1. Dispute regarding entitlement to customary bonus for specific accounting years — reference to Industrial Tribunal under the Industrial Disputes Act, 1947. (Para 1 , 2 )
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1994 Supreme(SC) 20
SUPREME COURT OF INDIA
KULDIP SINGH AND S. C. AGRAWAL, JJ.
Workmen of Kettlewell Bullen and Co. Ltd., Appellant
Versus
Kettlewell Bullen and Co. Ltd., Respondent.
Civil Appeal No. 5224 of 1990, D/-6-1-1994.
Advocates:
G.B.PAI, H.K.PURI, JAMSHED BEY, SHARAD PURI, SUMAN JYOTI KHAITAN, TAPAS RAY
G.B.PAI, H.K.PURI, JAMSHED BEY, SHARAD PURI, SUMAN JYOTI KHAITAN, TAPAS RAY
Customary bonus is established by long-term, unbroken, and uniform payments unrelated to profits. It is distinct from statutory profit-based bonuses under the Payment of Bonus Act, 1965. References to the Act in settlements do not convert a customary bonus into a statutory one if the payment remains profit-independent.
Headnote:
Payment of Bonus Ordinance, 1965 - Section 34(3) - Workmen - Annual salary or wages - Customary Bonus - It was submitted by workmen that bonus was being paid to them since year and that for years bonus was paid at rate of three and a quarter months basic wages and for - years it was paid at rate of 10.5 per cent of total annual salary or wages and that in year, it was paid at rate of 4 per cent on basis of Payment of Bonus Ordinance, 1965 - Management disputed said claim of the workmen and asserted that workmen were not entitled to claim Customary Bonus and that they were only entitled to Statutory Bonus at the rate of 4% payable - Bonus which was being paid by management had ripened into a Customary Bonus due to a long usage - Tribunal held that workmen were entitled to fixed Customary Bonus at rate of 10.5 per cent of annual salary or wages earned by each concerned workmen for years - Said Award was challenged by management before Calcutta High Court in a writ petition filed under Article 226 of Constitution - Said writ petition was allowed by a learned single Judge of said High Court by judgment dated whereby learned single Judge set aside award made by the tribunal on the view that workmen had failed to establish that they were entitled to Payment of Customary Bonus – Held, concept of any customary bonus was unknown to nationalised banks and that in all nationalised banks which are wholly owned undertakings of Government of India, employees must be dealt with on a common denominator in matter of bonus - Having regard to aforesaid circumstances, it was held that although payment was made in month but that payment was not customary bonus - Learned single Judge and Division Bench, of High Court, Court are of view that in drawing an inference that bonus that was being paid by respondent company to appellants was customary bonus payable at rate of 10. 5 per cent of salary or wages could be justifiably drawn by tribunal having regard to facts and circumstances of case and High Court was in error in setting aside award and holding that bonus that was paid was not in nature of customary bonus - Judgment and order of Division Bench of High Court dated in Appeal No. 103 of 1983 as well as that of learned single Judge dated in Matter No. are set aside and the award dated made by Eighth Industrial Tribunal holding that for years appellants were entitled to payment of customary bonus at the rate of 10.5 per cent of annual salary or wages earned by each concerned workmen in each such year is restored - Parties are left to bear their own costs - Appeal allowed.
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Table of Contents
2. Workmen claim entitlement to customary bonus based on long usage; management contends entitlement is limited to statutory bonus under the Payment of Bonus Act, 1965. (Para 2 )
3. Customary bonus is distinct from profit-based bonus; uniformity in payment rate need not be absolute from inception; long-term profit-independent payments establish custom. (Para 3 , 4 , 5 , 6 , 7 , 17 , 18 , 19 , 21 , 22 , 23 , 24 , 25 , 26 , 27 )
4. Customary bonus is an independent right from statutory profit bonus, established by long, uniform, profit-independent payments, regardless of references to the Payment of Bonus Act. (Para 23 , 24 , 25 , 26 , 27 )
5. Appeal allowed — High Court judgments set aside — Industrial Tribunal award restoring customary bonus entitlement restored. (Para 29 , 30 )
6. What distinguishes a customary bonus from a statutory bonus under the Payment of Bonus Act, 1965?
Statutory bonus is a profit-oriented bonus based on sharing surplus profits. Customary bonus is based on tradition or custom, often linked to festivals, and is independent of profit calculations. (Para 3 , 23 , 24 )
7. What criteria are used to determine if a bonus payment has become customary or traditional?
Factors include payment over an unbroken series of years for a sufficiently long period, payment regardless of profit or loss, and payment at a uniform rate. (Para 4 , 5 , 6 , 7 )
8. Must the rate of bonus payment be uniform from the very first year to be considered customary?
No. Uniformity does not need to be established from the beginning to the end. If a uniform rate is maintained for a significant period after initial variations, the tribunal may ignore the early years. (Para 7 , 21 )
9. Does a settlement referencing the Payment of Bonus Act convert a customary bonus into a statutory profit bonus?
No. If payments are unrelated to profit, a reference to the Act, such as Section 34(3), does not alter the nature of the payment from customary to statutory. (Para 23 , 26 )
10. How does Section 17 of the Payment of Bonus Act, 1965 treat customary bonuses?
Section 17 allows an employer to deduct any Puja or customary bonus paid from the amount of statutory bonus payable under the Act for that accounting year. (Para 25 , 26 , 27 )
Judgment
S. C. AGRAWAL, J.:- This appeal by the workmen of Kettlewell Bullen and Company Ltd. (hereinafter referred to as the workmen) involves the question whether the workmen are entitled to Customary Bonus at the rate of 10.5 per cent of the total annual salary or wages in respect of the years 1974 to 1977.
2. By order dated September 11, 1979 the Government of West Bengal referred to the Eighth Industrial Tribunal (hereinafter referred to as the Tribunal) the following dispute for adjudication under Section 10 of the Industrial Disputes Act, 1947:
"Whether the workmen are entitled to customary bonus for the accounting years 1974, 1975, 1976 and 1977? If so, at what rate?"
Before the tribunal it was submitted by the workmen that the bonus was being paid to them since the year 1959 and that for the years 1959 to 1963 bonus was paid at the rate of three and a quarter months basic wages and for the- years 1965 to 1973 it was paid at the rate of 10.5 per cent of the total annual salary or wages and that in the year 1964, it was paid at the rate of 4 per cent on the basis of Payment of Bonus Ordinance, 1965. The management disputed the said claim of the workmen and asserted that the workmen were not entitled to claim Customary Bonus and that they were only entitled to Statutory Bonus at the rate of 4% payable under the Payment of Bonus Act, 1965 (hereinafter referred to as the Bonus Act). The tribunal by its award dated April 16, 1982 found that the bonus was paid by the management for a long period from 1959 onwards not on the basis of the profit calculation and usually in the month of September before Puja festival and that from 1965 to 1973 it was being paid at the uniform rate of 10.5 per cent and, therefore, the bonus which was being paid by the management had ripened into a Customary Bonus due to a long usage. The tribunal held that the workmen were entitled to fixed Customary Bonus at the rate of 10.5 per cent of the annual salary or wages earned by each concerned workmen for the years 1974 to 1977. The said Award was challenged by the management before the Calcutta High Court in a writ petition filed under Article 226 of the Constitution. The said writ petition was allowed by a learned single Judge of the said High Court by judgment dated September 21, 1982* whereby the learned single Judge set aside the award made by the tribunal on the view that the workmen had failed to establish that they were entitled to Payment of Customary Bonus. The said decision of the learned single Judge was confirmed, in appeal, by a Division Bench of the High Court by judgment dated November 17,1986. The present appeal is directed against the said judgment of the Division Bench of the High Court.
* Reported in 1983 Lab IC NOC 80 (Cal).
3. Since the appeal relates to demand for customary bonus, it is necessary to mention that customary bonus differs from the bonus (as normally understood) based on the general principle that labour and capital should share the surplus profits available after meeting prior charges. Customary bonus has also to be distinguished from bonus claimed as an implied term of the contract of employment. The circumstances in which an implied agreement may be inferred have been laid down in M/s. Ispahani Ltd. Calcutta v. Ispahani Employees Union (1960) 1 SCR 24, 289 .
4. In Grahams Trading Co. (India) Ltd. v. Its Workmen, (1960) 1 SCR 107: bonus sought as a matter of tradition or custom, has been distinguished from bonus payable as an implied term of employment and it has been laid down that for determining whether the bonus is payable by way of custom or tradition the following matters be taken into consideration:
"(i) whether the payment has been over an unbroken series of years; (ii) whether it has been for a sufficiently long period, though the length of the period might depend on the circumstances of each case even so the period may normally have to be longer to justify an inference of traditional and customary puja bonus tha
