1. Dispute over payment of profit bonus and bonus as an implied condition of service under industrial adjudication. (Para 1 )
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1964 Supreme(SC) 106
SUPREME COURT OF INDIA
25th March, 1964
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO AND K.C. DAS GUPTA, JJ.
The Management of Bombay Co. (Private) Ltd. Cochin, Appellant
Versus
The Workmen of Bombay Co. (Private) Ltd., represented by the Cochin Commercial Employees Association, Respondents.
Civil Appeal No. 583 of 1963.
Advocates appeared
Mr. G. B. Pai, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Appellant; Mr. Janardan Sharma Advocate, for Respondents.
Advocates:
G.B.PAI, J.B.DADACHAN, JANARDAN SHARMA, O.C.MATHUR, Ravindra Narayan
G.B.PAI, J.B.DADACHAN, JANARDAN SHARMA, O.C.MATHUR, Ravindra Narayan
An implied condition of service for bonus payment, where rates are non-uniform, can only be inferred if payments are connected to a festival. The minimum quantum is a question of fact based on consistent past payments and remains payable even during years of financial loss.
Headnote:(A) Industrial Dispute - Bonus - Implied Condition of Service - Where the rate of payment of bonus has not been uniform in the past, an implied condition of service for the payment of some bonus can be inferred only if such payment is connected with a festival. (Para 4)
(B) Implied Condition of Service - Nature of Payment - The designation of a payment as an "advance" does not detract from the conclusion that it was paid as a bonus if a minimum amount was consistently left with the employees and not recovered. (Para 6)
(C) Quantum of Bonus - The minimum amount payable as an implied condition of service is a question of fact to be determined based on the minimum amount consistently paid over an unbroken period. Such minimum payment must be paid even if there is a loss in any given year. (Para 8)
Facts of the case:
A dispute arose between an employer and its workmen regarding the payment of bonus for two consecutive years. The workmen claimed bonus on the basis of profits earned and on the basis that payment of some bonus during a festival had become an implied condition of service. The tribunal found no available surplus for profit bonus but held that a bonus of 1.5 months' salary was an implied condition of service. The employer appealed, arguing that no such implied condition existed and that the payments made were merely advances against salary.
Findings of Court:
The court found that since the rate of payment was not uniform, an implied condition could only be inferred if the payment was connected to a festival. Evidence established that payments were consistently made around a specific festival since 1951-52. Although the employer termed these payments as "advances," the fact that at least one month's salary was always retained by the workmen indicated it was a festival bonus. The court determined that the minimum amount consistently paid was one month's salary, not 1.5 months.
Issues: Whether an implied condition of service for bonus can be inferred without connection to a festival when payments are non-uniform, and the determination of the minimum quantum of such bonus.
Ratio Decidendi: An implied term of service for bonus payment in the absence of a uniform rate can only be inferred if the payment is connected to a festival. Once such a condition is established, the minimum amount payable is a question of fact based on historical payments. This minimum amount is mandatory regardless of whether the employer suffered a loss in a particular year.
Result: Appeal partly allowed.
Legal Category Hierarchy
Table of Contents
2. Whether bonus payment constitutes an implied condition of service regardless of festival connection and the determination of the minimum payable amount. (Para 3 )
3. Implied conditions for non-uniform bonus payments require a festival connection; consistent Christmas payments establish such a condition despite advance designations. (Para 4 , 5 , 6 , 7 )
4. An implied condition of service for bonus payment, where rates are non-uniform, can only be inferred if payments are connected to a festival. (Para 4 )
5. Appeal partly allowed; bonus as an implied condition of service reduced to a minimum of one month's salary. (Para 8 , 9 )
6. When can an implied condition of service for bonus payment be inferred if the payment rates have varied?
An implied condition of service for bonus payment can be inferred despite non-uniform rates only if the payments are clearly connected to a specific festival. (Para 4 )
7. Does designating a festival payment as an advance prevent it from being an implied condition of service?
No, if a minimum portion of the advance is consistently left with the workmen and not recovered, it can be treated as a bonus and an implied condition of service. (Para 6 )
8. How is the minimum amount for a festival bonus as an implied condition of service determined?
The minimum amount is a question of fact determined by the lowest amount consistently paid over an unbroken period of time connected to the festival. (Para 8 )
9. Is a minimum festival bonus payable even during a year of financial loss?
Yes, once an implied condition of service for a minimum festival bonus is established, that minimum amount must be paid even if the employer suffers a loss. (Para 8 )
Judgment
WANCHOO, J. : This is an appeal by special leave from the award of the Industrial Tribunal Ernakulam. A dispute arose between the appellant and its workmen as to payment for bonus for the years 1957-58 and 1958-59, and was referred for adjudication to the tribunal. The respondents claimed bonus on two grounds : (i) on the basis of profits earned by the appellant, and (ii) on the basis that payment of some bonus at Christmas had become an implied condition of service between the appellant and its workmen. It may be mentioned that the claim was for four months wages for each year on the basis of profit bonus. The alternative claim was for 1 1/2 months wages for each year on the basis of an implied term of service. We may also mention that the appellant had paid two months basic salary as bonus for the year 1957-58, and one Month s basic salary as bonus for the year 1958-59. The appellant contended that there was no surplus available on the basis of the Full Bench formula applied in such cases and therefore no profit bonus could be paid. It also contended that no bonus was payable as an implied term of service.
2. The tribunal found on an application of the Full Bench formula that there was no available surplus in either of the two years and therefore no bonus was payable as profit bonus. It then went into the question whether any bonus was payable as an implied condition of service and relying on the decision of this Court in M/s. Ispahani Ltd. v. Ispahani Employees Union , (1960) 1 SCR 24 : held that, payment of bonus at the rate of 11/2 months salary as an implied condition of service had been established. It therefore ordered the appellant to pay that amount after taking into account one month s salary already paid by it. It is this award of the tribunal which has been brought before us by special leave.
3. The main contentions on behalf of the appellant are two-fold :
1. It is urged that the tribunal erred in holding that payment of bonus as an implied condition of service need not be attached to any festival;
2. On the undisputed facts of this case, the tribunal was not right in holding that a case had been made out for payment of some bonus as an implied condition of service, and in any case, even if a case had been made out for payment of some bonus, it could not be at the rate of 11/2 months salary.
4. Turning to the first contention raised on behalf of the appellant, we are of opinion that the tribunal was not right in holding that there could be an implied condition of service as to payment of bonus unconnected with any festival. In Ispahani s case, (1960) 1 SCR 24 : the question raised was whether there was an implied condition of service for payment of some bonus at the time of puja festival in Bengal. In that connection this Court laid down the tests for holding when it could be said that there was an implied condition of service for payment of some bonus in connection with some festival. This Court also pointed out that it was not necessary in order to established an implied condition of service as to payment of some bonus at the time of a festival like puja in Bengal that the amount paid in connection with the festival should be uniform, and that in the absence of a uniform rate, an implied agreement to pay something could be inferred. Now where the payment is connected with a festival it is possible to infer that there is an implied condition to pay something at the time of the festival, even though the evidence discloses that in previous years payment has not been made at a uniform rate. But it is difficult to see how the principle which applies to a case of payment at the time of a festival can be extended to infer an implied term of payment where the payment has been made entirely unconnected with any festival and at rates which have varied from year to year. We are therefore of opinion that when this Court laid down that there was an implied condition of service to pay something about the time of pu
