Judgment

BHAGWATI, J. - These two appeals, by special leave, arise out of an industrial dispute between the Central Inland Water Transport Corporation Ltd. (hereinafter referred to as the Corporation) and its workmen in regard to payment of bonus for the years 1967-68 and 1968-69 under the Payment of Bonus Act, 1965. The industrial dispute was referred to the Industrial Tribunal for adjudication under Section 10 of the Industrial Disputes Act, 1947. The Corporation raised three preliminary objections, one of which was - and that is the only preliminary objection with which we are concerned in the present appeals - that the establishment of the Corporation in which the workmen were employed was newly set up since 5th June, 1967 and the workmen were, therefore, by reason of Section 16 of the Payment of Bonus Act, 1965, not entitled to payment of bonus for the years 1967-68 and 1968-69. The Industrial Tribunal by an award dated 2nd March, 1971 rejected these preliminary objections and held inter alia that the Corporation was not entitled to claim immunity from payment of bonus under S. 16 and directed that the hearing of the reference should proceed on merits. The reference was then heard on the question of quantification of the amount of bonus and by an award dated 28th July, 1972, the Industrial Tribunal held that each workman was entitled to bonus at the rate of 4 per cent of the wage earned by him during each year or Rs. 40/- whichever is higher. This second and final award is challenged in appeal No. 179 of 1973, while the first preliminary award is challenged in appeal No. 180 of 1973. It is not disputed on behalf of the Corporation that if its liability to pay bonus is established and its claim to immunity is negatived, the quantum of bonus payable to the workmen would be what has been awarded by the Industrial Tribunal. The only question which, therefore arises for consideration in these two appeals is as to the liability of the Corporation to pay bonus under the Payment of Bonus Act, 1965. The Corporation claims to be free from liability to pay bonus by virtue of the provisions of S. 16. Is this claim well founded? To answer this question it is necessary to set out a few facts.

2. The River Steam Navigation Co. Ltd, (hereinafter referred to as the Company) was a limited liability Company incorporated in England in 1914. It owned a fleet of vessels which it plied in inland waters for carrying passengers and cargo from Calcutta to different places in Assam and vice versa along rivers flowing through what was then East Pakistan. It also owned a dock called Rajabagan Dockyard at 42, Garden Reach, Calcutta where it carried out repairs to its own vessels. A majority of shares of the Company were purchased by the Government of India and considerable financial assistance was given by the Government of India from time to time in view of the great strategic importance of keeping the river rotes to Assam open, but even so, the Company incurred losses in carrying on its operations. The climax came with the armed conflict between India and Pakistan towards the end of 1965 when river transport service had to be closed because the river routes passed through what was then East Pakistan and in fact, forty vessels belonging to the Company were seized by the Pakistan Government. This brought about total cessation of the principal business activity of the Company and in consequence, its financial position became so precarious that of 21st June, 1966 an application for winding up of the Company was made by one of its creditors in the High Court of Calcutta. It was realised by the Government of India that it was impossible to save the company as its total liabilities amounted to over Rs. 8 crores, the main creditors being the Government of India in the sum of about Rs. 6.19 crores, the State Bank of India in the sum of Rs. 1.50 crores and the Chartered Bank in the Sum of Rs. 1.60 crores. The Government of India, therefore, put forward a Scheme