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Dishergarh Power Sup... v. Workmen Of Dishergar...
Factual and Procedural Background
The appellants are two electricity companies incorporated under the Indian Companies Act, 1913, operating power stations at Dishergarh and Sibpore and employing roughly 400 and 250 workmen respectively. Between the accounting years 1965-66 and 1970-71 the companies and their workmen entered into yearly agreements under §34(3) of the Payment of Bonus Act, 1965 (“the Act”) for payment of bonus.
A dispute arose regarding bonus for the year 1971-72. The workmen demanded bonus equivalent to three months’ basic wages as on 31 March 1972 (claimed as “customary bonus”) or, in the alternative, the statutory maximum of 20 % under the Act. The companies maintained that only the statutory minimum bonus was payable because there was no “available surplus.” During conciliation proceedings the parties settled on certain interim terms, including payment of three months’ basic wages as on 31 March 1970 and a reference of the union’s bonus demand to adjudication.
By order dated 15 January 1973 the Government of West Bengal referred the dispute to the Ninth Industrial Tribunal, Durgapur. The Tribunal rejected the claim for customary bonus and found that the companies had suffered a loss, leaving no allocable surplus. Nevertheless, invoking its perceived power to promote industrial peace, the Tribunal modified the conciliation agreement and awarded the workmen three months’ basic wages as on 31 March 1972. Challenging the legality of that award, the companies obtained special-leave to appeal to the Supreme Court.
Legal Issues Presented
- Whether, in the absence of any allocable surplus, the Industrial Tribunal could direct payment of bonus exceeding the statutory minimum prescribed by §10 of the Payment of Bonus Act, 1965.
- Whether an Industrial Tribunal is empowered to substitute or enlarge the terms of an agreement reached under §34(3) of the Act by creating “a new contract” for reasons of industrial peace.
Arguments of the Parties
Workmen’s Arguments
- They were entitled to bonus equal to three months’ basic wages as on 31 March 1972 on the ground of customary bonus.
- In the alternative, they claimed the maximum statutory bonus of 20 % under the Act.
- Even if the Tribunal found no surplus, it could modify the conciliation agreement and award a higher bonus in the interest of industrial harmony.
Companies’ Arguments
- The establishments had incurred losses during 1971-72, leaving no “available surplus” under §5 of the Act; consequently only the statutory minimum bonus under §10 was payable.
- The Tribunal had no jurisdiction to rewrite the parties’ §34(3) agreement or to impose any bonus higher than that provided by the Act in the absence of surplus.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sanghi Jeevaraj Ghewar Chand v. Secretary, Madras Chillies, Grains Kirana Merchants Workers’ Union, AIR 1969 SC 530; (1969) 1 SCR 366 | The Payment of Bonus Act is an exhaustive code governing profit-bonus; adjudication must strictly follow its provisions. | Used to underscore that the Tribunal could not go beyond the Act once it found no surplus. |
| Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai, (1976) 3 SCC 832; AIR 1976 SC 1455 | Reaffirmation that statutory scheme in the Bonus Act controls bonus disputes. | Cited in conjunction with Sanghi Jeevaraj to stress the mandatory nature of the statutory framework. |
| New Maneck Chowk Spinning & Weaving Co. Ltd. v. Textile Labour Association, AIR 1961 SC 867; (1961) 3 SCR 1 | An industrial adjudicator may create or modify contractual obligations only within the confines of existing industrial law. | Relied upon to hold that the Tribunal’s creation of a new bonus contract, contrary to the Act, was impermissible. |
Court's Reasoning and Analysis
The Supreme Court noted that once the Tribunal rejected the claim of customary bonus and found that the companies had no available surplus, the only liability under the Act was to pay the statutory minimum bonus. The Act being exhaustive, any award of bonus beyond that minimum, absent surplus, would violate §§5 and 10.
Although industrial tribunals possess a broad power to mould relief and foster industrial peace, as recognised in New Maneck Chowk, that power is circumscribed by statutory mandates. The Tribunal’s action—substituting the date “31 March 1972” for “31 March 1970” and thereby enlarging the financial liability—directly conflicted with the Bonus Act’s scheme. Therefore, the award was ultra vires.
The Court further held that the conciliation settlement constituted a binding §34(3) agreement. Hence, in the circumstances of no surplus, the parties’ rights were confined to that settlement coupled with the statutory minimum bonus.
Holding and Implications
Appeal Allowed; Tribunal’s award set aside.
The workmen’s entitlement to bonus for 1971-72 is governed solely by the settlement dated 9 October 1972 reached before the Conciliation Officer, and not by the Tribunal’s modified award. The decision reiterates that industrial tribunals cannot override the Payment of Bonus Act under the guise of maintaining industrial peace, thereby reinforcing statutory supremacy in bonus disputes. No new legal doctrine was created; the ruling primarily restores the parties to their pre-award contractual and statutory positions.
V. Balakrishna Eradi, J.— This appeal by special leave has been preferred against the award dated May 8, 1974 made by the Ninth Industrial Tribunal of West Bengal, Durgapur in Case No. X-4 of 1973 on its file. The appellants are two companies incorporated under the Indian Companies Act, 1913 having their registered office in Calcutta. Both the appellants are engaged in the business of generation, transmission, distribution and sale of electricity in certain areas of Bengal and Bihar under licences granted by the Governments concerned. Appellant 1 has a power station at Dishergarh and Appellant 2 has its power station at Sibpore. In connection with their aforesaid business the two appellants were having at the relevant time 400 and 250 workmen respectively employed under them.
2. For the years 1965-66 to 1970-71 (inclusive) bonus was paid to the workmen on the basis of agreements entered into each year under Section 34(3) of the Payment of Bonus Act, 1965 (hereinafter referred to as the “Act”). Concerning the bonus payable for the year 1971-72, a dispute was raised by the workmen of the two companies and it was referred to conciliation under Section 12(1) of the Industrial Disputes Act, 1947. The contention of the workmen before the Conciliation Officer was that they were entitled to bonus equivalent to three months' basic wages as on March 31, 1972 as customary bonus or in any event as bonus payable under the provisions of the Act. The appellant Companies, on the other hand, contended that the workmen were entitled to only minimum bonus as provided under the Act on a computation being made in the manner laid in the said Act. The said dispute was ultimately settled before the Conciliation Officer inter alia on the following terms:
“(1) Subject to usual adjustments made in 1969-70 and 1970-71, each eligible workman will be paid an amount equal to three months' basic wages as on March 31, 1970.
(2) A sum of Rs 20,000 will be distributed equally among all workmen who were on the rolls on August 15, 1972 and have worked for at least 30 days. This will be ‘Silver Jubilee Year’ payment.
(3) The demand of the Union for bonus this year will be referred to a Tribunal for adjudication.
(4) The payment should be made by October 12, 1971. Eligible workmen under terms (1) of this settlement—
(a) Permanent and probationers. Rest of workmen will be paid bonus under the Payment of Bonus Act.”
Although the said settlement was an agreement under Section 34(3) of the Act since under its very terms as incorporated in clause (3), the parties had stipulated for a reference of the question for adjudication by a Tribunal. The issue was accordingly referred by the Government of West Bengal for adjudication to the Ninth Industrial Tribunal of West Bengal by an order of reference dated January 15, 1973.
3. In the written statement filed by the workmen before the Ninth Industrial Tribunal they claimed three months' basic wages as on March 31, 1972 as customary bonus or in the alternative 20 per cent of the salary or wages as bonus payable under the Act. The appellants reiterated before the Tribunal the same contentions which they had put forward before the Conciliation Officer. The Tribunal allowed the parties to adduce evidence. After a detailed discussion of the evidence produced before it, the Tribunal recorded a clear finding that the workmen had failed to make out the claim of customary bonus put forward by them and that the said plea had therefore to fail. It was further found by the Tribunal that the plea put forward by the appellant Companies that there was no available surplus during the year in question and that only the minimum bonus was payable under the provisions of the Act had to be upheld. The Tribunal, therefore, held that the unions representing the workmen had failed to make out the case put forward by the workmen that the workmen were entitled to maximum bonus of 20 per cent as provided under the Act. After having recorded the aforesaid findings, the Tribunal however proceeded to accept the contention advanced before it by the counsel appearing for the workmen that it was legally open to it to substitute for the agreement entered into between the parties before the Conciliation Officer a new contract and pass an award on that basis, if such a step would be conducive to industrial peace. On this reasoning the Tribunal proceeded to observe:
“In my opinion, there would not be material alteration in the financial liability of the companies in case the agreement was modified by substituting for the words that the workmen will be paid the amount equal to three months' basic wages as on March 31, 1970 by the words an amount equal to basic wages as on March 31, 1972.... I am, therefore, in agreement with this contention of the learned lawyer for the unions that the Tribunal should create a new contract and that it pass an award of three months' basic wage as on March 31, 1972. This in my opinion would be conducive to industrial peace and it would not violate any existing industrial law.”
Accordingly, the Tribunal passed an award directing the appellant Companies to pay to the workmen the balance amount by way of bonus as per the rates calculated by the Tribunal within a month from the date of publication of the award in the Calcutta Gazette. It is the legality of this award that is under challenge in this appeal.
4. It has to be remembered that the claim of the workmen which the Tribunal was considering while making the aforesaid observations was one for profit bonus only since the claim for customary bonus had been rejected by it. The rights and liabilities of the parties regarding profit bonus were governed by the provisions of the Act which are exhaustive on the subject and the adjudication had to be conducted by the Tribunal strictly in accordance with those provisions — see Sanghi Jeevaraj Ghewar Chand v. Secretary, Madras Chillies, Grains Kirana Merchants Workers' Union AIR 1969 SC 530, (1969) 1 SCR 366, (1969) 1 Lab LJ 719 and Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai (1976) 3 SCC 832, AIR 1976 SC 1455, (1976) 3 SCR 591.
5. As already noticed, the Tribunal has categorically found on a consideration of the evidence adduced before it that there was no “available surplus” in respect of the two companies for the year in question on a computation made under Section 5 of the Act. The settlement entered into before the Conciliation Officer constituted an agreement under Section 34(3) of the Act and but for the said agreement the liability of the appellants under the provisions of the Act would have been only to pay minimum bonus under Section 10 of the Act. Since the parties were at variance on the question of existence of liability for payment of customary bonus in the establishments as well as on the question regarding the existence of available surplus, provision was made in clause (3) of the agreement for reference under the industrial adjudication. If the Tribunal found that the claim for payment of customary bonus was substantiated it could have passed an order in favour of the workmen for payment of such bonus. That claim had been negatived. The only question which remained for determination for the Tribunal was whether the claim of the workmen for payment of 20 per cent of the salary or wages as bonus payable under the Act was tenable or not. That depended essentially on the question of existence of available surplus and its quantum, if any surplus was available. In view of the finding recorded by the Tribunal accepting the plea put forward by the appellant Companies that the result of the working of the companies during the concerned year was a loss and there was no available surplus, the Tribunal could not have legally proceeded to make an award directing payment of bonus at any rate higher than the minimum bonus specified in Section 10 of the Act. As pointed out by this Court in New Maneck Chowk Spinning and Weaving Co. Ltd. v. Textile Labour Association AIR 1961 SC 867, (1961) 3 SCR 1, (1961) 1 Lab LJ 521 — while it is certainly open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending agreement or making new one, but this power is conditioned by the subject-matter with which it is dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it to overlook the industrial law relating to that matter as laid down by the legislature. It is manifest that the impugned award made by the Tribunal is clearly inconsistent with the provisions of the Payment of Bonus Act which contemplate the imposition of an obligation for payment of only the minimum bonus where the employer has no allocable surplus in the concerned accounting year. However, inasmuch as the appellant Companies had entered into the settlement before the Conciliation Officer agreeing to pay bonus at a rate higher than the minimum bonus, the said settlement would constitute an agreement under Section 34 of the Act and the terms of the settlement will govern the liability for bonus for the year in question.
6. It follows from the foregoing discussion that the impugned award passed by the Ninth Industrial Tribunal is not legally sustainable. The appeal is accordingly allowed and the award of the Industrial Tribunal will stand set aside. The rights of the workmen for payment of bonus for the year in question will be governed by the terms of the agreement entered into before the Conciliation Officer on October 9, 1972.
7. In view of the condition imposed by the order of this Court dated November 21, 1974 while granting special leave, the appellants are directed to pay the costs of the respondents in this appeal.
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