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PETITIONER: B.N. ELIAS AND CO., LTD., EMPLOYEES’UNION AND OTHERS

       Vs.

RESPONDENT: B.   N. ELIAS & CO., LTD., AND OTHERS.

DATE OF JUDGMENT: 24/03/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1960 AIR  886            1960 SCR  (3) 382  CITATOR INFO :  R          1963 SC 474  (6)  R          1963 SC1007  (8,27)  R          1972 SC  70  (11)

ACT: Industrial  Dispute--Bonus--Implied  term  of  agreement  or condition   of   service--Ex   gratia    Payments--Customary bonus--Puja bonus.

HEADNOTE: Since  1942 the respondents had been making ex  gratia  pay- ments  to their employees (appellants) in addition to  wages and salaries,  but these were not regular and in 956, no  ex gratia  payments were made at all.  The  appellants  claimed that their right to be paid bonus had become an implied term of agreement or a condition of service and, at any rate,  it should be paid as customary bonus, and relied on the case of The Graham Trading Co. (India) Ltd. v. Its Workmen, [1960] 1 S.C.R.  107.  The evidence showed that though  the  payments were  made  from 1942 to 1952 it was made clear  every  time that the payments were made as ex gratia: Held,  (1) Where payments are made to workers ex gratia  and are accepted as such, it is not possible to imply a term  of service on the basis of an implied agreement to pay bonus. (2)  that  there  cannot  be a customary  payment  of  bonus between   employer  and employee where terms of service  are governed  by contract, express or implied, except where  the bonus  may  be connected with a festival,  whether  Puja  in Bengal or some other equally important festival in any other part of the country. The Graham Trading Co. (India) Ltd. v. Its Workmen, [1960] 1 S.C.R. 107, explained. (3)  that for the year 1956 one month’s basic wage should be paid as Puja bonus to the subordinate staff as it has become customary and traditional in the respondents’ concerns, 383

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 121 of 1959.

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Appeal  by special leave from the Award dated June 3,  1957, of the Second Industrial Tribunal, West Bengal. N.   C.  Chatterjee,  D.  L.  Sen  Gupta  and  Dipak   Datta Choudhri, for the appellants. C.   K. Daphtary, Solicitor-General of India, H. N.  Sanyal, Additional Solicitor-General of India and S. N.   Mukherjee, for the respondents. 1960.  March 24.  The Judgment of the Court was delivered by WANCHOO, J.-This appeal by special leave raises the question of bonus.  There was a dispute between the workmen of B.  N. Elias  &  Co. Ltd. (hereinafter called the  appellants)  and their  employers,  B.  N.  Elias and  Co.  Ltd.  and  others (hereinafter  called the respondents) with respect to  bonus for  the  years  1954,  1955 and  1956.   The  case  of  the appellants  was  that  they  were entitled  to  bonus  as  a condition  of service irrespective of profit or loss on  the following scale:- I--Clerical staff. 1  month’s basic pay as bonus in April, 1 month’s basic pay as bonus in August, 1  month’s  basic pay as bonus in  December. II--Subordinate staff. 1  month’s basic wages as bonus in April, 1  month’s basic wages as bonus in August, 1 month’s basic wages as bonus at Puja time, 1 month’s basic wages as bonus in December. According to the appellants this bonus was always paid  from 1942 to 1952.  Later as there were some disputes between the appellants  and the respondents, the respondents  wanted  to stop  the payment of bonus from 1953, though something  less was  paid that year in 1954 the amount of bonus was  further reduced.   Consequently,  a  dispute was  raised  which  was referred  by  the  Government of West Bengal  in  May  1956. Subsequently another dispute was raised with respect to  the bonus  for  the  years 1955 and 1956 and this  time  it  was claimed  as a customary bonus or as a condition  of  service payable at regular intervals of four 384 months  and  at a uniform rate.   Thereupon  a  consolidated reference  was  made  by the Government of  West  Bengal  in September  1956 with respect to all the three years, i.  e., 1954, 1955 and 1956, to the same tribunal. When the matter came up before the tribunal, the respondents contended  that they were not in a prosperous condition  and were  unable  to  pay any further  bonus  besides  what  had already been paid for the years in dispute.  It was admitted that  since  about 1942 the respondents had been  making  ex gratia payments to their employees in addition to wages  and salaries.   These  payments  were made at the  rate  of  one month’s basic wage each time but their number in the  course of  one  year  used to vary.  At one  time  four  ex  gratia payments  were  made to clerical and subordinate  staff  but later  the number of ex gratia payments was reduced for  the clerical staff to three per year but it remained at four for the subordinate staff until the year 1952.  As, however, the trading  result in 1952 deteriorated as  compared  with  the previous years, the respondents made only two ex gratia pay- ments  to clerical staff and three to subordinate staff  for the  year  1953.  A dispute was then raised by  the  workmen with regard to that year but the Government refused to  make a reference to the tribunal.  In 1954 and 1955 two ex gratia payments  were  made  to  clerical  staff  and  two  to  the subordinate staff.  In 1956, no ex gratia payments were made at  all.   The respondents denied that these  payments  were made  as  a condition of service or as an  implied  term  of

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agreement irrespective of profit or loss.  They also  denied that  these were customary payments irrespective  of  profit and loss.  It was alleged that they were truly and  strictly ex  gratia payments made by the respondents voluntarily  out of  goodwill  in circumstances in which  no  tribunal  would award a bonus.  The respondents therefore resisted the claim for any further payment as bonus for these three years. Before  the tribunal, the appellants abandoned  their  claim for  bonus  on the basis of the Full  Bench  formula.   They however pressed their claim on the 385 ground  that  bonus was payable as An implied  condition  of service and had also acquired the status of customary bonus. The  tribunal,  however, negatived the contention  that  the payment of bonus as claimed had become an implied  condition of  service.   It also held that the case of  the  employees based on custom was not tenable.  In consequence it  refused to  grant  any  further bonus for the years  1954  and  1955 beyond what the appellants had been already paid and reject- ed the claim for 1956 altogether. Shri N. C. Chatterjee for the appellants has mainly  pressed the  claim  for bonus on the ground that it is  a  customary bonus  and relies on The Graham Trading Co. (India) Ltd.  v. Its  Workmen  (1).  Before we deal with this aspect  of  the matter  we  may  shortly dispose of the claim  based  on  an implied  agreement  or condition of service.   The  evidence shows that though payment was made uninterruptedly from 1942 to  1952 three times a year to the clerical staff  and  four times  a  year to the subordinate staff, it was  made  clear every  time  the payment was made that it was an  ex  gratia payment.   Further  the receipts given by the  employees,  a sample  of  which  was produced, show  that  the  bonus  was accepted  as ex gratia bonus.  As is pointed in  The  Graham Trading Co. (1) it would not be possible to imply a term  of service  on  the  basis of an  implied  agreement  when  the payment  was  clearly  made  ex gratia  and  had  even  been accepted   as  such,  as  in  this  case.   Therefore,   the contention of the appellants that the bonus claimed by  them has  become an implied term of agreement or a  condition  of service must fail. Our  attention in this connection was drawn to a  letter  of appointment  issued to one C. V. Thomas in which  under  the head " other allowance ", the following appears- "  Equivalent  to a month’s salary every 4th month  will  be allowed after your confirmation in employment." That  is, however, an express term in the  contract  between the National Tobacco Company of India Limited (which is  one of the respondents before us) (1)  [1960] 1 S.C.R. 107. 386 and Thomas and cannot be a basis for a finding of an implied term of agreement to give bonus three times a year.   Thomas may  have  a claim on the basis of this  term  of  agreement between  him  and the company, about which we  say  nothing. Another  letter of appointment also of National Tobacco  Co. of  India Limited with respect to one Ram Shankar Misra  was referred  to.  In that letter, however, among the  terms  we find  a  term relating to bonus at the rate of  Rs.  15  per month  after  confirmation.  That is again an e  press  term between that employee and the National Tobacco Co. of  India Limited  and cannot support the case of an in lied  term  of agreement by which a month’s bonus is paid thrice a year  in April,  August  and December.  The  tribunal  was  therefore right in rejecting the contention based on the implied  term of agreement or condition of service.

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Turning  now to the case of customary bonus which  has  been pressed  before us on the -authority of The  Graham  Heading Co. (1) we may point out that that was a case of a customary and  traditional bonus payable at Puja which was  a  special festival  of  particular importance in  Bengal.   That  case cannot be held to have laid down that there can be customary bonus  as  such  unconnected  with  some  festival.   It  is difficult to introduce a customary payment of bonus  between employer and employee where terms of service are governed by contract, express or implied, except where the bonus may  be connected  with  a festival whether Puja in Bengal  or  some other  equally important festival in any other part  of  the country.   The  principles  laid  down  in  that  case   for governing  customary and traditional bonus connected with  a festival  cannot in our opinion be extended to what  may  be called a customary bonus unconnected with any festival.   We are  therefore of opinion that the appellants having  failed to  prove  (except in one matter with which  we  shall  deal presently) that there was an implied agreement or  condition of service for payment of bonus, they cannot ask for payment of  any  bonus  on  the  basis  of  any  customary   payment unconnected with any festival. (1)  [1960] 1 S.C.R. 107 387 This  brings us to one of the payments to subordinate  staff which was " one month’s basic wages as bonus at Puja time ". It  will  be noticed that this payment  to  the  subordinate staff  at  Puja time is in addition to  the  other  payments which  are common between the clerical and  the  subordinate staff.   This payment of one month’s basic wage as bonus  at Puja  appears to have continued uninterrupted from the  time it  started in 1942 or thereabout upto the time the  dispute arose  in 1954.  The payment was invariably of  one  month’s basic wage and it appears that it was paid even in a year of loss,  vide  Ex.  E. We are therefore of  opinion  that  the principles laid down in The Graham Trading Co. (1) apply  to one month’s Puja bonus payable to the subordinate staff  and it should be held that this payment has become customary and traditional  in the respondents’ concerns when  the  dispute was  raised  for the first time in 1954.  We have  no  doubt that  if  the  judgment in The Graham Trading  Co.  (1)  was available  to  the  tribunal it would  have  held  that  one month’s  basic  wage as bonus at Puja  time  to  subordinate staff   had   become  customary  and  traditional   in   the respondents’ concerns.  We therefore partly allow the appeal and  hold that one month’s basic wage as Puja bonus  to  the subordinate  staff has become customary and  traditional  in the  respondents’ concerns and we order the  respondents  to pay that for the year 1956 for which no bonus whatsoever has been  paid.   The  rest of the appeal fails  and  is  hereby dismissed.   In  the circumstances we order the  parties  to bear their own costs. Appeal allowed in part. (1) [1960] 1 S.C.R. 107. 388