Dismissed

Workmen of M/S Bata Shoe Co., (P) Ltd. v. M/S Bata Shoe Co. (P) Ltd.

Supreme Court1 May 19721972 INSC 130 · [1973] 1 S.C.R. 4501972 INSC 130

Case brief

AI extract

What is this about?

Workmen claimed statutory profit bonus for 1964 in addition to the 'general bonus' paid quarterly under the 1962 agreement. The Court held the payment was an annual production-linked bonus in lieu of profit bonus, so section 32(vii)(a) barred any further claim under the Act.

What did the court decide?

Award of the Third Industrial Tribunal, West Bengal confirming denial of statutory bonus was upheld; no costs.

What the court decided

Workmen of M/S Bata Shoe Co., (P) Ltd… — Labour and Industrial Disputes | Supreme Court (1973)

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450

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WORKMEN OF M/S DATA SHOE CO., (P) LTD.

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MIS DATA SHOE CO. (P) LTD.

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May 1, 1972

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[C. A. VAIDIALINGAM AND I. D. DUA, JJ.]

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Payment of Bonus Act 1965-P'IJlment of profit bonus-Worktra having agreed in writing to accept bonus in terms of the agreements-Whether under, s. 32(vii) (a) such agreements bar further bonus.

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A dispute arose between the respondent company and the appellant• workmen as regards payment of profit bonus under the Payment of Bonus Act 1965. The company, and the appellants, represented by its Union had J,een entering into various agreements from time to time, the last being the agreement on August• 30, 1962 (,Ex. A-5). As per Ex. A-5, the respondent paid bonus for the year 1964 at the rates mentioned thelcein. The appellants demanded that. they should be paid the profit bonus as !)er the Act in addition to what has been paid under the agreement. Ex. A-5 . The Company pleaded s. 32(vii) (a) of the Bonus Act as a -bar to further bonus. On a reforence to the Industrial Tribunal, it was held that. in view of the general bonus paid under agreement Ex. A-5, it was .an annual bonus, though paid qualrterly, and it was linked with production or productivity and that it ·~'as paid in lieu of bonus based on profits. TherefoPo, the workmen are not entitled to claim bonus for the vear 1964 under the Act. On appeal to this Court, it was contended that paymcuts 11nder the agreement, Ex. A-5, was made quarterly and they do not have th» character of an ·annual bonus. There is no material or record to show that the company paid the amount in lieu of bonus based on profits. The amount paid under the ~greement was only an ex-gratia. payment and not a profit bonus under the Act.

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The respondent, howe,-er, contended that in order to decide tbr character of the general bonu; paid under the agreement of 1962, previous agreement must be referred to, which would clearly show that what was being paid by ti>• company was production bonus or as an inc.entive wage and not an ex-gratia payment

Dismissing the appeal,

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HELD : The general_ b0nus paid under Art VJ or the agreement dlded August. 30, 1962, Ex. A-5, was a payment of annual bonus based on profits_ Although Article VI of Ex. A-5 does not throw much light as to the nature and charac~" of the general bonus payable under it, a reference back to previous settlements and discussjons between the parties will show that the pattern of bonus paid to the workers were mmetimes called production bonus, ]ater on called ex-gratia paymenL but from 1951 called as general bonus, which was paid quarterly, at the request of ti•• workel-s. at a particular percentge based on salary exclud- ing dearness allow!lnce, H'3.ving this background in mind, it is clear that what wa' being paid under Art. VI of Ex. A-5 was a payment linked with production or productivity. The principal emphasis was that the amount, was being paid as an incentive to production and therefore, it was paid as production bonus as a wage incenti. Further, it was an annual bonus paid from year to yealr not only during the period of agreement but also for the succeeding year till the required notice was given under the agreement. Even then, the agrrement was to continue lo have

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WORKMEN v. BATA SHOE co. (Vaidialingam, I.)

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451

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A force notwithstanding· the notice till a fresh agreement en.tered into. Therefore, it is clear that ~ payment of ge°".:a' bonu• paid quarterly was "annual bonus" as contemplated by s. 32(vn) (a) of the :Act. !464 A-465 GI

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Smith v. Smith, (1923) P.D. 191, and Moss' Emp:res Ltd. v. Inland Revenue Comml;sioners, (1937] 3 All E.R. 381 followed.

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B Under the circumstance< workers could claim not any additional bonus under the Act for the period. for which the agreement was in operation and s. 32(vii) (a) of the Act was a bar to their claim. (465 Cl

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M/s Titaghur Paper Mills Co. Its Workmen, [1959] Supp, 2, S.C.R. 1012; The New Manek Clwwk Spinning and Weaving Co. Ltd. Ahmedabad and others v. The Textile Labour Association, Ahmedabad, [1961] 3 S.C.R. 1 and Sanghi Jeevaraj Chewar Chand and others v. Secretary, Madras Chillies, Grains Kirana Merchants Workers' Union and another, [1969] l S.C.R. 366, referred to.

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CIVIL APPELLATE JURISDICTION: C.A. No.1040 of 1968.

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Appeal by special leave from the Award dated September 16, 1967 of the Third Industrial Tribunal, West Bengal in Cas• No. VIII-235/66.

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Debabrata Mookherjee, Janardan Sharma and Anil Das Chowdhury, for the appellants.

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C. K. Daphtary and M. C. Bhandare, B. P. Maheshwari and Leila Sheth, for the respondent.

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The Judgment of the Court was delivered by

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Vaidialingam J. In this appeal, by special leave, the short question that arises for consideration is whether the appellants are precluded bys. 32(vii)(a) of the Payment of Botius Act, 1965 (hereinafter to be referred as the Ac-t) from. claiming bonus under the Act in view of the agreement Ex. AS dated August 30, 1962.

The respondent Company is a fairly prosperous concern and one of the biggest of its kind in Asia. It has factories at Batanagar in West Bengal, Faridabad in the present Haryana State, Digha and Mokamehghat in 'Bihar and Administrative Offices in Calcutta. It has Central Repair shops in Calcutta and other places and a Purchasing Depot in Kerala. It has about 900 shops for retail sale scattered throughout the country besides the wholesale agents. Its branches have a wide market both in this country as well as abroad. It employs a very large number of workmen in its factory, Administrative Office and Central Repair Shops. The Company and the appellants, represented by its Unions have been entering into various agreements from time to time, the last of which was on August 30, 1962, Ex. A.5. As per Ex. A.5 the respondent paid bonus for the year 1964 at the rates mentioned therein. The appellants demanded that they should be paid the profit bonus as per the Act ir. addition to what has been paid as

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(1973] l S.C.R.

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SUPREME COURT REPORTS

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per Ex. A.5 The Company declined to accede to the demand of the workmen on the ground that the general bonus paid under· Ex. A.5 was an amount paid as production bonus or incentive wages. The Company also pleaded s. 32(vii) (a) as a bar.to the workmen making a claim for payment of bonus under the Act. During the conciliation proceedings the Union and the Company agreed to have the dispute referred for adjudication to the Industrial Tribunal. Accordingly, the State Government on June 25, 1966, referred to the Third Industrial Tribunal, West Bengal, for adjudication the following dispute : · -

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"Whether the employees of the Company represented by Bata Mazdoor Union are entitled to Bonus for the year, 1964 under the Payment of Bonus Act, 1965 in addition to the Bonus paid to them and whether in view of ~ Agreement dated the 30th August, 1962, between the Union and the Company for payment of Bonm:, the Payment of Bo'l.us Act, 1965 is applicable to such employees."

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Before the Tribunal the appellants' plea was that the amount paid under the agreement Ex. A. 5 is an ad hoc or an ex-gratia payment made out of charity and as a supplement to the wages and that it was not a bonus linked with production or productivity. It was not an annual payment, nor was it paid in lieu of bonus based on profits. The workmen accepted the position that the general bonus paid under the agreement was neither customary nor a profit bonus; nor a bonus as an implied term of contract. On all ·these grounds the workmen pleaded that s. 32(vii)(a) is no bar to their claim for bonus under the Act.

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The Company on the other hand, after a reference to the v~rious prior agreements, under which the amounts have been paid as bonus, though under different names, pleaded that the general bonus paid under the agreement Ex. A5 was an amount paid as production bonus or incentive wages. The Company placed considerable reliance on the minutes of the discussions that took pface between the Union and the Company whenever demands were raised and the agreements arrived at between the parties, which were later on incorporated as formal settlements from time to time. These proceedings were relied on by the Company for the purpose r>f showing that the demands for payment of bonus were as production bonus and that what was ultimately paid under the various agreements including the one in question, namely, Ex. A.5 were all understood by all parties as production bonus or incentive wages. As the necessary conditions required under s. 32(vii)(a) were present in this case, according to the Company,· the claim for profit bonus under the Act is not sustainable.

WO!WtfEN v. BAT>, llH9t: C(),. (Yaiakdillggrn., /.)

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453

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Thci ll\clustri~ Trib\lnal, after a fairly elaborate consideration of tb.e various agreements as well tb.e record of. the proceedings leading upto those agreements and the other materials on record has hel\i in its award th.at the general bonus that was being paid by the Company i11cluding the payment of bonus under the agreement Ex. A.5 was not a profit sharing bonus. The Tribunal. has found th.at the general bonus paid um;ier the agreement of 1962 was an annual bonus lin)ced with production or productivity and that'\ was paid in lieu of bonus based on profits. The merii circumstance that the payment of bo11us was made quarterly, accord, ing to the Tribunal, does not take ii away from the nature of a'll annual pa~nt. Tiie Tribunal ultimately held that in view Of the c agreement Ex. A.5 the workmen are not entitled to claim bonus for the year 1964 under the Act. .

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On behalf of the appellants Mr. D. Mookerjee, learned coun-· ~1. very strenuously cnticised the reference made by the Tribunal to the previous agreements for interpreting the nature of the payment under Ex. A.5. It was contended that the Tribunal having D held that the agreement of 1962 was a self-contained agreement,. committed a very .serious error in htw in interpreting the term "General Bonus" occurring in the said agreement by reference to the previous agreements. According to Mr. Mookerjee, the Tribunal should have considered the nature of the payment by a reference only to the provisions contained in the agreement of 1962. I Read in that manner, it was pointed out, the inevitable conclusion· should· be that the general bonus paid under tht; agreement of 1962 was not an annual bonus, nor was it linked with production or productivity and. it has not been paid in lieu of bonus based on profits. The gimeral· bonus paid does not satisfy the test of production bonus as laid down by this Court. The payments admittedly being made quarterly· do not have the character of an annual bonus. There is no material on record to show that the Company paid the amount under the agreement in lieu of bonus based on profits. 'nle contention taken before the Tribunal by the workmen that the amount paid und·~r the agreement was only an ex-gratia payment to supplement the wage bill of the workmen without any relation to production or productivity was also pressed before us by the G. counsel.

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On the other hand, Mr. C. K. Daphtary, learned counsel for the respondent Company, pointed out that in order to appreciate and decide about the character of the general bonus paid under the agreement of 1962, it was not only necessary but also obligatory on the part of the Tribunal to refer to the previous agreements. H ~he counsel pointed out that the various demands made from time to time by the workmen as well as the minutes of the discussion that took place between the parties which ultimately resulted in

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454

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[1973] I S.C.R.

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SUPREME COURT REPORTS

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the various agreements extending over a fairly long period, will clearly show that what was being paid by the Company was production bonus or as an incentive wage. As the same payment was being continued under the agreement of 1962, the Tribunal was justified in holding that the general bonus that was being paid by the Company over a long number of years was by way of production bonus or as an incentive wage. Mr. Daphtary also referred us to the various provisions contained in the several agreements regarding the duration of the agreements and also to their having binding effect till they were terminated by notice given in. accordance with the terms of the agreement. All this, according to the counsel, will clearly show that the intention of the parties was that the agreements under which the payments were made were to be throughout the year and also to be continued from year to year. The material on record, according to the counsel, will also show that the payments were made quarterly at the express desire and request of the workmen, but as the payments extended throughout the year and will also continue year to year, they are in the nature of annual payment of bonus.

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Before we consider the various contentions of the learned counsel on both sides, it is desirable to refer to the material provisions of the Act. All parties are agreed that the additional .claim for bonus for the year 1964 was under the provisions of the Act. Section 2 (21) defines the expression "Salary or wage". This definition among other things includes dearness allowance also. Section 8 lays down the conditions for eligibility for bonus. Sections 10 and 11 deal with the payment of minimum and maximum bonus respectively in the circumstances mentioned therein. Section 17 enables an employer to adjust the amount paid as pooja or customary bonus or interim bonus against the final bonus payable under the Act. Section :2 deals with various classes of employees to wt.om the Act does not apply. The relevant provision with which were are concerned is section 32 (vii) which.is as follows :

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"Section 32. Nothing in this Act shall apply to : (vii) employees--

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(a) who have entered before the 29th May, 1965 into any agreement or settlement with their employers for payment of an annual bonus linked with production or productivity in lieu of bonus based on profits; or

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(b) who have entered or may enter after that date into any agreement or settlement with their . employers for payment of such annual bonus in lieu of the bonus payable under this Act,

WORKMEN v. BATA SHOE co .• ( Vaidialingam, !.) 455

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A for the period for which such agreement or settlement is in operation;"

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We are particularly concerned wit'.1 sub-clause (a) of cl. (vil) as the appellants claim is resisted on the basis of the agreement dated August 30, 1962. In order to attracts. 32(vii) (a) the Company will have to establish :

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( 1) That there has been an agreement or settlement entered into·between the workmen and the Company before May 29, 1965;

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(2) The said agreement or settlement was one for payment of annual bonus;

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( 3) The said payment of bonus was linked with production or productivity; and

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( 4) The said payment was in lieu of bonus based on profits.

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In· this c= there is no controversy that there has been an agreeD ment Ex. A.5 entered into between the parties on August 30, 1962, wbi.ch is anteriQr to May 29, 1965. There is also no controversy that the amount paid under this agreement is characterised as general bonus. The question then arises whether the said payment as geqeral bonus was an annual bonus linked with production or producivity and paid in lieu of bonus based on profits.

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The nature of production bonus has been discussed by this Court in M/s Titaghur Paper Mills Co. Ltd .. v. Its Workmen('). It has been stated that payment of production bonus is by way of an incentive to higher production and is in the nature of an incentive wage. The extra payment depends not on extra profits but on production. _ From this decision it is clear that the principal F element in the payment of extra amount is to provide an incentive to production.

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In The New Maneck Chowk Spin,ning and Weaving Co. Ltd·. Ahmedabad and others v . . The Textile Labour Association, Ahmedabad(2), it has been stated that there are four types of bonu~ which have been evolved under the Industrial Law as laid down G by this Court, namely, ( 1) Production bonus or Incentive wage ( 2) Bonus as an implied term of contract between the parties: (3) Customary .bonus in connection with some festival, and ( 4) Profit Bonus which was evolved by the Labour Appellate Tribunal and approved by this Court. Under the Act there is no c0ntroversy, what is payable is the profit bonus. In the case before us H from the A ward it is seen that the Union conceded that the amount paid as general bonus un~er__t_he agreement was neither customary; (1) [1959] SuPP. 2 S.C.R. 1012. (2) [1961] 3 S.C.R. !.

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(1973] I S.C.R.

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SVPRIM& COURT RBPOITS

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110r profit bonus; nor bonus as an implied tenn of contract. In the nature of things the Union has not raised the plea that the amount paid under the agreement is a profit bonus. Equally, the COQlpany could not also take up such a plea as their attempt was to show that it is a payment as production bonus or fficentive wages.

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In Sanghi Jeevaraj Ghewar Chand and others v. Secretary, Madras Chillies, Grains. Kirana M11rchants Workers' Union and another(l), it has been held that w"here the bar -of s. 32(vii) (a) of the Act operates, the employees in such cases so long as the agreement or settlement is in operation cannot claim bonus on the basis of Full Bench Formula or under the Act.

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Therefore, it becomes essential to find out the nature of· the payment made under Ex. A.5. That is an agreement entered into .between the appellant and the respondent Company on August 30, 1962. The purpose of the agreement is stated to be to promote and improve industrial and economic relationship between 1he Company and its workmen and to establish and maintain satisfactory working conditions. . In Article IV, among various other matters, the Union has acknowledged that it is the exclusive right and function of the Company to maintain among other matters the -efficiency. In Article V dealing with lock out and strikes, the Com-pany, on the one hand, has agreed not to declare any Jock out so long as the workmen do not commit any breach of the agreement. The Union, on the other hand, has also agreed while retaining its right to go on strike, not to permit its members individually or collectively to curtail or restrict production and certain othe. mat· ters. Article VI dealing with general bonus is as follows : "'Article VI--General Bonus :

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The Company declares and make• a payment of General Bonus one month after the end of each quarter at the rate of 20% of the total salary and/ or wages paid to each workman and employee during the quarter immediately preceding (such salary or wages are exclusive of Dearness Allowance or any other special allowarices or rewards granted to him during such period). Such Bonus will be payable to those who have completed six months approved service ending on the last day of the quarter; and to those who have completed less than six months approved service on the last day of the quarter, the Bonus will be payable at the rate of 10% of their total salary or wages as aforesaid. The Bonus will be available only to those who are in the employ ol the

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(

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(l) !1969] 1 S.C.R. 366.

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WORKMl!N v. BATA SHOE co: (Vaidialingam, /.) "67

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Company on the last date of the quarter and who have given regular and approved service during the quarter to which the payment of Bonus is available."

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Under Article VIII it is provided that the agreement is to be in force until December 31, 1965 and that it shall continue (iom year to year thereafter unless either party gives notice in writing of its intention to enter into negotiations for the purpose of amend· ing the agreement. The said Article further provides for the period of notice as well as the starting of negotiations and the agreement continuing to be in froce till a new settlement or agree· ment is arrived at.

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C A mere reading of Article VI relating to general bonus will not by itself throw much light on the character of such payment. But, it is clear that the payment is to be made at the end of each quarter at the percentage mentioned therein of the total salary or wages which does not include Dearness Allowance. The said Article also provides for the period of service necessary for qualify0 ing to get the higher or lower percentage of bonus astthe case may be. The emphasis is also laid on the workmen giving regular and approved service during the quarter to which the payment of bonus is available.

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Nonually, it is the agreement Ex. A.5, which has to be looked into for the purpose of ascertaining the rights and liabilities of the E employer and employees. That is, the agreement will have to be looked into for the purpose of ascertaining the nature and character of the general bonus payable under Art. VI, provided that clause gives a full and clear indication regarding the character of . such payment. But, a mere reading of Article VI does not give i.ny indication regarding the character of such payment. The F other clauses in the agreement also do .not throw much light _on this aspect. But it is not as if that agreement Ex. A.5 has been entered into between the parties for the first time. The expression "General Bonus" occurs, as we will show presently, in certain previous agreements. Under those circumstances, in our opinion, in order to properly appreciate the .character. alid nature of the payment that was being made originally and that was continued under G Article VI of the agreement of 1962, it is not only relevant but also necessary to consider the various settlements and agreements that took place between the parties on prior occasions.

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We are not inclined to agree with the contention of Mr. Mookerjee that the Tribunal has committed a very serious error in H law when it tried to interpret the nature of the payment under Ex. A.5 by reference to the previous settlements and discussions that took place between the parties. The Tribunal was perfectly justified in considering those agreements as they, in our ojiinion,

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(1973] 1 S.C.R.

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458

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SUPREME COURT REPORTS

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give a complete and clear picture of the nature of the claims made by the Union, the stand taken by the Company and the nature of the agreement ultimately arrived at between the parties regarding the payment of the amount in question.

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Hence we will also refer to the prior agreements as well as the events leading upto those agreements. The earliest agreement is Ex. A. dated May 16, 1946. Under Article V the Company agreed to pay Victory bonus of six weeks pay, for the employees mentioned therein. Under Article VI, the Company agreed to pay bonus on production or special bonus equivalent to 10% of pay. It is significant to note that the payment under Art. VI of this agreement is characterised as a production or special bonus at a fixed percentage on the pay of the employees.

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On March 6, 194 7, the Union addressed a letter Ex. B to the Company requiring "Production Bonus" to be increased in the manner stated therein. In fact the Union wanted an increased percentage depending upon the salary drawn by the employees. It is to be noted that the Union also understood the payment made under Ex. A. as a production bonus; and under Ex. B it is the production bonus that they wanted to be increased. In view of this demand, there were discussions between the parties and ultimately they entered into an agreement Ex.Con July 12, 1947. This agreement states that 10% production bonus given under Ex. A .is not to be increased. But an extra amount of 5 % or 2 % was given as an Attendance Bonus.

On November 22, 1948, there was another agreement Ex. A.1 entered into between the parties. Article VI related to ex-,;ratia payment of bonus, which is as follows :

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'Article VI-Ex-Gratia Payment of bonus

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The Company declares--and makes an ex-gratia payment of Bonus one month after the end of each quarter at the rate of 10 per cent of the total salary and,' or wages paid to each employee during the quarter immediately preceding (such salary or wages are exclusive of dearness allowance or any other special allowances or atter. fance bonus or rewards granted to him during the said period); such bonus will be payable only to those employees who have completed six months' approved service ending on the last day of the quarter; and to those employees who have completed less than six months' approved service on the last day of the quarter the exgratia Bonus will be payable at the rate of5% of their total salary or wages as aforesaid. The ex-gratia Bonus will be available only to those employees who are in the employ of the Company on the date fixed for payment.

WO!UWEN v. BATA SHO! CO. (Vaidi11/ingam., J.)

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459

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and who have given regular and approwd service during the quarter to which the ex-gratia payment ol. Bonus is available.'

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It will be noted that while in the agreements Exs.A and C, what was ch11racterised as production bonus, has hlle.n changed in Ex. A. 1 as ex-gratia payment of bonus. Article VIII provided for the agreement being in force till December 31, 1950 and to continue year to year unless either party gives notice in writing of its inten· tion to enter into negotiations for the purpose of amending the agreement.·

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On May 15, 1951, the Union made a representation for modi· c fying the agreement Ex. A.I. In respect of this demand on October 3, 1951, agreed minutes of discussion and agreement between the parties were recorded in Ex. D.

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Frotn Ex. D it is seen that the Union had accepted the position that the approximate living wage has been attained in this Com· pany and therefore, the bonus has to be paid as an incentive to D greater efficiency in production as well as towards labour's contri· bution to the prosperity of the Company. In view of this, the Union repre&ented that the bonus that is being paid sh011ld not be regarded a5 ex-gratta payment. Hence the Company was request· ed to delete the oxpression "ex-gratia" and to substitute the word "general". The Union further suggested that as the payment of bonus on the basis of earned salary .is a sufficient incentive for E attendance; the attendance ?>onus, which was being paid, should be discontinued and that a general bonus is to be paid ilt a ·flat rate -of 15 % every quarter to all the employees. This representation Was·acceptttfbytlie Conipany·aoo·Ex.,, Ij, llhoWs thatit_was agreed between the parties that the affeildance·. bl'.>llU8 wa!I to be discon- · tinued and that the'terrii. "ex,~atitl'' wa5 to' be su\ttituted by the F word "generaF'. If was also agreed that tfie rate should be increased· to 15% 'anct"7t% respecti'vely. The suggestion of the Union for paymelit of the am0unt l:Very quarter was also agreed to by the parties; lt was·a!So agreed that the arrangements efitered Into between the parties arc t_o eontlnue till December 31. 1953.

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G From Ex. D. it -i~ .clear that the Union itself has required the payment of bonus to be made "as an incentive to greater efficiency in .production". and .the workmen wanted the expression "ex-gratia" .to be substituted by the· word "general", The Union accepted that approximate living wage is being earned by the em. · ployees of this Company. Further, the Union wanted the amount to be paid at a ftat fixed rate every quarter. It is also to be noted from Ex. D H that the changes agreed to between the parties were to take effect from the fitst quarter of 19S2. On the basis of the arrangement recor'ded in Ex. D, the parties entered -into a formal agreement Ex. A.2 on November 22, 1951. This" is called Collective Agree-

l2-Ll286Su!>CI/72

[1973) 1 S.C.R.

460

SUPREME COURT REPORTS

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ment as finally amended by the settlement of October 3, 1951, evidenced by Ex. D. Article I dealing with the purpose of the agreement states that i! was with a view to promote and improve industrial and economic relationship between the Company, and its employees and to establish and maintain satisfactory working conditions. Article VI dealing with the general bonus is as follows:

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"Article VI--General Bonus :

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The Company declares and makes a payment of General Bonus one month after the end of each quarter at the rate of 15 per cent of the total salary and/ or wages paid to each employee during the quarter immediately preceding (such salary or wages are exclusive of Dearness Allowance or any other special allowance or rewards granted to him during such period); such bonus will be payable only to those employees who have completed six months' approved service ending on the last day of the quarter; <ind to those employees who have completed less thai1 six months' approved service on the last day of the quarter the Bonus will be payable at the rate of 7!% of their total salary or wages as aforesaid. The Bonus will be available only to those employees who are in the employ of the Company on the last date of the quarter and who have given regular and approved service during the quarter to which the payment of Bonus is available." ·

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It will be noted that this article is in substitution of the original Article VI in the 1948 agreement Ex. A.1. What was characterised as ex-gratia payment of bonus in Ex. A.1 was designated as general bonus in Ex. A.2. It must be noted that it was for the first time that the expression "general bonus" has found a place in the agreement between the parties. This change was effected due to the representation made by the Union and accepted by both the parties as recorded in the minutes Ex.D. The rate has been mcreased to 15% and 7!% respectively depending upon the service of the employee. This rate is on the. basic wages; and dearness allowance has been excluded for purposes of calculation. Attendance bonus was abolished and the rate in Article VI shows that it has combined the old production bonus as well as ·the · attendance bonus. The payment is also to be made every quarter as required by the Union. Article VIII provided that the ·agreement shall be in force upto December 31, 1953 and was to continue from year to year thereafter unless either party gives notice in writing of its intention to enter into negotiations .for. the purpose of amending the agreement.

D • ,

WORKMEN v. BATA SHOE co. (Vaidialingam, J.)

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461

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A On December 28, 1953 the Union made a representation for effecting certain modification in the agreement Ex. A.2. This was followed by the proposals contained in Ex. B.3 on March 11, 1954. Paragraph 3 of Ex. B.3 relates to bonus. After referring to the existing payment of general bonus at the rate mentioned in Ex. A.2, the Union made a request to the Company to revise the B rate of bonus by including dearness allowance also in the wages or salaries for purposes of calculation of bonus, the reason being "the necessity of giving incentive to the employees and the rate at which bonus is paid to employees of many other comparable concerns." There was also a demand for P90ja or festival bonus. Ultimately, the demand with regard to bomrs was that : (a) the . <:: general bonus paid quarterly at the end of each quarter of the year should be increased to 20% and 10% depending upon the length of service of the employee and the payment at the said percentage should be on a calculation of both the basic wages and de11mess allowance paid to an employee during the quarter; and (2) · the workmen should be paid pooja bonus equal to thr~ months' wages including dearness allowance besides the general boous.

¶156

¶157

There was a supplementary claim made on behalf of the Union on March 15, 1954 under Ex. B.4, that the payment to be made under Ex. B. 3, should have retrospective effect from January l, 1954. Three p<>ints emerge from this demand of the Union: cl) Increase in the rate of general bonus and percentage to be work«! E out on wages including dearness allowance; (2) A claim for pa:fment of pooja or festival bonus; and (3) The payments of both (1) and (2) to take effect from January 1, 1954. · But the significant point to be noted is that in Ex. B. 3 the reason given by the Union itself for claiming general bonus at an increased rate and for working out the percentage of wages including dearness allowance was "the necessity for giving incentive to the . employees .... " These demands of the Union were discussed and agreed minutes of discussion and agreement were recorded in Ex. D.1 dated February 18, 1955. It is seen that there were as many as 45 meetings between the representatives of the Union and the Company beginning from April 9, 1954. Ex. D.1 shows that the demands in letters dated December 28, 1953, March 11, 1954 and G March 15, 1954 were discussed thread bare between the parties. The minutes show that the Company was not willing to accede in full to the increased rate& claimed by the Union regarding general bonus; nor was it inclined to take into account dearness allowance for the purpose of calculation of bonus. But the Company was prepared to show some consideration by merging a part of the H dearness allowance in the basic wages as that will result in a slightly higher amount being received as general bonus by the workmen. The claim for pooja or festival bonus was not accepted by the Company. Both partieil. ultimately agreed that the gene-

¶158

U97311 S.C.R.

¶159

462

¶160

SUPREME cm PT RLPORTS

¶161

ral bonus will be paid at 1 H% instead of the original 15% as per Ex. A.2. The minutes further show that all demands made by the Union have been fully settled by increasing the percentage of general bonus. The tentative agreement' recorded in Ex. D.1 was the subject of a collective agreement between the parties under Ex. A.3 dated February 18, 1955. Article VI deals with: general bonus. Except for the difference in the rate of 17!% and 8.75% on the basic wages excluding dearness allowance, the· provision regarding payment of general bonus under this Article was similar· to those contained in Article VI of Ex. A.2 of 1951.

¶162

Article VIII provided that the agreement is to be in force till December 31, 1957 and that it was to continue from year to year thereafter unless either party has given notice in the manner provided therein.

¶163

On December 24, 1957 the Union sent a letter Ex. B.5 to the Company requiring the general bonus to be paid at 50% and 25 % respectively in place of the p . ._sent rate of 1 ?t % and 8. 7 5 % . The demand was also to calculate this rate on salaries including the dearness allowance. A further request was made that half of the bonus as pi:r the demand be paid "in four quarters in a year as at present.and the remaining half at the time of pooja every year". This again led to the parties discussing the demands and the minutes of discussion and conclusions arrived at by the parties by agreement are recorded in Ex. D.2 dated October 6, 1958. The minutes disclose that the demands of the Union were carefully considered by the Company. The Chairman of.the Company drew the. attention of the Union to the agreed minutes of settlement Ex. D and pointed out "that bonus was being paid as an incentive to greater efficiency in production ...... " and suggested that "bonus payment be linked with the generally accepted formula :ind be ·no fonger paid on per.:entage basis. But the Union did not accept the suggestion of the Chairman and stated that "as a matter of security they would like the continuation of the same to be paid on a fixed percentage basis." After further discussion, the Chairman agreed to a token increase in the rate of bonus. It was agreed between both the parties that the payment of general bonus will be increased from l 7t% to 18!% on the wages excluding dearness allowance. The conclusions so arrived at were incorporated in the agreement Ex. A.4 on Octob~r 6, 1948. This again is styled as a collective agreement. Article VI relating to general bonus is substantially the same as Art. VI in EJ<. A.5 excepting that the rate was 18!% and 9.25% depending upon the service of the workman. The percentage was to be calculated only on the total salary excluding dearness allowance and _the general bonus was to be paid at the end of every qua rte' A rttck VIII provides that the claim was to be in. force till December 31,

WORKMEN v. BATA SHOE co. (Vaidia/ingam, J.) 4~3

¶169

'!65 _and that it was to continue from year to year unless a notice v. 1s given by either party in the manner provided therein.

¶170

This takes us to the agreement under consideration Ex. A.5 dated August 30, 1962. This is the seventh agreement in the series. We have in the earlier part oi the judgment referred to Articles VI and VIII. Article VI deals with general bonus and it was to be paid at 20% and 10% respectively on the basic wages excluding dearness allowance. It was to be paid at the end of each quarter. It will be seen- th>1t the rates are slightly higher than those provided in the previous agreement Ex. A.4 of 1958.

¶171

¶172

We have very exhaustively dealt with the various demands made by the workmen, the minutes recording the discussion that c took place between the parties regarding the demands the conclusions arrived at therein as well as the final agreeme~ts entered into on different dates between the parties, a& they furnish the background, so to say, for the agreement under consideration Ex. A.5. It will be seen that originally in 1946 the payment was made as production or special bonus. Specific demand was made D by the Union on March 6, 194 7 to increase "production bonus". The Company did not agree to this request. On the other hand, Ex. C., the agreement, clearly shows that there would. be no increase in production bonus. But an additional amount was given as attendance bonus. In 1948 what was originally characterised as production bonus was termed "ex-gratia" payment of bonus. The U'.lion specifically desired in 1951 to substitute "ex- E gratia bonus" by "general bonus" an4 to abolish attendance bonus. The demand also was for general bonus to be paid at a tlat rate every quarter. For the first time the expression "general bonus.'' occurs in the demand made by the Union on May 15, 1951 and in the agreed minutes of October 3, 1951. The same was incorporated in the final agreement of November 22, 1951. The Union F made a demap.d on March 11, 1954 for increase in the rate of general bonus so as to provide an incentive to the employees. This was accepted and embodied finally in the agreement dated February 18, 1955. In Ex. B.5, the. Union made a specific demand for further increase of the rate of general bonus and wanted half the amount to be paid quarterly as at present and the balance at G the time of pooja. Though, the minutes of the discussion in respect of this demand shows that the Chairman of the Company wanted to alter what was given as incentive to greater efficiency in production to one on profit basis, the Union preferred the payment to be contmued as was being done on a fixed percentage basis. The. pattern of bonus paid sometimes called production bonus, later on called ex-gratia payment, but from 1951 called as general fl bonus, was being paid quarterly at a particular percentage based· on the salary excluding dearness allowance. Having this · background in mind, it is clear that what was being paid under Art. VI

¶173

[1973] I S.C.R.

¶174

SUPREME COURT REPORTS

¶175

464

¶176

¶177

of Ex. A.5 wa; a payment linked with production or .productivity. The principal emphasis is that the amount is being paid as an .incentive to production and therefore it is paid as production bonus or as a wage incentive. That it is an incentive payment in order to secure greater efficiency in production is clear from Exs. D, B.3, and D.2. We have already referred to the contents of these exhibits in .great detail. Even the workmen in Ex. B.3 required the rate of general bonus to be increased in view of the necessity of giving incentive to the employees. But a more important point emerges from the minutes of discussion recorded on October 6,. _1958 in Ex. D.2. The Chairman of the Company emphasised that what wa·s being paid as general bonus was as an incentive to greater efficiency in production. The Chairman specifically wanted this n:.eth<JQ of payment to be changed and suggested that the bonus payment be linked with the generally accepted fortnula, namely, of profit bonus and that the payment on a fixed percentage be abolished. . But this suggestion to. alter the nature of the payment from a fixed percentage as a production )Jonus for providing an incentive to greater efficiency in production was not accepted by the Union, which wanted the fixed percentage basis to be continued. That is, the Union was not prepared to receive bonus on the basis of profits, but wanted to continue the existing· arrangement of payment at a fixed percentage as an incentive to efficiency in production. That is, the Union wanted the character of the payment as production bonus being continued. Therefore, these circumstances clearly lead to· the conclusion that the payment that. was being made and continued in the agreement Ex. A.5 was payment of bonus linked with production or productivity. It is also clear that the said payment was made in lieu of bon11s based on profits because the Union itself did licit agree to the suggestion of the Chairman as contained in Ex. D.2 to alter the ~haracter of payment to one of profit sharing bonus. Therefore, this also shows that the payment under Ex. A.5 was in lieu of bonus based on profits. The expressions used in s: 32(vii) (a) are "linked with production or productivity" and that test is satisfied in respect of the payment made under Ex. A.5. It is not the case of the Union that the characte( of payment which was designated as an incentive to greater efficiency in production even as early as 1951 ( vide Ex. D) ha5 been altered either in the subsequent agreements or in the agree'llent Ex. A.5. If so. it follows that the payment of general bonus in Ex. A.5 retains the same character as a payment by way of an incentive to greater efficiency in production.

¶178

As the minutes of the discussion that took place between the parties have been recorded then and there, they are items of evidence which are more valuable and useful than the oral evidence adduced by the parties. For instance, P.W. l, Secretary. of the· Union, has deposed that the payment in EX. .. A.5 is not linked with

. WORKMEN v. DATA SHOE co. (Vaidialingam, J.) 465

¶187

A production. On the other hand, the Labour Officer of the Company, as D. W.. 1 has stated that the said payment is linked with production. This type of evidence does not lead us any where. That is why, we have placed more emphasis and reliance on the documentary evidence adduced by the parties, more especially when there is no controversy that the record of the meetings do not represent the actual facts.

¶188

Then the question is whether the bonus paid is an annual bonus, which is another requirement of s. 32(vii)(a) of the Act. That bonus has been paid at the end of every quarter at any rate from 1948, is clear from the various settlements and agreements, c referred to earlier. That the Union itself required that · bonus should be continued to be paid quarterly, is clear from the letters written by the Union, particularly Ex. B.5 dated December 24, 1957. We have already referred to the various agreements which no doubt prescribe the normal duration of the period of the agreement, which extends to over a year. There is also a further provision to the effect that even after the date of expiry mentioned D there.in, the agreement will continue to be in force till a notice is given in the manner provided for in the agreement. Therefore, it will be seen that it is not as if that bonus is paid for one quarter and does not enure for a succeeding quarter. On the other hand, the amounts payable are not restricted to one particular quarter and the intention is made clear in the agreement that it has to E operate throughout the year and also continue from year to year. It is not possible to accept the contention of Mr. Mookerjee that it is only when a payment is made at the end of the year, it can be considered to be an annual bonus. The essential test to be satisfied is that the payment should enure throughout the year and it should also be continued from year to year. As observed by F Lord Maugham in Moss' Empires, Ltd. v. Inland Revenue Commissioners(') the expression "annual" must be taken to have the quality of being recurrent or being capable of recurrence. Adopting this test, the payments in the case before us were to continue the whole of the year and also were to be paid from . year to year not only during the period of agreement but also for the succeeding year till the required notice was given under the agreement. G Even then there is a provision in the agreement to the effect that the agreement will continue to have force notwithstanding the notice till a fresh agreement or settlement is entered into. Therefore it is clear that the payment of general bonus is "annual bonus" as contemplated bys. 32(vii)(a) of the Act. The Court of Appeal in Smith v. Smith(² ) had to consider whether a _payment H to be made weekly during the life time of a person was an "annual p;.yment". It was held as fo\lows :

¶189

(I) '19371 3 AILE.~. 381.

¶190

(2) [1923] Probate Division 191 ··

[f973] ! S.C.R.

466

SUPREMB COURT llEl'OR TS

¶195

•

¶196

"It is no dOubt payable week)}'; but that fact does not A prevent it from being an annual payment if the· weekly payments may extend beyond a year." The position, as pointed out by us ~lier, in the case before-us, is also the same.

¶197

It follows from the discussion above that the general bonus B paid under Article VI of the agreemeµt .d.ated August 30, 1962, Ex. A.5 is a payinent of annual bonus linked with production or productivity in lieu of bonus based on profits. It further follows that as the agreement has been entered into .before May 29, 1965, the employees cannot claim any additional bonus under the Act for the period for which the agreement is in operation. It is the case of all parties that the agreement Ex. A.5 at the relevant time c was in operation. If so, it follows that the view of the Tribunal thats. 32(vii)(a) of the Act is a bar to claim any additional bonus under the Act is correct.

¶198

In the result, the award of the Industrial Tribunal is confirmed and this appeal dismissed. There will be no order as to costs.

¶199

¶200

s.c.

¶201

Appeal dismissed

Workmen of M/S Bata Shoe Co., (P) Ltd. v. M/S Bata Shoe Co. (P) Ltd.

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Workmen of M/S Bata Shoe Co., (P) Ltd. v. M/S Bata Shoe Co. (P) Ltd.

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