1. Dispute regarding entitlement to customary Puja bonus and profit bonus for specific accounting years. (Para 1 , 2 , 3 )
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1964 Supreme(SC) 298
SUPREME COURT OF INDIA
9th November 1964
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO AND M. HIDAYATULLAH, JJ.
Vegetable Products Ltd., Appellant
Versus
Their Workmen, Respondents.
Civil Appeal No. 1092 of 1963.
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (Mr. B.P. Maheshwari, Advocate, with him), for Appellant; Mr. B. Sen, Senior Advocate, (Mr. Janardan Sharma, Advocate, with him), for Respondents.
Important Points
A customary festival bonus requires an unbroken series of payments at a uniform rate, regardless of profit. Payments made ex gratia, conditionally, or as advances for other bonuses break this continuity and negate the customary nature of the bonus.
Subject
Labor Law - Industrial Disputes
Headnote
(A) Industrial Law - Customary Bonus - Criteria for establishing a customary or traditional bonus on the occasion of a festival: (i) that the payment has been made over an unbroken series of years; (ii) that it has been for a sufficiently long period; (iii) that it has been paid even in years of loss and did not depend on the earning of profits; and (iv) that the payment has been made at a uniform rate throughout. (Paras 7, 8)
(B) Customary Bonus - Effect of ex gratia or conditional payments - A claim for customary bonus is negatived if payment was made ex gratia and accepted as such, or if it was made on conditions (such as minimum days of work) or as an advance to be adjusted against other bonuses, as such instances break the required unbroken series of payments. (Paras 9, 10)
(C) Profit Bonus - Quantum - A profit bonus cannot be awarded in excess of the available surplus determined for the relevant year. (Para 11)
Facts of the case:
A dispute arose between an employer and its workmen regarding the payment of a festival bonus for 1961 and profit bonuses for the years ending December 1959 and December 1960. The tribunal held that the festival bonus had become customary at the rate of one month's wages and awarded profit bonuses for both years. The employer challenged the finding on the customary nature of the festival bonus and the calculations regarding the profit bonus.
Findings of Court:
The festival bonus was not customary because the payment in 1959 was made and accepted as ex gratia and was subject to a condition regarding the number of days worked, and payments in 1960 and 1961 were accepted as advances to be adjusted against profit bonuses, thereby breaking the continuity of payment. The profit bonus for 1960 was set aside as the award exceeded the available surplus. The profit bonus for 1959 was upheld as the amount awarded was reasonable relative to the available surplus.
Issues: Whether the payment of a festival bonus had become customary or traditional; and whether the tribunal's awards for profit bonuses for the years 1959 and 1960 were based on correct calculations of available surplus.
Ratio Decidendi: To establish a customary festival bonus, there must be an unbroken series of payments over a long period at a uniform rate, including years of loss. Payments made ex gratia, conditionally, or as advances for other bonuses break this continuity and negate the claim of a custom. Additionally, a profit bonus award is unsustainable if it exceeds the actual available surplus.
Result: Appeal partly allowed.
(B) Customary Bonus - Effect of ex gratia or conditional payments - A claim for customary bonus is negatived if payment was made ex gratia and accepted as such, or if it was made on conditions (such as minimum days of work) or as an advance to be adjusted against other bonuses, as such instances break the required unbroken series of payments. (Paras 9, 10)
(C) Profit Bonus - Quantum - A profit bonus cannot be awarded in excess of the available surplus determined for the relevant year. (Para 11)
Facts of the case:
A dispute arose between an employer and its workmen regarding the payment of a festival bonus for 1961 and profit bonuses for the years ending December 1959 and December 1960. The tribunal held that the festival bonus had become customary at the rate of one month's wages and awarded profit bonuses for both years. The employer challenged the finding on the customary nature of the festival bonus and the calculations regarding the profit bonus.
Findings of Court:
The festival bonus was not customary because the payment in 1959 was made and accepted as ex gratia and was subject to a condition regarding the number of days worked, and payments in 1960 and 1961 were accepted as advances to be adjusted against profit bonuses, thereby breaking the continuity of payment. The profit bonus for 1960 was set aside as the award exceeded the available surplus. The profit bonus for 1959 was upheld as the amount awarded was reasonable relative to the available surplus.
Issues: Whether the payment of a festival bonus had become customary or traditional; and whether the tribunal's awards for profit bonuses for the years 1959 and 1960 were based on correct calculations of available surplus.
Ratio Decidendi: To establish a customary festival bonus, there must be an unbroken series of payments over a long period at a uniform rate, including years of loss. Payments made ex gratia, conditionally, or as advances for other bonuses break this continuity and negate the claim of a custom. Additionally, a profit bonus award is unsustainable if it exceeds the actual available surplus.
Result: Appeal partly allowed.
Legal Category Hierarchy
Advocates:
B.P.MAHESHVARI, B.SEN, JANARDAN SHARMA, M.C.SETALVAD
B.P.MAHESHVARI, B.SEN, JANARDAN SHARMA, M.C.SETALVAD
Table of Contents
2. Workmen claim bonus as customary or implied term; employer contends no custom exists and no available surplus for profit bonus. (Para 2 , 3 )
3. Payments made ex gratia or as advances break the continuity of custom; profit bonus awards must be supported by available surplus. (Para 6 , 9 , 10 , 11 , 12 , 13 )
4. Customary bonus requires an unbroken series of payments over a long period, at a uniform rate, independent of profit or loss. (Para 7 , 8 )
5. Appeal partly allowed; awards for customary Puja bonus and 1960 profit bonus set aside; 1959 profit bonus award upheld. (Para 14 )
6. What are the requirements to establish a customary or traditional festival bonus?
A customary bonus is established if payment has been made over an unbroken series of years for a sufficiently long period, paid even in years of loss, and at a uniform rate throughout. (Para 7 , 8 )
7. Does a payment made ex gratia or with conditions negate a claim for customary bonus?
Yes, if a payment is made and accepted as ex gratia or is subject to conditions, such as minimum working days, it breaks the continuity required to establish a customary bonus. (Para 9 , 10 )
8. How is the requirement of a uniform rate interpreted for customary bonuses?
Uniformity does not need to be established from the very beginning; a consistent rate maintained over a significant later period may suffice, provided there are no subsequent breaks or contradictions. (Para 8 )
9. Can a profit bonus be awarded if the amount exceeds the available surplus?
No, a profit bonus cannot be awarded in excess of the available surplus; if the surplus is insufficient to cover the awarded amount, no profit bonus can be granted for that year. (Para 11 )
Judgment
WANCHOO, J. :- This is an appeal against the award of the Fourth Industrial Tribunal, West Bengal. There was a dispute between the appellant and, its workmen as regards profit bonus with respect to the years ending December, 1959 and December 1960. Further them was dispute also about Puja bonus payable in 1961. Consequently, a reference was made by the Government of West Bengal on March 13, 1962 to the tribunal with respect to these matters, namely, (i) Puja bonus payable in 1961, and (ii) profit bonus for the years ending December 1959 and December 1960.
2. The case of the workmen was that payment of Puja bonus had become either an implied term of employment between them and their employer or customary. As to profit bonus, the workmen claimed that they were entitled to profit bonus in view of the large profits earned by the appellant in the two years in question. Thus they claimed four months wages as profit bonus for both the years and 1 1/2 months wages as Puja bonus payable in 1961.
3. The appellant on the other hand contended that payment of Puja bonus had neither become an implied term of service between the appellant and its workmen nor had the same become customary or traditional at Puja time. As to profit bonus, the appellant s case was that there was no available surplus in either of the two years and, therefore, the workmen were not entitled to any profit bonus.
4. The tribunal took necessary evidence and came to the conclusion that payment of one month s wages at the time of Puja as customary bonus had been established, though it apparently did not accept the claim that payment of Puja bonus as an implied condition of service had been proved. As to profit bonus it came to the conclusion on calculation of available surplus that four months wages could be paid as profit bonus for the year ending December 1959 and one month s wages for the year ending December 1960. In the result it made its award accordingly.
5. The appellant challenges the finding of the tribunal that Puja bonus at the rate of one month s wages per year had become customary in this concern. The appellant further challenges the calculations of the tribunal with respect to profit bonus for the two years in dispute.
6. We shall first consider whether it has been established that payment of one month s wages as bonus at the time of Puja has become customary in this concern. So far as the contention that such payment had become an implied condition of service is concerned, it does not appear to have been seriously pressed before the tribunal; and in any case it stood negatived by the fact that in 1959 the payment was made and accepted as ex gratia. It is, therefore, necessary only to consider whether the tribunal was right in holding that payment of one month s wages at the time of Puja as customary bonus has beet proved.
7. The circumstances for proving the payment of customary or traditional bonus on the occasion of a festival like Puja were considered by this Court in The Grahans Trading Co. (India) Ltd. v. Its Workmen (1960) 1 SCR 107, and it was laid down that on proof of the following four circumstances payment of customary or traditional bonus on the occasion of a festival like Puja can be said to be established, namely-
"(i) That the payment has been made over an unbroken series of years :
(ii) that it has been for a sufficiently long period, the period has to be longer than in the case of an implied term of employment.
(iii) that it has been paid even in years of loss and did not depend on the earning of profits; and
(iv) that the payment has been made at a uniform rate throughout."
It was also held that
"the fact that the employer made the payment ex gratia made no difference; nor did unilateral declarations of one party inconsistent with the course of conduct adotped by it matter".
8. The tribunal has held that these conditions have been satisfied in the present case and that is how it came to the conclusion that payment of customary or tradition
