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PETITIONER: UPENDRA CHANDRA CHAKRABORTY AND ANR.

       Vs.

RESPONDENT: UNITED BANK OF INDIA

DATE OF JUDGMENT30/04/1985

BENCH: KHALID, V. (J) BENCH: KHALID, V. (J) DESAI, D.A. ERADI, V. BALAKRISHNA (J)

CITATION:  1985 AIR 1010            1985 SCR  (3)1057  1985 SCC  Supl.   26     1985 SCALE  (1)972

ACT:      Bonus-Customary bonus,  concept of-Tests to be applied- Bonus paid  to the  employees of  the respondent Bank during the  pooja   period,  whether   has  the  characteristic  of customary bonus  know to  law-Applicability of  section 33-C (2) of the Industrial Disputes Act, 1947.

HEADNOTE:      Two employees  of the respondent Bank preferred a claim on the  basis of the existence of legal light in them to the payment of a customary bonus on the eve of pooja. Their case was that  the bonus  paid to  them every  year on the eve of pooja at  the rate  of  pay  as  on  1st  September  of  the respective year  was unrelated to any profit or loss made by the company  and that  the consecutive payment for more than 16 years  without any break of such bonus has developed into a condition  of service  giving  rise  to  a  right  and  an expectancy which  in  law  assumed  the  characteristics  of customary bonus.  The claim  was resisted by the bank on the grounds,  namely,   (a)  the   application  itself  was  not maintainable since  the alleged right pleaded by the workmen was not a condition of service and that such a right did not exist in  fact also;  (b) the  conditions of  service of the employees of  the Bank  are governed  by various  awards and settlements; (c)  though there  were agreements entered into between the  bank and its employees on several matters there was no  agreement at  any time on the question of payment of bonus; and (d) though the bonus was paid, as a result of the employees demand  every year  as per  separate agreement for the payment thereof the bonus paid was related to profit and not based  on any  custom. After  considering correspondence that passed  between the  Bank and its employees, the Labour Court dismissed the application holding that on the basis of the material  on record,  there was  no  existing  right  to customary bonus  and that  the Labour Court could not either create or  declare a  right which  was not  in existence  to stretch  its   jurisdiction  under  section  330(2)  of  the Industrial Disputes Act. Hence the appeal by special leave. ^      HELD: 1. In the facts and circumstances of the case the bonus  received   by  the   appellants  did   not  have  the

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characteristic of  customary  bonus  as  known  to  law  and therefore they  were not  entitled to  the quantification of that amount under section 33-c(2) of the Industrial Disputes Act, on the basis of tho existence of a legal right in them. [1063 F] 1058      2. In  Vegetable Products  Ltd. v.  Their Workmen, 1965 (1) LLJ  468, the  Supreme Court  has laid down the tests to determine what  exactly is  customary or festival bonus. The tests laid down are; (I) that the payment has been made over an unbroken  series of  years; (2)  that it  has been  for a sufficiently long period-the period has to be longer than in the case  of an  implied term of employment; (3) that it has been paid  even in  years of  loss and did not depend on the earning of  profits; and  (4) that the payment has been at a uniform rate  throughout. In  the instant  case, the  record shows that  the bonus paid does not satisfy the requirements laid down by the Court. The mere fact the payments were made in the  month of  September or  thereabout  every  year,  by itself will not make the bonus paid a customary pooja bonus. The rate  has not  been uniform.  The management  has at all times taken  the definite stand that the payment was related to profits and that it was in anticipation of making profit. Further the  payments were  made at  all  time  pursuant  to demands made by the employees. 11061 C-F      Vegetable Products  Ltd v.  Their Workmen, (1965) 1 LLJ 468 applied.      3. The  concept of  any customary  bonus is  unknown to nationalised banks.  All the  nationalised banks  are wholly owned undertakings of the Government of India. In the matter of bonus,  the employees  of the  nationalised banks must be dealt with  on  a  common  denominator.  If  therefore,  the contention of  the appellants  were to prevail the employees of  the   respondent.  which   is  only   one  amongst  many Nationalised banks,  would  enjoy  an  undeserved  advantage compared to  their counterpart  in other  nationalised banks and even  in the  other branches  of the respondent bank and may become  a cause of disharmony and inequality. Therefore, in larger  public interest  also, the  demand for  customary bonus otherwise  found to  be untenable,  must be negatived. [1063 C-E]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1416 of 1981.      From the  Judgment and  Order dated  28.12.1975 of  the Central Govt.  Labour Court  at Calcutta  in Application  No L.C. 28 of 1976.      M.K Ramamurthi and Amlan Ghosh for the Appellants.      G.B. Pai,  V.S. Desai,  D.N. Mukherjee,  N.R. Chaudhary and R. Mukherjee for the Respondent.      KHALID, J.  This  appeal,  by  special  leave,  by  two employees of  the United  Bank  of  India  at  Calcutta,  is directed against  a decision given by the Central Government Industrial Tribunal- 1059 cum-Labour Court,  Calcutta, on  28th December,  1979, in an application made  under Section  31-C (2)  of the Industrial Disputes Act,  1947. The  claim made  by them related to the bonus paid on the eve of Pooja every year which according to them was  customary in  nature, irrespective  of  profit  or loss.      2. The  Labour Court  after  considering  the  evidence

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placed before  it held  that the  bonus claimed could not be characterised as  customary since  it did  not answer to the requirements of  law to  be customary  bonus and that in the absence of  an existing  right to  customary bonus  or bonus founded on  an implied  agreement as a condition of service, the  application   made  under   section  33-C(2)   was  not maintainable and accordingly dismissed the same      3. The petitioners’ claim was attempted to be Supported by the  fact that  they were  given one month’s pay as bonus for the  years 1959  to 1963,  one and  half months’ for the year 1964  and two  months’ pay  for the years 1965 to 1974. Their further  case was  that this bonus was paid every year on the  eve of  Pooja at the rate of pay as on 1st September of the  respective year and was unrelated to any profit made by the  company. The payment of such bonus consecutively for 16 years  without any break and unrelated to profit or loss, without its  sanction either  in law  or any  award  or  any written  settlement,   payable  on  the  eve  of  the  Pooja developed into a condition of service giving rise to a right and an  expectancy which  in law assumed the characteristics of customary  bonus. This  claim was resisted by the Bank on the ground  that the application itself was not maintainable since the  alleged right  pleaded by  the workmen  was not a condition of  service and that such a right did not exist in fact also. The conditions of service of the employees of the Bank are  governed by various awards and settlements. Though there were  agreements entered into between the bank and its employees on  several matters  there was no agreement at any time on  the question of payment of bonus. Bonus was paid to its employees  every year  as  a  result  of  demand  raised separately by  them and in respect of every year there was a separate agreement  with regard  to bonus.  It  was  further stated that  the bonus  paid was  related to  profit and not based on any custom      4. The  Labour Court considered the correspondence that passed between  the BANK  and its  employees and came to the con- 1060 clusion that  a right  to customary  bonus in  favour of the employees of  the Bank  did not  exist. The  application was dismissed holding  that on  the basis  of  the  material  on record, there  was no  existing right to customary bonus and that the  Labour Court  could not either create or declare a right which was not in existence to stretch its jurisdiction under Section  33-C(2) of the Industrial Disputes Act. It is the correctness  of this  finding that we are called upon to decide in this appeal.      5. The  Counsel on  both  sides  took  us  through  the various letters  that passed  between the  employees of  the Bank and the Bank and brought to our notice the past history relating to  the payment  of bonus  for a  considerably long time. It  is seen that the Bank had been paying bonus at the rate of one month’s salary from 1959 to 1963. This is period prior to  the Bonus  Act which  came into force in 1965. The payment continued  even after coming into force of the Bonus Act. We  find from  the materials  on record  that the above payments were not made by the bank unilaterally without  any demand, unrelated to profit or loss as a customary bonus. It is true that payments were made on the eve of the Pooja. The bonus so paid was not called Pooja bonus except in 1972 when the words ’Pooja’ was mentioned at the time when the payment was made.  The bonus in question was paid for the years 1958 and 1959  as a  result of protracted negotiations. Bonus for the year 1962 was paid at the rate of one month’s pay on the basis of Desai award. This rate continued for the year 1.963

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also. In 1964, it was at the rate of 45 days’ pay. This rate was further  increased for  the year 1965 to two months’ pay and this  we find was as a result of the discussions held on the subject  between the  management and the union from time to time.  The two months’ rate continued till the year 1969. In 1969,  the Bank  was nationalised  and till 1971 bonus at the rate  of two  months’ basic salary was sanctioned by the Ministry  of   Finance  and  was  accordingly  paid  to  the employees. In  1972, the  General  Secretary  of  the  Union claimed by a letter that the employees were getting bonus at the  rate   of  two  months’  pay  at  the  time  of  Pooja, irrespective of profits and asked for an enhancement of rate of bonus. Discussions were initiated and ultimately the Bank agreed to  pay an  additional bonus  for the year 1972 of an additional four  days pay  and for  the year 1973 two months and 12 days and for 1974 two months and 271/2 days.      6. We have ourselves gone through the letters which are on 1061 record that  passed between  the parties. The correspondence shows .  that the  bonus was paid from year to year pursuant to negotiations  that took  place between  the Union  of the employees and  the Bank and that the rates of bonus were not uniform, but  were fluctuating. The Bank had a definite case that  bonus   was  paid  out  of  the  profits  made  or  in anticipation of  profits. The claim of the Union that it was customary and  unrelated to  the profits  of  the  Bank  was attempted to be made at a belated stage of the case.      7. Before  deciding the case on the above materials, it would be  useful to  refer to  the decision of this Court in Vegetable Products Ltd. v. Their Workmen(l) where this Court has  laid  down  the  test  to  determine  what  exactly  is customary or  festival bonus.  The tests  laid down  by this Court are:  (I) that  the payment  has  been  made  over  an unbroken series  of years;  (2)  that  it  has  been  for  a sufficiently long period-the period has to be longer than in the case  of an  implied term of employment; (3) that it has been paid  even in  years of  loss and did not depend on the earning of  profits; and  (4) that the payment has been made at a  uniform rate  throughout. From the materials disclosed in the  records, reference  to which was made by us earlier, it will be evident that the bonus paid in this case does not satisfy the  requirements laid  down by  this Court detailed above. It  may be  true that  the payments  were made in the month of  September or  thereabout every  year, but  that by itself will not make the bonus paid a customary Pooja bonus. The rate  has not  been uniform.  The management  has at all times taken  the definite stand that the payment was related to profits and that it was in anticipation of making profit. The payments were made at all times pursuant to demands made by the  employees. We  would like  to refer  to only  two or three letters to fortify our conclusion that the payment was pursuant to  the demands  of the  employees. In  the  letter dated  20th   September,  1958,  addressed  to  the  General Secretary, United Bank of India’s employees Association, the opening sentence reads as follows:      "With reference  to the  several demands  as stated  in your letter dated-we have agreed as follows: (1) [1965] 1 LLJ 468. 1062          (1) Annual bonus for the year 1958.. In the  letter dated  September  3,  1968,  written  to  the President of  the Association and marked as confidential, it is stated that "the Bank tried to impress upon the President through a  number of  discussions to  persuade him to revise

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the present system of paying  bonus in September to a system after the  year’s results  are  available  and  to  pay  the minimum as  provided for  in the  Bonus  Act  then  and  the balance if any after the year’s profit figures are known and since the  Bank did  not propose  to strain its relationship with  the   employees  and  as  the  request  made  was  not acceptable to the employees, it was decided to pay the bonus at the  rate of  two   months’ basic  salary, as existing on 1.9.1968." In  the letter dated December 29, 1972, addressed to the  General Secretary  of the  Association it  is stated that in case of this Bank, bonus is paid on the basis of the agreement  arrived  at  between  your  association  and  the management equivalent to two months’ basic pay.. " Reference may also  be made to a letter dated 17th April, 1973, by the Association to  the Chairman  and Managing  Director of  the Bank which reads as follows:           ".. As  you know,  bonus  is  being  paid  at  the      present rate  of two  months basic  pay as on September      1st each  year since  1964,  when  after  a  continuous      struggle  the   original  pre-amalgamation   rate.  was      restored gradually, beginning with 15 days basic pay in      1958.. "      In the letter addressed to the General Secretary (dated 26th   August, 1973)  reference is again made to the demands made by the association for additional bonus for 1972 and to the subsequent  discussions and  agreement  for  payment  of bonus at  the rate  of two  months and  12 days  pay  as  on 1.9.1973.      8. From  the above letters it is evident that bonus was paid as a result of long discussion at every stage- No bonus was paid  for the years 1950 to 1958. From 1959 onwards, the rate has not been uniform. There is no evidence to show that this payment  was unrelated to the profits. The letters sent by the  management clearly  indicated that bonus payment was related to  the profits  and  the  Bank  always  wanted  its employees  to   wait  for  the      financial  position  for computation of the bonus payable. The 1063 evidence in  this case does not also justify inference of an implied agreement  on the part of the Bank to pay bonus of a customary nature  at the time of Pooja, without any relation to profits  as a  condition of service. The Labour Court has noted the fact that it was nobody’s case that bonus was ever paid in  any year of loss or that there was any year of loss and that  the bank  had consistently taken the position that bonus was paid out of the year’s profit in anticipation.      9. There  is one  other aspect  of the  claim  now  put forward which  cannot be  lost sight  of, which  affords  an additional  reason   to  reject   the  contention   of   the appellants. The  respondent is  a nationalised bank. Roughly in all  there are  25 nationalised banks. The concept of any customary bonus  is unknown  to nationalised  banks. All the nationalised banks  are wholly  owned  undertakings  of  the Government of India in the matter of bonus, the employees of the nationalised  banks must  be  dealt  with  on  a  common denominator. If  therefore the  contention of  the appellant were to  prevai the  employees of  the respondent,  which is only one  amongst many  nationalised bank,  would  enjoy  an undeserved advantage compared to their counterparts in other nationalised banks  and even  in the  Other branches  of the respondent bank  and may  become a  cause of  disharmony and inequality. Therefore  in larger  public interest  also, the demand for  customary bonus otherwise found to be untenable, must be negatived.      10.  On  a  careful  consideration  of  the  facts  and

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circumstances of  the  case  disclosed,  we  find  that  the appellants have  not succeeded  in persuading us to disagree with the  findings of the Labour-Court or to satisfy us that the bonus  that they  received  had  the  characteristic  of customary bonus as known to law and that therefore they were entitled to  the quantification of that amount under Section 33-C (2) of the Industrial Disputes Act, on the basis of the existence  of  a  legal  right  in  them.  The  appeal  has, therefore, to fail and is dismissed with out any order as to costs S.R.                                       Appeal dismissed. 1064