IMPORTANT POINT
Where in a company having number of undertakings separate accounts are kept for each separate undertaking they shall be treated as different undertakings for the purpose of the Payment of Bonus Act, 1965.

Headnote:(i) Haryana Cooperative Society Act, 1984-Section 3, proviso and Section 34, third proviso-Payment of Bonus Act, 1965-Entitlement of higher bonus-Employees working with Primary Agricultural Cooperative Banks-Claim of bonus at the same rate at which it was paid to employees working in Apex Bank i.e. Haryana State Cooperative Land Development Bank Limited-Primary cooperative banks maintaining separate books of accounts and separate Balance Sheet and Profit and Loss account were prepared-Primary cooperative banks are distinct cooperate entities with their own respective registration or incorporation-Primary Banks incurring losses-There is no allocable surplus-Whether High Court was justified in directing payment of bonus at the rate payable to staff working with Apex Bank-(No).
       Held : Third proviso to Section 3 makes it clear that where for any accounting year, a separate Balance Sheet and Profit and Loss account are prepared and maintained in respect of any department or undertaking or branch, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under the Act for that year, unless for the previous period such department or undertaking or branch was treated as a part of the establishment for the purpose of computation of bonus. Similarly, third proviso to Section 34 deals with modalities for working out entitlement for bonus. (Para 7)
       The entitlement of higher bonus comes in case the allocable surplus permits payment of higher bonus in terms of the applicable formula. A reading of the impugned judgment shows that the High Court was of the view that Rule 21 had overriding effect vis-a-vis Section 34, by referring to Section 34-A of the Act. The view is clearly untenable. Rule 21 was interpreted to mean as if all other provisions of the Act had to give way to Rule 21. It is really not so. Sections 34 and 34-A make the position clear. The Primary Banks have independent corporate existence and were undisputedly maintaining separate Balance Sheet and Profit and Loss account. Therefore, proviso to Section 3 of the Act has full application. Unfortunately, the High Court did not take into account the effect of the proviso to Section 3, and third proviso to Section 34. (Para 12)
       Where in a company having number of undertakings separate accounts are kept for each separate undertaking though it is not a requirement of the Companies Act, 1956 (in short the Company Act ), they shall be treated as different undertakings for the purpose of the Act. These aspects do not appear to have been considered by the High Court which erroneously proceeded to hold about Rule 21 having overriding effect over Section 34. Rules are framed under Section 32 of the Act. Therefore, question of Rules have overriding effect does not arise. (Para 13)
       (ii) Interpretation of Statutes-Proviso to Section-Effect of-Normal function of a proviso is to except something out of the enactment or to qualify something enacted therein.
       Held : The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. "If the language of the enacting part of the statute does not contain the provisions which are said to occur in it you cannot derive these provisions by implication from a proviso. "Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co. (1897 AC 647) (HL). Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. (Para 8)

JUDGMENT

Arijit Pasayat, J.-Delay condoned.

Leave granted.

2. The pivotal issue involved in this appeal relates to the question as to whether the employees working with Primary Agricultural Cooperative Banks (in short Primary Banks ) are entitled to bonus at the same rate at which it was paid to employees working in the Apex Bank (also described as State Bank ) i.e. The Haryana State Cooperative Land Development Bank Limited. The Apex Bank is governed by the Haryana Cooperative Society Act, 1984 (in short the Act ). The appellant transacts its business mainly through Primary Banks which are its members. The members of the Apex Bank belonging to the area of operation of the particular Primary Bank automatically become members of the concerned Primary Bank from the date of registration. Staff of the Primary Banks except class IV employees are drawn from the Apex Bank out of the cadre maintained by it in terms of clause 70 of the model by-laws applicable to the Primary Banks. The respondent No. 1- union raised a demand stating that it is entitled to bonus at the rate applicable to employees of the Apex Bank. The claim was resisted by the Primary Banks on the ground that they are separate entities with separate Balance Sheet and Profit and Loss accounts and have a distinct cooperative and corporate identity under the Act and, therefore, is not required to pay bonus at the same rate as the employees of the Apex Bank in terms of Payment of Bonus Act, 1965 (in short the Act ). Accepting the writ petition filed by respondent No. 1- union, learned Single Judge of the Punjab and Haryana High Court directed payment of bonus at the rate payable to the staff working with the Apex Bank, which is also described as the State Bank in the rules framed by the Registrar of Cooperative Societies under Section 37(2) of the Act. The view was confirmed by a Division Bench in Letters Patent Appeal by the impugned judgment.

3. Mr. P.P. Rao, learned senior counsel, appearing for appellant-Bank submitted that the High Court lost sight of third proviso to Section 34 of the Act, which clearly stipulated that the minimum bonus was 8.33 per cent of the salary or wages earned by the employee concerned during the accounting year, if the employer has no allocable surplus in the accounting year or the amount of such allocable surplus is only that which for the proviso to sub-section (2A) of Section 10 would entitle the employees only to receive the amount of bonus which is less than the aforesaid percentage.

4. It was submitted that the High Court erroneously held that Rule 21 has overriding effect vis-a-vis the aforesaid provision. It was further submitted that merely because the members of the staff were drawn from the Apex State Bank, it does not mean that they continued to be the employees of the State Bank. On the contrary, they are employees of the Primary Bank with different service conditions. It was further submitted that if really allocable surplus was to be taken as a whole including the financial results of both the Apex Bank and the primary Banks for payment at par with that of the employees of the Apex Bank, then there has to be aggregation of the profits of the Primary Banks which are running at loss with that of the Apex Bank. Unless that is done there was no rationale for the direction given by the High Court to pay at par with the employees of the Apex Bank.

5. Per contra, learned counsel for the respondent No. 1 - union submitted that the High Court has correctly analysed the legal position. In any event, the appellant itself was adopting the formula approved by the High Court in terms of Rule 21. Reference was made to certain correspondences made by the Managing Director in the matter of bonus i.e. letter dated 28.8.1980 (relating to payment of bonus for year 1978-79).

6. In order to appreciate the rival submission a few provisions need to be noted. Sections 3, 10, 34 and 34-A are as under:

"3. Establishment to include departments undertakings an

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2003 Supreme(SC) 1306

IMPORTANT POINTWhere in a company having number of undertakings separate accounts are kept for each separate undertaking they shall be treated as different undertakings for the purpose of the Payment of Bonus Act, 1965.

Cases Referred (8)

IMPORTANT POINT
Where in a company having number of undertakings separate accounts are kept for each separate undertaking they shall be treated as different undertakings for the purpose of the Payment of Bonus Act, 1965.