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PETITIONER: MANAGEMENT OF BOMBAY CO.  LTD.

       Vs.

RESPONDENT: WORKMEN

DATE OF JUDGMENT: 25/03/1964

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

CITATION:  1964 AIR 1770            1964 SCR  (7) 477  CITATOR INFO :  F          1969 SC 998  (15)  R          1976 SC1455  (20)

ACT: Industrial Dispute- Christmas bonus- Implied agreement-Test.

HEADNOTE: An  industrial dispute arose between the appellant  and  its workmen  as  to payment of bonus for the years  1957-58  and 1958-59.   The dispute was referred for adjudication to  the tribunal.   The respondents claimed bonus on the basis  that payment  of  some bonus at Christmas had become  an  implied condition of service between the appellant and its  workmen. The workmen claimed 1 1/2 months wages for each year on  the basis  of  an implied term of service.  On these  facts  the tribunal held on the basis of the decision of this Court  in M/s.  Ispahani Ltd. v. Ispahani Employees Union that payment of  bouns at the rate of 1 1/2 months’ salary as an  implied condition of service had been established.  It is this award of  the  tribunal which ha,-, been  challenged  before  this Court. Held:  (i)  Where the payment of bonus is connected  with  a festival  it is possible to infer that there is  an  implied condition to pay something at the time of the festival, even though  the payment has not been made at a uniform  rate  in previous  years.  In the present case, the payment  has  not been  uniform over the years and before an implied  term  of service  to pay bonus can be inferred it must be shown  that the payment was connected with some festival.  Therefore the tribunal  was  not right in holding that there could  be  an implied  condition  of  service  as  to  payment  of   bonus unconnected with any festival. In the present case, though the amount paid in December  was originally  called an advance, at least one  month’s  salary out of the so-called advance always remained with the  work- men  and  was  treated as  bonus  connected  with  Christmas festival.  On the facts of this case it was held that  there was  an implied condition of service between  the  appellant and  its  workmen that something would be  paid  every  year about Christmas time as festival bonus. M/s.   Ispahani Ltd. v. Ispahani Employees’ Union, [1960]  1

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S.C.R. 24, relied on. (ii) In  a case of payment which is made at  different  term and  is  not at a uniform rate the duty of the court  is  to connect   the  payment  with  a  festival  (in   this   case Christmas).   On the evidence in this case it is clear  that the  minimum  is  only  one  month’s  salary  payable  about Christmas  time  and this was actually paid in  1951-52  and 1953-54.   Therefore  the payment of one month’s  salary  as Christmas bonus is proved as an implied condition of service between the appellant and its workmen on the admitted  facts of this case.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 583 ,of 1963. Appeal  by special leave from the Award dated June 18,  1962 of the Industrial Tribunal, Ernakulam, in Industrial Dispute No. 38 of 1960. 478 G.  B.  Pai,  J. B. Dadachanji, O. C.  Mathur  and  Ravinder Narain, for the appellant. Janardan Sharma, for the respondents. March 25, 1964. The judgement  of the Court was delivered by WANCHOO,  J.-This  is an appeal by special  leave  from  the award  of  the Industrial Tribunal,  Ernakulam.   A  dispute arose between the appellant and its workmen as to payment of bonus  for the years 1957-58 and 1958-59, and  was  referred for  adjudication to the tribunal.  The respondents  claimed bonus on two grounds: (i) on the basis of profits earned  by the  appellant, and (ii) on the basis that payment  of  some bonus  at Christmas had become an implied condition of  ser- vice between the appellant and its workmen.  It may be  men- tioned  that the claim was for four months’ wages  for  each year  on the basis of profit bonus.  The  alternative  claim was for 1 1/2 months’ wages for each year on the basis of an implied  term  of  service.  We may also  mention  that  the appellant had paid two months’ basic salary as bonus for the year  1957-58,  and one month’s basic pay as bonus  for  the year  1958-59.   The appellant contended that there  was  no surplus  available  on the basis of the Full  Bench  formula applied in such cases and therefore no profit bonus could be paid.   It  also contended that no bonus was payable  as  an implied term of service. The  tribunal  found  on an application of  the  Full  Bench formula that there was no available surplus in either of the two  years  and  therefore no bonus was  payable  as  profit bonus.  It then went into the question whether any bonus was payable  as an implied condition of service and  relying  on the  decision  of this Court in Messrs.   Ispahani  Ltd.  v. Ispahani  Employees’ Union(1) held that payment of bonus  at the rate of 1 1/21 months’ salary as an implied condition of service  had  been established.  It  therefore  ordered  the appellant  to pay that amount after taking into account  one month’s salary already paid by it.  It is this award of  the tribunal which has been brought before us by special leave. The main contention on behalf of the appellant are two-fold: (1)  It  is  urged that the tribunal erred in  holding  that payment of bonus as an implied condition of service need not be attached to any festival; (2)  On the undisputed facts of this case, the tribunal  was not right in holding that a case had been made out for (1) [1960] 1 S.C.R. 24. 479

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payment  of some bonus as an implied condition  of  service, and  in any case, even if a case had been made out for  pay- ment  of  some bonus, it could not be at the rate of  1  1/2 months’ salary. Turning  to  the first contention raised on  behalf  of  the appellant, we are of opinion that the tribunal was not right in  holding  that  there could be an  implied  condition  of service  as to payment of bonus unconnected with any  festi- val.  In Ispahani’s case(1) the question raised was  whether there  was  an implied condition of service for  payment  of some bonus at the time of puja festival in Bengal.  In  that connection  this Court laid down the tests for holding  when it could be said that there was an implied condition of ser- vice  for  payment  of some bonus in  connection  with  some festival.   This  Court  also pointed out that  it  was  not necessary  in  order to establish an  implied  condition  of service  as  to  payment  of some bonus at  the  time  of  a festival  like  puja  in  Bengal that  the  amount  paid  in connection with the festival should be uniform, and that  in the  absence of a uniform rate an implied agreement  to  pay something  could  be  inferred.  Now where  the  payment  is connected with a festival it is possible to infer that there is an implied condition to pay something at the time of  the festival,  even  though  the  evidence  discloses  that   in previous years payment has not been made at a uniform  rate. But  it is difficult to see how the principle which  applies to  a  case  of payment at the time of  a  festival  can  be extended  to  infer  an implied term of  payment  where  the payment has been made entirely unconnected with any festival and  at rates which have varied from year to year.   We  are therefore  of  opinion that when this Court laid  down  that there  was an implied condition of service to pay  something about  the time of puja festival in Ispahani’s  case(2),  it was  clear that such implied condition of service  could  be inferred where the rate of payment was not uniform only when such payment was obviously connected with some festival.  In the present case also, the payment has not been uniform over the years and therefore before an implied term of service to pay bonus can be inferred it must be shown that the  payment was  connected with some festival.  It would in our  opinion be impossible to infer an implied condition of service where payment  has  not  been uniform in  the  past,  unless  such payment  can  be  connected  with  some  festival.   We  are therefore of opinion that the tribunal was wrong in  holding that an inference could be, drawn for payment of bonus as an implied  condition  of service in the circumstances  of  the present  case when the payment was not uniform in  the  past even though it was not connected with any festival. (1)  [1960] 1 S.C.R. 24. 480 But that in our opinion does not dispose of the matter.  The evidence  shows that payment of some bonus began to be  made from  the year 1945-46 in which year bonus varying from  one month  to 3 1/2 months’ salary was paid in this branch.   It may  be  added  that the appellant has  a  number  of  other branches in other parts of the country.  What we are  saying in  this case is only concerned with the Cochin  branch  and may  not necessarily be applicable to other branches of  the appellant, the facts of which are not before us. From  1946- 47 to 1949-50, it appears that some lumpsum was paid, though the  amount  is  not exactly known.  It is  also  not  clear whether during the years 1945-46 to 1949-50 payment was made about  Christmas time, as there is no evidence  either  way. In 1950-51 it appears that 1 1/2 months’ salary was paid  as bonus.   No payment appears to have been made in  that  year

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about  Christmas time, though it is said that 1 1/2  months’ salary was paid as bonus sometime afterwards.  From  1951-52 right  upto  1958-59, payment was made at the  rate  of  one month’s  salary to two months’ salary about Christmas  time. It is clear therefore that at any rate since 1951-52 payment is  connected  with Christmas festival, though there  is  no clear  evidence as to the earlier payments  being  connected with Christmas.  At the same time there is no clear evidence that  those payments were not connected with Christmas  even though  payment  for the year 1950-54 might have  been  made sometime  after Christmas.  On the whole therefore it  seems to  us that it is possible to infer that the payments  which began from 1945-46 and have been made throughout upto  1958- 59   were  in  all  probability  connected  with   Christmas festival.  This inference in our opinion is strengthened  by the  fact  that  from  1951-52  undoubtedly  payments   were connected   with  Christmas  and  were  always  made   about Christmas  time,  even though there was adjustment  on  some occasions later on by payment of more amount or by reduction of the amount already paid by deducting some part of it from later salary.  We are therefore of opinion that we can infer from  the  evidence on the record that the  payment  in  the present   case   is  connected  with   Christmas   festival. Therefore even though the tribunal was wrong in holding that the  payment  need not be connected with any festival  in  a case  like the present where the rate has not been  uniform, the  respondents  have made out -a case of payment  of  some bonus  as an implied condition of service connected  with  a festival  subject  to what we say on the  second  contention raised on behalf of the appellant. The  appellant however contends that it has not been  proved that  the,  payment  of bonus was  in  connection  with  the Christmas festival on the undisputed evidence in this 481 case. Now  the evidence is that something used to be  invari ably paid at least from 1951-52 about Christmas time.  Later on  something  mote  was paid in some years.   In  one  year nothing more was paid and in three years the appellant  took back  part of the payment which had been made.   The  appel- lant’s contention is that the payment before Christmas which has  been  established in this case was only an  advance  in connection with the festival which was later adjustable from the salary of the workmen.  It is true that when the payment was made it was designated as an advance.  For example, when payment  was made in December 1953, it was designated as  an advance  and  it was stated in the notice that it  would  be treated as advance against any bonus and in the event of  no bonus  as  advance against salary.  Even  so,  the  evidence shows  that  the so-called advance was  never  recovered  in full.  Sometimes more was paid in addition to what had  been paid in December.  Once nothing more was paid but the amount already  paid  in December was not recovered.   Three  times something was recovered from what was paid in December; even so  a  minimum of one month’s salary out  of  the  so-called advance  in December was always left with the  workmen.   So though the amount paid in December was originally called  an advance,  at least one month’s salary out of  the  so-called advance always remained with the workmen and was treated  as bonus connected with Christmas festival.  The fact that  the payment was originally called advance would not detract from the conclusion that some amount was really paid as bonus  in connection with Christmas festival. There  is no evidence to show that this amount was paid  ex- gratia.   In this connection our attention is drawn to  what happened in April 1954.  Then a notice was given about  pay-

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ment  of additional bonus which was called  ex-gratia.   The evidence  however shows that in 1953-54 one  month’s  salary was  paid in December and in addition half a month’s  salary was  paid later on and it was this additional  half  month’s salary which was designated as ex-gratia payment.  There  is nothing  to show that the payment made in December was  ever designated  as  ex-gratia payment.  It could  hardly  be  so designated  for it was usually called an advance  which  was claimed  as  recoverable though the whole of  it  was  never recovered.   In spite of the payment made in December  being called an advance, we are of opinion that on the evidence in this case it is clear that part of the advance was made as a bonus  in connection with Christmas festival.  It is  there- fore  established on the evidence that there was an  implied condition  of service between the appellant and its  workmen that something would be paid every year about Christmas time as festival bonus. L/P(D)ISCI-- 16 482 The  next  question to which we turn is the  minimum  amount which  has  to be paid as an implied condition  of  service. Here again the evidence shows that the minimum that has been paid,  at  any rate since 1951-52, is  one  month’s  salary. Sometimes  more has been paid, but one month’s salary  seems to  have  been  paid in connection  with  Christmas  for  an unbroken  period of time, which is long enough to permit  an inference that there is an implied condition of service  for payment  of one month’s salary as festival bonus.  connected with  Christmas in this branch of the appellant.  We  cannot agree  with the tribunal that the evidence shows  a  minimum payment  of 1 1/2 months’ salary at the time  of  Christmas. It is true that if we take into account what was. paid later also  over the entire period from 1950-51, the minimum is  1 1/2  months’ salary-, but in a case of payment which is  not at  a  uniform rate we have to connect the  payment  with  a festival  (in this case Christmas).  We can  therefore  only look  at the payment made in December to decide what is  the minimum  which  may be treated as a  condition  of  service. Once  it  is proved that there was an implied  condition  of service,  some amount has to be paid under the said  implied term;  what  the  minimum would be in that  behalf  must  be decided as a question of fact.  On the evidence in this case it  is  clear that the minimum is only  one  month’s  salary payable  about Christmas time and this was  actuallypaid  in 1951-52  and  1953-54, though in other years more  was  paid which  was  later liable to adjustment.  We  therefore  hold that  there is an implied condition of service  between  the appellant  and  its workmen that one month’s salary  as  the minimum  would  be paid as Christmas bonus  to  the  workmen about   Christmas  time.   The  decision  of  the   tribunal therefore allowing 1 1/2 months’ salary as the minimum  must be  modified and We hold that payment of one month’s  salary as  Christmas  bonus is proved as an  implied  condition  of service  between  the  appellant  and  its  workmen  on  the admitted  facts  of the case.  The minimum of  one  month’s, basic  salary  has to be paid even if there is loss  in  any given year.  We may add that though this is the minimum,  it would  be  open to the appellant to pay more if  its  profit position justifies the payment of more.  But we cannot agree with  thetribunal  that  in the  year  1958-59,  the  profit position of the appellant justifies payment of more than the minimum.   It  has been found that in that  year  there  was actually  a  small  loss  of Rs.  8,000/-  suffered  by  the appellant.   Therefore  even  though  the  tribunal  may  be justified in awarding a reasonable amount as festival  bonus

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once  it  is  proved that something has to  be  paid  as  an implied  condition of service towards such bonus, it  cannot be  said  in this case that the tribunal  was  justified  in giving anything beyond the minimum for 483 this  was a year of loss.  We are therefore of opinion  that the  amount awarded as festival bonus for the  year  1958-59 should  be reduced to one month’s salary and  order  accord- ingly. Before  we part with this appeal we should like to add  that there  was  no stay order by this Court in this  case.   The -extra amount of 15 days’ salary awarded by the tribunal has already  been paid to the workmen.  Mr. Pai has  assured  us that  he would advise his client that the additional  amount so paid may not be recovered back in the circumstances.   We therefore  partly allow the appeal in the manner indi  cated above. In the circumstances we pass no order as to costs. Appeal partly allowed. 484