http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: MESSRS.  ISPAHANI LTD.  CALCUTTA

       Vs.

RESPONDENT: ISPAHANI EMPLOYEES UNION

DATE OF JUDGMENT: 06/05/1959

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. SINHA, BHUVNESHWAR P. GAJENDRAGADKAR, P.B.

CITATION:  1959 AIR 1147            1960 SCR  (1)  24  CITATOR INFO :  R          1959 SC1151  (5,6)  RF         1961 SC 867  (8)  RF         1962 SC1340  (6)  R          1963 SC 474  (4,7)  C          1963 SC1007  (27)  R          1963 SC1474  (9)  R          1964 SC1770  (2)  RF         1969 SC 998  (9,11,12,15)  R          1972 SC  70  (9)  R          1976 SC1455  (19)

ACT: Industrial            Dispute-Puja             Bonus-Implied agreement-Test--Benefits   arising  out  of   service   with employer’s Predecessors-Workmen if entitled to.

HEADNOTE: The workmen were originally employed by M/s.  M.M.  Ispahani Ltd.,   which   shortly  before  the  partition   of   India transferred   its   registered  office  from   Calcutta   to Chittagong.   The  appellant  company  was  incorporated  on September  5, 1947 and took over the good-will  and  trading rights of M/s.  M. M. Ispahani Ltd. and, also purchased  its stock-in-trade,  properties and assets.  Most of the  shares of the appellant were held by M/s.  M. M. Ispahani Ltd.  and the business of the appellant was of the same nature carried on  in the same premises with the same workmen on  the  same remuneration.  On the transfer of M/s.  M. M. Ispahani  Ltd. to  Chittagong  the  question  arose  of  retrenching  those workmen  who were not willing to go to Chittagong  and  when the  appellant  company  came into existence  it  agreed  to employ those workmen.  The workmen apparently agreed to  the termination  of  their services with M/s.   M.  M.  Ispahani Ltd., and after receiving their provident funds and  arrears -of salaries they were appointed by the appellant.  M/s.  M. M.  Ispahani Ltd. used to pay puja bonus to the  workmen  at the  rate of one month’s wages and the appellant  also  paid the  same from 1948 up to 1952, even in the years  in  which the appellant suffered losses.  As the appellant did not pay puja bonus for 1953, a dispute arose and was referred for 25

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

adjudication.   The workmen also claimed benefits  from  the appellant  for the period of service rendered by them  under M/s.  M. M. Ispahani Ltd. Held, that the workmen were entitled to the puja bonus equal to  one  month’s  wages as it was an  implied  term  of  the employment  of the workmen.  Puja was a special festival  in Bengal and it had become usual with many firms there to give bonus before Puja to their workmen.  A claim for puja  bonus was  based  either  on implied  agreement  or  on  customary payment.   An  implied agreement could be  inferred  if  the following circumstances were established:- (i)  that the payment was unbroken (ii) that the payment had been made for a sufficiently  long period; and (iii) that it was not paid out of bounty. The  payment:  need  not necessarily be at  a  uniform  rate throughout,  and  it  was for the  Tribunal  to  decide  the quantum in a particular year taking into account the various payments made in previous years. In  the  present case the payment was unbroken and  was  not made  out  of bounty as it was made even in years  of  loss. The sufficiency of the length of the period depended on  the circumstances  of  each  case and in the  present  case  the appellant had paid the bonus since its birth. Mahalaxmi  Cotton Mills Ltd., Calcutta v.  Mahalaxmi  Cotton Mills Workers Union, 1953 L.A.C. 370 approved. Held  further,  that the workmen were not  entitled  to  any benefits  arising out of their employment with M/s.   M.  M. Ispahani Ltd.  The workmen had agreed to the termination  of their service with that company, and there was no express or implied   undertaking  given  by  the  appellant   regarding continuity of service when employing the workmen.

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos. 473 &  474 of 1957. Appeals  by special leave from the judgment and order  dated the 27th July 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No. Cal.     257 of 1954. M.C. Setalvad, Attorney-General for India (M/s.     J. B. Dadachanji, S. N. Andley and Rameshwar Nath, Advocate     of M/s.  Rajinder Narain & Co., with him) for the appellants. S.K. Mukherjee and P. K. Ghosh for the respondents. 26 1959.  May 6. The Judgment of the Court was delivered by. WANCHOO J.-These are two connected appeals by special  leave against the decision of the Labour Appellate Tribunal in  an industrial  matter.  Appeal No. 473 is by Messrs.   Ispahani Ltd. (hereinafter called the company) and appeal No. 474  is by  the  employees of the company  represented  by  Ispahani Employees’  Union  (hereinafter called the  workmen).   They will be disposed of by one judgment. There was a dispute between the company and its workmen on a number  of matters, which was referred by the Government  of West  Bengal  to the adjudication of the  Second  Industrial Tribunal,  by an order of December 17, 1953.  There  were  a number  of matters which had to be adjudicated upon; but  of these only two now survive, namely- (1)whether  the  workmen are entitled to  puja  bonus  for 1953, and (2)whether  the workmen are entitled to receive  from  the company  any benefits for the period of service rendered  by them under Messrs.  M. M. Ispahani Ltd.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

A  few facts may be set out here to give the  background  of this dispute.  Originally, there was another company  called Messrs.  M. M. Ispahani Ltd. which was carrying on  business in  Calcutta  since December 1934 before  the  partition  of India.  Shortly before the partition took place, Messrs.  M. M.  Ispahani Ltd. transferred their registered  head  office from Calcutta to Chittagong, now in Pakistan.  That  company thus  became  a Pakistani company after  August  1947.   It, however, continued to own properties in India and carried on some business in Calcutta on a small scale.  The company was incorporated  on September 15, 1947 and took over the  good- will and trading rights of Messrs.  M. M. Ispahani Ltd.  and also purchased the stock-in-trade, properties and assets  of that  company.   Most  of the shares of  the  company  were, however,  held  by  Messrs.  M. M.  Ispahani  Ltd.  and  the business  of  the, company was of the same  nature  and  was carried  on in the same premises with the  same  telegraphic address 27 and  with  the  same  workmen  on  the  same   remuneration. Further, the company continued to pay puja bonus at the rate of one month’s wages from 1948 up to 1952.  As no bonus  was paid  in 1953, a dispute arose between the company  and  the workmen,  which  was referred for  adjudication  along  with other, matters. The   Industrial  Tribunal  held  that  it  had   not   been established  that  puja bonus had been paid at  the  uniform rate  of one month’s wages for a sufficiently long time  and for  unbroken period, and therefore rejected the  claim  for puja  bouns  for 1953.  On the other  question  relating  to whether  the  workmen  were entitled  to  receive  from  the company  any benefits for the period of service rendered  by them  under Messrs.  M. M. Ispahani Ltd., it held  that  the workmen  were  entitled  to take into  account  the  service rendered  by them under Messrs.  M. M. Ispahani Ltd. in  the matter  of benefits due under the law during  their  service under the company. This  award  led to two appeals, one by the company  on  the question of benefits arising from the service rendered under Messrs.   M. M. Ispahani Ltd., and the other by the  workmen with  respect to puja bonus for the year 1953.   The  Labour Appellate Tribunal allowed both the appeals.  It held on the question  of bonus that it had been proved that  puja  bonus had  become  a  term  of employment  and  the  workmen  were therefore entitled to bonus at the rate of one month’s wages for  the year 1953.  As to the benefits arising out  of  the service  rendered  by  the  workmen  under  Messrs.   M.  M. Ispahani  Ltd.,  it  held  that  there  was  termination  of employment  of  the  workmen when Messrs.   M.  M.  Ispahani migrated  to Pakistan and the employment of the  workmen  by the company was fresh employment and they therefore were not entitled  to  any benefits arising out of  their  employment under  Messrs.   M. M. Ispahani Ltd.  Both the  company  and workmen  applied for special leave to appeal to  this  Court against the decision of the Appellate Tribunal insofar as it was  against them.  The applications were granted; and  that is how the matter has come up before us. 28 We shall first take up the appeal of the company relating to puja bonus for the year 1953.  Two points have been urged in this behalf, namely-- (1)the Appellate Tribunal had no jurisdiction to interfere with  the  finding of the Industrial Tribunal as  it  was  a finding of fact; and (2)even  if the Appellate Tribunal had  jurisdiction,  its

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

decision is incorrect in law. Puja is a special festival in Bengal and it has become usual with  many  firms there to give bonus before puja  to  their workmen.  This matter came up before the Appellate  Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers’ Union.(1) In that case puja bonus was claimed as  a matter of right payable by the employer at  a  special season of the year, namely, at the time of the annual  Durga Puja.   This  right was not based on the  general  principle that  labour  and capital should share the  surplus  profits available after meeting prior charges.  It was held in  that case  that  this right rested on an  agreement  between  the employer and the employees, and that the agreement might  be either  express  or implied.  Where the  agreement  was  not express,  circumstances  might  lead  the  tribunal  to   an inference of implied agreement.  The following circumstances were  laid  down in that case as material for  inferring  an implied agreement:- (1)  The payment must be unbroken: (2)  It must be for a sufficiently long period; and (3)  The circumstances in which -payment was made should  be such as to exclude that it was paid out of bounty. The, Appellate Tribunal further pointed out that it was  not possible  to lay down in terms what should be the length  of period  to  justify the inference of implied  agreement  and that  would depend upon the circumstances of each case.   It also pointed out that the fact of payment in a year of  loss would  be  an important factor in excluding  the  hypothesis that  the  payment was out of bounty and in  coming  to  the conclusion that it was as a matter of obligation based (1)1952 L. A. C. 370. 29 on  implied  Agreement.  As to the quantum of bonus  it  was laid  down  that even if payment was not at a  uniform  rate throughout   the  period,  the  implied  agreement  to   pay something could be inferred and it would be for the tribunal to decide what was the reasonable amount to be paid as  puja bonus.   The  tests laid down in that case have  since  been followed  in a number of cases by the  Industrial  Tribunals and   the  Labour Appellate Tribunal.  We do  not  think  it necessary to, refer to all those cases.  It may now be taken as  well  settled  that puja bonus in  Bengal  stands  on  a different  footing from the profit bonus based on  the  Full Bench formula evolved in The Millowners’ Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay (1).  The  claim for puja bonus in Bengal is based on either of two  grounds. It  may  either  be a matter of  implied  agreement  between employers  and employees creating a term of  employment  for payment of puja bonus, or (secondly) even though no  implied agreement  can be inferred it may be payable as a  customary bonus.  In the present case we are concerned with the  first category,  (namely,  that  based  on  an  implied  agreement creating  a term of employment between the employer and  the employees),  and  so  we shall  confine  ourselves  to  that category.  It was this kind of bonus which was considered by the Appellate Tribunal in Mahalaxmi Cotton Mills cause  (2). We are of opinion that the tests laid down in that case  for inferring  that there was an implied agreement for grant  of such  a  bonus  are correct and it is  necessary  that  they should  all  be satisfied before bonus of this type  can  be granted. This brings us to the two questions raised on behalf of  the company,  as  set out above.  The first  question,  (namely, that the Appellate Tribunal had no jurisdiction to interfere with  the  finding of the Industrial Tribunal that  begin  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

question  of  fact) can be easily disposed of.   We  are  of opinion  that the decision whether there is an implied  term of employment is a mixed question of fact and law and not  a pure question of fact.  This is similar to the decision, for example, on a question whether a custom has been (1) 1950 L.L.J. 1247              (2) 1952 L.A.C.370 30 established  or whether adverse possession has been  proved, or whether a Hindu family has ceased to be joint as a matter of  law accepting the facts proved.  The Appellate  Tribunal will therefore have jurisdiction to consider whether on  the facts proved before the Industrial Tribunal an inference  in law  can  be drawn that an implied term  of  employment  for grant  of  puja bonus has been established.   The  Appellate Tribunal therefore had jurisdiction to consider this matter. The  next  question is whether in law the  decision  of  the Appellate Tribunal drawing the inference of an implied  term of employment in this case is correct. The undisputed  facts here are these: The workmen when they were in the employ  of Messrs.  M.M. Ispahani Ltd. always used to get puja bonus at the  rate  of one month’s wages.  This was asserted  by  the workmen  in their written statement and the company did  not deny  it  in  its  reply.  All that it  said  was  that  the practice  or custom prevalent at the time of  Messrs.   M.M. Ispahani Ltd. and the payment of bonus by that company  were immaterial  and  did not bind the  company.   This  averment impliedly  admitted that Messrs.  M.. M. Ispahani Ltd.  used to  pay  puja  bonus as alleged  by  the  respondents.   The company  practically  took over the  business  from  Messrs. M.M. Ispahani Ltd. and it was found that it had been  paying bonus  ever since it came into existence from 1948 right  up to  1952 without any break at the rate of one month’s  wages and that this bonus was paid even in the years in which  the company  suffered  loss.   In  the  circumstances,  it   was established  in this case that (1) the payment was  unbroken and (2) it was not paid out of bounty due to profits  having arisen,  for  it was paid in some years of loss  also.   The only other question that remains is whether it had been paid for  a  sufficiently  long period in order  to  justify  the inference  that it was an implied term of  employment.   The length  of the period depends on the circumstances  of  each case  and  what  may be a short  period  not  justifying  an inference  of an implied term of employment in one case  may be  long enough in another.  In the present case, since  the appellant has paid the bonus 31 continuously  since its birth, we agree with  the  Appellate Tribunal that the circumstances justify the inference of  an implied term of employment for payment of puja bonus at  the rate  of  one month’s wages every year.  The appeal  of  the company must therefore fail. Turning now to the appeal of the workmen on the question  of benefits,  we  are  of  opinion that  the  decision  of  the Appellate Tribunal on this question also is correct.  It  is true that the company practically took over the business  of Messrs.   M.  M. Ispahani Ltd.  But, as pointed out  by  the Appellate  Tribunal,  when  Messrs.   M.  M.  Ispahani  Ltd. transferred  their headoffice from Calcutta  to  Chittagong, the  question arose of retrenching those employees who  were not  willing  to go to Chittagong in view  of  the  expected partition  of India.  In these circumstances,  the  company, when  it  came into existence in September 1947,  agreed  to employ  those  employees of Messrs.  M.  M.  Ispahani  Ltd., whose   services  were  likely  to  be  terminated.    These employees.  apparently  agreed to the termination  of  their

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

services  with Messrs.  M. M. Ispahani Ltd.,  and  therefore obtained settlement of their claims for provident fund,  and also  received all arrears of salary from them.   They  were thereafter  appointed, after withdrawal of  their  provident fund,  by  the  company.  There was no  express  or  implied undertaking  given  by the company regarding  continuity  of service  and the employees joined the provident fund of  the company  afresh.  In the circumstances the decision  of  the Appellate  Tribunal  on this question is  correct,  and  the appeal of the workmen must also fail. We  therefore  dismiss both the appeals and  in  consequence order the parties to bear their own costs of this Court.                                    Appeals dismissed. 32