Bankeshwardhar K. Dubey v. New Standard Engineering Company Ltd.

1. The petitioner who was an employee with New Standard Engineering Company, Ltd. (respondent 1), has filed this petition challenging the order of the Eighth Labour Court, Bombay, in Application No. 416 of 1983. By that application the petitioner had claimed bonus from respondent 1, for the year 1981–82 (i.e, from 1 April, 1981 to 31 March, 1982) in accordance with the provisions of the Payment of Bonus Act, 1965 (hereinafter referred to as the Bonus Act). The Labour Court rejected the application on the ground that the petitioner was disqualified from receiving the bonus as laid down by S. 9 of the Bonus Act.

2. The facts are not in dispute in the present case. The petitioner was in service of respondent 1 and has rendered such service during the year 1981–82. However, the petitioner is said to have committed a misconduct in the night between 18/19 April, 1982. That misconduct is in the shape of an assault on the other employee of respondent 1. An inquiry was held for this misconduct. A chargesheet was prepared on 20 April, 1982. After the above inquiry, the petitioner was dismissed from service on 9 October, 1982. Respondent 1 did not dispute the position that the petitioner was entitled to have a bonus for the year 1981–82 and the only contention of respondent 1 is that on account of the abovementioned dismissal the petitioner is disqualified from getting a bonus. This contention is raised on the basis of S. 9 of the Bonus Act. That section reads as follows:

“Disqualification for bonus.— Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for—

(b) riotous or violent behaviour while on the premises of the establishment; or …”

The above contention of respondent 1 has been accepted by the Labour Court. Sri Kochar, appearing for the petitioner, as also Sri Agarwal, who appears for respondent 3 (Union of India), submitted that the impugned order is erroneous and that the Labour Court should have ordered payment of bonus to the petitioner. As against this Sri Vernekar, for respondent 1, urged that the order in question is in consonance with the provisions of S. 9 and consequently this petition deserves to be dismissed.

3. Sri Kochar and Sri Agarwal contended that what is material in the present case is that till the expiry of the accounting year 1981–82 there was neither any misconduct nor dismissal, therefore, and consequently the petitioner secured a vested right for getting bonus and that such a vested right cannot be disturbed on account of an event that took place in the subsequent accounting year, i.e, the event of dismissal as mentioned above. It will be necessary to note the various provisions of the Act for the purpose of finding out as to whether S. 9 contemplates an embargo on the right of bonus which had already been vested in the petitioner. Section 2(1) defines the term “accounting year”. It is not necessary to reproduce it but in the present case the said accounting year is the one which commences from 1 April. Section 4 contemplates computation of gross profits derived by an employer in respect of the accounting year. Section 5 has made a provision for computation of the available surplus in respect of the accounting year. Then comes S. 8 and it reads as follows:

“Eligibility for bonus.— Every employee shall be entitled to be paid by his employer in an accounting pear, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year,”

I have already reproduced S. 9 in Para. 2 above. As to how much bonus should be paid to an employee is dealt with by Ss. 10 and 11. Section 10 provides that every employer shall be bound to pay to every employee in respect of the accounting year a minimum bonus which shall be 8.33 per cent of the earnings of the employees. This section has also made certain additional provisions but they are not relevant. As per S. 11, every employee is entitled to be paid an additional bonus in respect of such accounting year and such payment depends upon the available surplus to be determined under S. 5 for that particular accounting year. Section 14 contemplates as to how the working days in the accounting year should be computed. Section 13 provides that the employee would be entitled to a pro rata bonus depending upon his working days in the accounting year.

4. As provided in S. 19, the bonus payable under the Bonus Act has to be paid within one month after the decision under S. 22, if the liability to pay the bonus is disputed. Otherwise such a bonus has to be paid within 8 months from the close of the accounting year. Of course as per proviso to that section. Government can extend this period of 8 months up to two years.

5. It was contended by Sri Kochar and Sri Agarwal that all these provisions if read together would show that the Act has conferred a right on an employee to receive bonus in an accounting year. They urged that the disqualification provided in S. 9 would be available only if the contingency of dismissal of service arises in a particular accounting year. In substance they urged that whenever such contingency arises the employee would not be entitled to a bonus in that year though otherwise he would have acquired a right to get bonus on account of his service rendered by him. An instance was taken by Sri Agarwal. He has assumed that present petitioner had rendered service up to 30 November, 1972, and he has been dismissed in December, 1982 for riotous act. He contended that for the service rendered by the petitioner from 1 April till December, 1982, ordinarily the petitioner would have got a pro rata bonus and according to Sri Agarwal the effect of the disqualification under S. 9 is that his right to receive such a pro rata bonus is taken away.

6. As against this Sri Vernekar urged that the wording of S. 9 is such that all unpaid bonus would stand forfeited it an employee is dismissed under any of the clauses of S. 9 at any time before the payment is actually made. It is in this way be submitted that the petitioner would not be entitled to get bonus for the year 1981–82 as before the payment of bonus by the employer the petitioner has been dismissed on 20 April, 1982. Sri Vernekar relied upon the decision of Madras High Court in the case of Wheel and Rim Company of India, Ltd. v. Government of Tamil Nadu, [1971 — II L.L.J 299]. Where was a settlement between the employer and the employees in the year 1967 which granted certain amounts of bonus to the employees. However, before the actual payment of the bonus was made one of the employees was dismissed from service for misconduct such as fraud, etc. That employee made a claim under Ss. 33-C(1) and 33-C(2) of the Industrial Disputes Act for the bonus as per the settlement. The employer denied the right of the employee on the ground of the abovementioned dismissal. The matter went up to the High Court and the High Court held that the employee would not be entitled to a bonus accrued under the settlement of 1967 as he has been subsequently dismissed from service in the year 1969.

7. Sri Vernekar relied upon the following relevant headnote:

“The short question that arises for consideration in this case is whether an employee, dismissed from service on any one of the grounds enumerated in S. 9 of the Payment of Bonus Act, 1965, is disentitled to receive bonus payable only for the accounting year in which the order of dismissal is passed or is disentitled to receive whatever bonus was remaining unpaid on the data of the order of dismissal.

Held, there are weighty reasons foe the view that S. 9 of the Act is intended to deprive the worker of his right to receive whatever bonus he was entitled. The reasons are:

(i) Use of the expression ‘notwithstanding anything contained in this Act’.

(ii) Use of the expression ‘disquafied from receiving bonus under the Act’

(iii) Absence of any reference to any particular accounting year in vivid contrast with the use of class expression in S. 18 providing for deduction of the amount of the loss caused to the employer by the misconduct of the employee from out of the bonus payable to the employee in the particular accounting year only…”

It is true that the abovementioned decision of the Madras High Court supports the contention of Sri Vernekar that the dismissal contemplated by S. 9 would have the effect of forfeiting the right for the unpaid bonus for the previous years. However, there is much substance in the contention of Sri Kochar and Sri Agarwal that the abovementioned decision does not lay down a correct proposition of law. It is material to bear in mind that S. 8 prescribes an eligibility clause for the right of bonus. That section says that every employee is entitled to be paid, in the accounting year, bonus in accordance with the provisions of the Act. Thus a right is conferred on an employee in a particular accounting year to get the bonus. It is true that S. 19 has permitted an employer to pay bonus within a period of eight months from the close of the accounting year or within a period of one month of the decision under the dispute of the Industrial Disputes Act. However, that S. 19 can have no relevant for the purpose of deciding the eligibility and entitlement of bonus by an employee. All that can be said of S. 19 is that it has prepared a mechanism for the implementation of the right of an employee over the bonus, by providing as to when the payment should be made. It is thus clear that the right to bonus accrues to an employee in the concerned accounting yeas itself and the question is as to whether this accrued right can be set at bought on account of the subsequent dismissal of the employee in the succeeding year. As already stated above Sri Vernekar urged that such an accrued right would come to an end on account of the subsequent event of dismissal as contemplated by S. 9. Certain anomalous position would arise if this contention of Sri Vernekar is accepted. The anomaly would be that the accrued right of an employee to receive bonus would ultimately depend upon future uncertain contigencies. This can very well be illustrated if a few examples are taken.

8. In the present case, the right accrued to the petitioner on 31 March, 1982, for getting bonus and now let us see as what would happen in the following contingencies:

(1) 31 Match, 1981 right accrued.

(2) 2 April, 1981 bonus paid (let us assume that it is so paid).

(3) 20 April, 1981 misconduct by the petitioner.

(4) 9 October, 1982 petitioner dismissed.

Thus in the above instance the petitioner got the bonus on 2 April, 1981. I may state here that though S. 19 permits the payment within 8 months it does not prohibit the employer to pay the bonus immediately after the expiry of the accounting year and hence I have taken an instance of payment of bonus on 2 April, 1981. Would it be possible for the employer to claim back the bonus on account of the subsequent event of dismissal of the employee on 9 October, 1982. It is not contended before me on behalf of respondent 1 that such a claim for return of bonus amount against an employee would be permissible. At the same time Sri Vernekar contended that if for one reason or the other the payment was not made before the dismissal, the employee would be prevented from claiming bonus for the earlier year.

9. I would like to take another example:

(1) 3 March, 1980 right accrued.

(2) Amount not paid by the employer and the dispute is taken up under the Industrial Disputes Act.

(3) 1989 dispute is ultimately decided at various stages up to Supreme Court in favour of the employee meaning thereby that the employee would be entitled to get the bonus for the year ending on 31 March, 1981.

(4) In 1990 the employee commits a misconduct and he is dismissed from service as contemplated by S. 9.

(5) Till 1991 the amount is not paid.

What would be the result of misconduct? Would it be possible to contend that due to this dismissal in 1990 the right of the employee to get bonus for the year 1981–82 is abolished. In my opinion, it would be very difficult to accept this contention of the employer.

10. It is true that S. 9 is a non obstante clause and it states that notwithstanding anything contained in the Act the employee should be disqualified from claiming the bonus if something contemplated by that section happens. However, it is necessary to bear in mind that S. 8 has granted annual right to an employee to get the bonus. It would not be possible to construe the provisions of section to mean that all accrued rights for earlier to previous years would be negatived on account of a subsequent dismissal under S. 9. In my opinion, the provisions of S. 9 would apply when the sight of bonus in a particular year is in the process of being accrued. The effect of non obstante clause has been considered by the Supreme Court in many case. It has been held by the Supreme Court in the case of Dominion of India now Union of India v. Shirinbai A. Irani, [A.I.R 1954 S.C 596] as follows:

“Although ordinarily there should be a close approximation between the non obstante clause and the operative part of section the non obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of words thereof, a non obstante clause cannot cut down that construction and restrict the scope of its operation. In such cases, the non-ostante clause has to be read as clarifying the woole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment”.

There are certain other rules of interpretation of statutes which must be borne in mind. The very purpose of legislating the Payment of Bonus Act is to confer a right on every employee for getting bonus every year. Section 9 has penal consequences and consequently it will be necessary to construe the provisions of S. 9 in a strict manner, more particularly so as not to affect the rights which had already accrued. It is also necessary to interpret both the sections viz., Ss. 8 and 9 harmoniously. This aspect has been considered by the Supreme Court in the case of Tiruth Singh v. Bochhittar Singh, [A.I.R 1955 S.C 830]. The relevant headnote reads as follows:

“Where the language of a statute, in its ordinary meaning and grammatical construction leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence”.

It may state that the wording of S. 9 does not convey the meaning that it wants to take away the right of an employee which had been accrued in all the previous years. A question is as to how the main S. 8 together with S. 9 should be construed and the Supreme Court has held in the case of Dilip Kumar v. State of Uttar Praedsh, [(1976) 1 SCC 560 : A.I.R 1976 S.C 133], as follows:

“If two constructions are possible upon the language of the statute, the Court must choose the one which is consistent with the good sense and fairness, and eschew the other which makes its operation unduly oppressive, unjust or unreasonable, or which would lead to strange, inconsistent results or otherwise introduce an element of bewildering uncertainty and practical inconvenience in the working of the statute”.

Apart from the above position it is also necessary to bear in mind that the Payment of Bonus Act is meant to ameliorate the position of the employees and while canstruing that enactment it would be necessary that a rule of beneficial interpretation should be adopted, so as to achieve the object of the Act.

11. It is thus clear that S. 8 has granted an annual recurring right of bonus to every employee and all that S. 9 has provided is that such a right in a particular accounting year will become nugatory if the employee has been dismissed in the contingencies mentioned in that section. In the present case, there was no dismissal during accounting year 1981–82. The subsequent dismissal in the year 1982–83 will not enable the employer to withhold the payment of bonus to the petitioner. The impugned order, therefore, deserves to be quashed and there should be a direction that the necessary bonus amount should be paid by respondent 1 to the petitioner. However, in order to enable the advocates to place before the Court the figure that should be paid to the petitioner, this matter is adjourned till tomorrow at 11 A.M

12. I have heard Sri Kochar, for the petitioner and Sri Vernekar, for respondent 1. It appears that respondent 1 disputes the quantum of the bonus amount payable to the petitioner, particularly the claim of ex gratia payment. Under these circumstances the matter will have to go back to the Labour Court for further inquiry as detailed in the final order. I am told that the Eighth Labour Court is not now working and hence the matter should go to the Sixth Labour Court.

13. I may add that the petitioner who was a watchman with respondent 1 has to fight out this litigation for getting bonus and in that background it will be in the fitness of the things if respondent 1 is or dared to pay the costs of this petition. The costs are quantified at Rs. 500.

14. The rule is made absolute with the cost quantified at Rs. 500 to be paid by respondent 1 to the petitioner. The impugned order is quashed and the matter is remitted to the Sixth Labour Court if there is no Eighth Labour Court working for further inquiry. It is made specifically clear that the calculations made by the petitioner that 18.50 per cent of his wages come to Rs. 2,377.25 would not be put into dispute. Similarly there would not be any dispute about the grant of 8.33 per cent minimum burns. The only inquiry that is to be done by the Labour Court is as to whether the petitioner is entitled to ex gratia payment of 10.17 per cent and the amount payable by respondent 1 to the petitioner should be worked out after deciding these quantums. The matter should be decided as expeditiously as possible, say within a period of four months.