Closing bonus is not an implied condition of service or a customary bonus, but rather a profit bonus dependent on the profits made by the appellant.

Judgment

WANCHOO, J. : This appeal. by special leave arises out of a question of bonus referred by the Goverment of West Bengal to the Third Industrial Tribunal. The appellant is a company carrying on business in Calcutta and the dispute relates to closing bonus for the year 1958. It appears that the appellant bad been paying a bonus which was called dosing bonus, to its workmen at the rate of one months pay from 1948 to 1957. In 1958, however, as the profits of the appellant fell considerably, the quantum of closing bonus was reduced to half a month s pay. In consequence a dispute was raised by the respondents-workmen represented by two unions and their claim was that they should have been paid one month s bonus as usual Consequently reference was made to the tribunal and the question for decision was whether the management was justified in reducing the quantum of closing bonus to half a month pay in 1958.

2. The case of the workmen was that the appellant had been paying two kinds of bonuses to its workmen each year, namely, (i) Puja bonus which was paid usually before the puja festival, and (ii) closing bonus which was paid after the close of the financial year ending on March 31st each year. The workmen claimed that closing bonus had been paid at a uniform rate from 1948 to 1957 and this payment had therefore become an implied condition of service between the workmen and the appellant; in the alternative the claim was that the payment had acquired the character of customary bonus and was not dependent upon profits earned by the appellant.

3. On the other hand the contention of the appellant was that the payment of closing bonus at a uniform rate of one month s pay for ten years previous to 1958 had not in fact turned the payment into an implied condition of service as this bonus was of the nature of profit bonus and its payment depended upon the profits made by the appellant. It was urged further that the very fact that this bonus was paid after the accounts for the year were made up and the profits ascertained showed that it was a bonus depending upon profits; the circumstance that it was paid at a uniform rate for sometime was only fortuitous, particularly as the appellant had increased the puja bongs as Its profits increased in order to help the workmen at festival time. As to the alternative case of customary bonus, the appellant contended that this bonus had no connection with any festival and was paid after the state of profits earned by the appellant was known and therefore could not be demanded as a customary bonus. Finally, the appellant pleaded that if closing bonus was treated as profit bonus there was no available surplus to justify the grant of any further amount as bonus besides half a month s pay which the appellant had already given to the workmen.

4. The tribunal came to the conclusion that it had not been proved that the payment of closing bonus had become an implied condition of service and in that connection relied on the decision of this Court in M/s. Ispahani Ltd. Calcutta v. Ispahani Employees Union. 1960-1 SCR 24: Further, it held that the bonus could not be held to be a customary bonus as there was nothing to show that it had been paid even in a year of loss. It therefore negatived the case of the workmen that closing bonus of one month s pay was payable every year after the accounts were closed either as an implied condition of service or as a customary bonus. The tribunal then went into the question whether any further amount besides half a months pay which had already been paid by the appellant as bonus could be awarded as profit bonus on the basis of the Full-Bench formula approved by this Court in the Associated Cement Companies Ltd. v. Its workmen, 1959 SCR 925 It held that there was sufficient available surplus to warrant payment of one month s pay as profit bonus and therefore ordered that half a month s basic salary be further paid as profit bonus to the workmen for the year in dispute. It is