate decision of the High Court on Point No. 3 that the impugned exemption notifications issued under Section 36 from year to year by the State of Tamil Nadu were null and void, has to be upheld not on the ground that hearing, personal or otherwise, was not given to the employees but on the ground that the procedure indicated by us hereinabove regarding third category of cases of exercise of powers of conditional legisla­tions was admittedly not followed by the appellant-State while passing the impugned orders of exemption in favour of the Housing Board. (Para 26)

       (v) Legislation—Delegated legislation and conditional legislation—Distinction between—While exercising a delegated legis­lative function or a conditional legislative power, delegate may in a given case be required to consider view point of rival parties likely to be affected by exercise of such power—Section 36 of Payment of Bonus Act is a piece of conditional legislation only—­Applicability of principles of fair play. (Paras 14 to 19)