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PETITIONER: SANGHI JEEVARAJ GHEWAR CHAND & ORS.

       Vs.

RESPONDENT: SECRETARY,   MADRAS  CHILLIES,  GRAINS   KIRANA    MERCHANTS

DATE OF JUDGMENT: 16/07/1968

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. HEGDE, K.S.

CITATION:  1969 AIR  530            1969 SCR  (1) 366  CITATOR INFO :  R          1972 SC1436  (13)  E          1976 SC1455  (28,37,38)  RF         1976 SC1775  (17)  RF         1979 SC 876  (6)  R          1984 SC 457  (2,3,4)  R          1986 SC1486  (4)

ACT: Payment  of Bonus Act (21 of 1965), ss. 1(3), 22, 32(x)  and 39  - Act whether exhaustive on the law relating  to  bonus- Whether  employees entitled to payment of bonus  dehors  the Act  in case of excluded and exempted  establishments--Scope of ss. 22 and 39. Legislative  history  and Statement of Objects  and  Reasons when can be looked into.

HEADNOTE: The appellants are : (i) an establishment with less than  20 employees  and  which  was  not  a  factory;  and  (ii)   an establishment  in  the  public  sector.   On  the  question, whether  in view of the non-applicability of the Payment  of Bonus Act, 1965, to the two appellants-in the first case  by reason of exclusion under s. 1(3) and in the other by reason of  exemption  under  s.  32(x)-the  employees  of  the  two appellants were entitled to claim bonus dehors the Act. HELD  :  Considering  the history of  the  legislation,  the background  and  the  circumstances in  which  the  Act  was enacted  the  object of the Act and its scheme,  it  is  not possible  to accept the construction suggested on behalf  of the   respondents  (employees)  that  the  Act  is  not   an exhaustive  Act  dealing comprehensively with  the  subject- Matter of bonus in all its aspects, or that Parliament still left  it  open to those to whom the Act does  not  apply  by reason  of  exclusion or exemption to raise a  dispute  with regard   to   bonus  dehors  the  Act   through   industrial adjudication  under  the Industrial Disputes Act,  1947,  or other corresponding laws. (1)  The  Court is justified in looking into the history  of the  legislation and the statement of objects  and  reasons, not  for  the  purpose of construing the Act,  but  for  the limited   purpose  of  ascertaining  the   background,   the conditions  and circumstances which led to its passing,  the

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mischief  it  was  intended to prevent  and  the  remedy  it furnished to prevent such mischief. [372 B-C] Heydon’s  case,  76 E.R. 637, Bengal Immunity  Co.  Ltd.  v. State   of   Bihar,   [1955]  2  S.C.R.  603,   R.   M.   D. Chamarbaughwalla  v.  Union  of India,  [1957]  S.C.R.  930, Central Bank of India v. Their Workmen, [1960] 1 S.C.R. 200, Corporation, of the City of Nagpur v. Its Employees,  [1960] 2 S.C.R. 942, State of West Bengal v. Union of India, [1964] 1  S.C.R.  371 and Azeez Basha v. Union of India,  [1968]  1 S.C.R. 833 referred to. Until  the  enactment  of the Payment of  Bonus  Act,  1965, payment of bonus was not a statutory obligation on the  part of the employer nor was it a statutory right of an employee. It was originally a voluntary payment.  Under the Full Bench formula,  evolved  by  the Labour  Appellate  Tribunal  with respect  to  disputes  for payment of bonus  in  the  Bombay Textile  Industry, it acquired the character of a  right  to share  in  the surplus of profits  enforceable  through  the machinery  of the Industrial Dispites Act, 1947,  and  other corresponding  Act.  Under that Act, workmen  of  industrial establishments could raise an industrial dispute and 367 demand  by way of bonus a proportionate share in profits  on the  principle that both capital and labour had  contributed to the making of profits and therefore both were entitled to a  share therein.  As a result of the observations  of  this Court  in Associated Cement Companies Ltd. v.  Its  Workmen, [1959] S.C.R. 925 and in Ahmedabad Miscellaneous  Industrial Workers’  Union  v. The Ahmedabad Electricty Co.,  [1962]  2 S.C.R.  934, the Government of India appointed a  Commission to   make  recommendations  with  respect   to   legislation regarding  bonus.  The Government accepted the  majority  of the Commission’s recommendations and sponsored the enactment of  the Payment of Bonus Act.  Under this Act. liability  to pay  bonus has now become a statutory obligation imposed  on employers.  In providing such statutory liability Parliament has  laid down a statutory formula on which bonus  would  be savable  irrespective  of  whether  the  establishment  had, during  a  particular accounting year, made profit  or  not. Parliament further laid down that the formula it had evolved and the statutory liability it provided, shall apply only to certain   establishments   and   not  to   all.    In   such circumstances,  Parliament  has not to  provide  by  express words  that henceforth no bonus shall be payable  under  the industrial  Disputes  Act or other  corresponding  Acts,  as those Act never conferred any statutory right to bonus. [373 G-H; 375 H; 376 B-C; 381 A-D] Muir Mills Co. v. Suti Mills Mazdoor Union, Kanpur, [1955] 1 S.C.R.  991,  Baroada Borough Municipality v.  Its  Workmen, [1957]  S.C.R.  33,  Shree Meenakshi  Mills  Ltd.  v.  Their Workmen [1958] S.C.R. 878, State of Mysore v. The Workers of Gold  Mines, [1959] S.C.R. 895, Associated Cement  Companies Ltd.  v. Its Workmen, r.[1959] S.C.R. 925 and The  Ahmedabad Miscellaneous  Industrial  Workers’ Union v.  The  Ahmedabad Electricity Co. Ltd. [1962] 2 S.C.R. 934, referred to. (2)  The  Payment  of  Bonus  Act  was  intended  to  be   a comprehensive  and  exhaustive law dealing with  the  entire subject  of bonus.  The fact that the preamble  states  that the Act shall apply only to certain establishments and  that s.  1(3) of the Act excludes establishments where less  than 20  persons ape employed, from the application of  the  Act, does not necessarily mean that Parliament ras not dealt with the subject-matter of bonus and the persons to whom it shall apply  comprehensively in the Act.  Even where an Act  deals comprehensively   with  a  particular  subject-matter,   the

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Legislature  can provide that it shall apply  to  particular persons  or  group of persons or to  specified  institutions only, and so, Parliament can lay down as a matter of  policy that it will exclude from the application of the Act certain types  of establishments and also provide for  exemption  of certain other types of establishments which would  otherwise fall within the scope of the Act. [380 C-H; 385 H] (3)  Since the Payment of Bonus Art is an exhaustive statute dealing  with subject of bonus, one of the  consequences  is that  under s. 1(3) of the Act, employees in  establishments engaging    less than 20 Persons would get no  bonus  either under this Act or under industrial adjudication provided for by the Industrial Disputes Act and other corresponding Acts. Under  s. 1(3)Parliament has excluded  petty  establishments with  less than 20 employees in view of the  recommendations of   the  Commission  in  that  regard,  namely,  that   the application of the Act to such establishments would lead  to harassment of petty proprietors and disharmony between  them and  their  employees.   To  hold  that  employees  in  such establishments would still be entitled to bonus, though  not under  the Act, would lead to the anomaly that if there  are two  establishments  in  the  same  trade  or  industry  one engaging  more than 20 persons and the other  engaging  less than 20 person, then, in the former case the employer  would be 368 liable to pay bonus at the rate laid down in the Act,  while in the latter, the employer would be liable to pay bonus  on the basis of the Full Bench formula which may be at a higher rate depending upon the quantum of profits in the particular year. [382 C-F; 384 C-E] (4)  Under   s.   32(x)  of  the  Payment  of   Bonus   Act, establishments  in the public sector are exempted  from  the application  of  the Act.  Therefore,  employees  in  public sector concerns would not be entitled to bonus, either under the Act or which they might otherwise have got by raising  a dispute   under  the  Industrial  Disputes  Act  and   other corresponding statutes.  The exemption is a limited one  and in  granting it, Parliament had a definite policy  in  mind, namely,  not  to  subject  such  establishments  which   are conducted  without any profit motive and are run for  public benefit, to the burden of bonus.  To hold that even in these exempted  cases, the employer would still be liable  to  pay bonus if the employees of such institutions were to raise  a dispute under the Industrial Disputes Act and claim bonus in accordance  with the Full Bench formula would also  lead  to the  anomaly that the Legislature would be giving  exemption with  one  hand  and  taking it away  with  the  other.   If Parliament wanted to retain the right to claim bonus by  way of  industrial  adjudication in the case  of  establishments which are either excluded or exempted from the Act it  would have  made an express saving provision to that effect as  it has done for employees of coal mines. [382 F-H; 383 F-H; 384 A-C] (5)  There  is  no question of a right to  bonus  under  the Industrial  Disputes Act or other corresponding  laws  being saved under S. 39 of the Payment of Bonus Act, because : (a)  the  Industrial Disputes Act or the corresponding  laws though  they  confer substantial rights on  a  workman  with regard  to lay off, retrenchment compensation, etc., do  not provide for a statutory right to payment of bonus; and  [385 C-G] (b)  the  definition  of  ’employee under s.  2(13)  of  the Payment  of Bonus Act is wider than that of ’workman’  under the  Industrial Disputes Act.  Therefore, a dispute  between

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an employer and his employees, in relation to bonus may  not be  an  industrial dispute.  Section 22 of  the  Payment  of Bonus  Act,  by  fiction,  makes  such  disputes  industrial disputes  and  applies  the  provisions  of  the  Industrial Disputes Act.  But the Payment of Bonus Act does not provide any  machinery  or  procedure  for  the  investigation   and settlement of disputes which may arise between employers and employees,  such  as  a dispute as  to  the  computation  of allocable  surplus, or quantum of bonus or as to whether  an establishment in the public sector is liable to pay bonus in view of s. 20 of the Act.  Therefore, s. 39, which  provides that  the  provisions  of the Payment of Bonus  Act  are  in addition to and not in derogation of the Industrial Disputes Act and other corresponding laws, became necessary in  order that  the  machinery of the Industrial Disputes Act  may  be available  for  adjudication  of  such  disputes  under  the Payment of Bonus Act F377 H; 378 A-G; 379 B-D]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1630 of 1967. Appeal by special leave from the award dated April 28, 1967, of the Industrial Tribunal, Madras in Industrial Dispute No. 78 of 1966.           and Civil Appeal No. 1721 of 1967. 369 Appeal  by special leave from the order dated July 14,  1967 of the Additional Industrial Tribunal, Mysore in A.I.D.  No. 29 of 1966. E.C. Agarwala and Santosh Gupta, for the appellants (in C.A. No. 1630 of 1967). C.K.  Daphtary, Attorney-General, G. B. Pai, S. K.  Dholkia, and  O.  C. Mathur, for the appellant (in C.A. No.  1721  of 1967). M.   K. Ramamurthi and M. V. Goswami, for respondent No. 1.   (in C.A. No. 1630 of 1967). H.   R. Gokhale, M. K. Ramamurthi, Shyamala Pappu and Vineet    Kumar,  for the respondents (in C.A. No.  1721  of 1967). The  Judgment of the Court was delivered by Shelat, J. In Civil Appeal No. 1630 of 1967, workmen engaged by  certain chilies and kirana shops in Madras and who  were members  of the respondent Union made a demand  on  December 13,  1965 for bonus for the year 1964-65 equivalent to  four months’ wages.  Conciliation proceedings having failed,  the dispute was referred to the Industrial Tribunal, Madras.  In Civil  Appeal  No. 1721 of 1967,  the  appellant-company  is admittedly  an establishment in public sector to which  sec. 20  of  the Payment of Bonus Act, 21  of  1965  (hereinafter referred  to  as  the Act) does not apply.   In  both  these cases, the Tribunals held that though the Act did not apply, in the first case by reason of sec. 1(3) and in the other by reason  of sec. 32(x), the employees were entitled to  claim bonus  and  awarded their claims in C.A. No. 1630  of  1967. The  appeals by special leave challenge the  correctness  of the  view taken by the Tribunals as to the scope and  nature of the Act. The question for decision in both the appeals is whether  in view of the non-applicability of the Act to  establishments, not  being factories and which employ less than  20  persons therein  as the appellants in appeal No. 1630 of  1967  are, and the exemption of employees in an establishment in public sector  though  employing  more  than  20  persons  as   the

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appellant-company  in appeal No. 1721 of 1967 is under  sec. 32(x) of the Act, the employees in both these establishments could  claim  bonus, dehors the Act.  The  question  depends upon  the true view of certain provisions and the  scope  of the  Act.  But before we take upon ourselves the  burden  of construing  these,  provisions,  it is  necessary  to  refer briefly  to the history of the question of bonus, the  back- ground  and the circumstances in which the Act  was  passed. This Is Permissible for the limited purpose of  appreciating the mischief Parliament had in mind and the remedy which  it wanted  to provide for preventing that mischief,and not  for the purpose of aiding us in construing the provisions of the Act. 370 As early as 1584, in Heydao’s case(1) it was said that  "for the sure and true interpretation of all statutes in general" four  things are to be considered: (i) What was  the  common law before the making of the Act, (ii) What was the mischief and  defect for which the common law did not provide,  (iii) What  remedy the Parliament hath resolved and  appointed  to cure  the  disease of the Commonwealth, and  (iv)  the  true reason of the remedy.  In Bengal Immunity Company Limited v. The  State  of  Bihar(2) this Court  approved  the  rule  in Heydon’s  case(1)  and  in  construing  Art.  2865  of   the Constitution observed at p. 633 as follows :-                 In   order   to   properly   interpret   the               provisions  of that Article it is,  therefore,               necessary  to  consider how the  matter  stood               immediately before the, Constitution came into               force, what the mischief was for which the old               law  did not provide and the remedy which  has               been provided by the Constitution to cure that               mischief’. In the Corporation of the City of Nagpur v. Its  Employee(3) the question was as to the meaning of the word "industry" in sec.   2(14)  of  the  C.P.  &  Berar  Industrial   Disputes (Settlement) Act (23 of 1947).  This Court said that "if the word  were  to  be construed in  its  ordinary  sense  every calling, service, employment of an employee or any business, trade  or calling of an employer would be an industry.   But such  a  wide meaning appears to overreach  the  object  for which  the Act was passed".  The Court, therefore, found  it necessary to limit the scope of the said word having  regard to the aim, scope and the object of the Act.  Relying on the four   tests  laid  down  in  Heydon’s  case(1)  the   Court considered  the  fundamental  basis  of  the  definition  of industry, viz. relationship between employees and employers, the  long  title and the, preamble of the  Act  showing  the object  of  passing the Act  the historical  background  for passing  it and held that "it is manifest that the  Act  was introduced as an important step in achieving social justice, to  ameliorate  the conditions of service of the  labour  in organised activities than to anything else and therefore the Act was not intended to reach the personal services which do not depend on the employment of labour force".  Similarly in R.  M.  D. Chamarbaugwalla v. The Union of  India  (4),  the question arose whether looking to the general words used  in sec.  2(d)  of the Prize Competitions Act, 42  of  1955  the words  ’prize competition’ included not merely  competitions of  a  gambling  nature  but also  those  in  which  success depended  to a substantial degree on skill.   In  construing the said definition, the Court gave a restricted meaning  to the  words "prize competition" as meaning only  competitions as  were  of  a gambling‘ nature.  In doing  so,  the  Court approved the

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(1)[1955] 2 S.C.R.603. (2) 76 E.R. 637. (3) [1960] 2  S.C.R. 942 (4) 1957 S.C.R. 930. 371 principles of construction stated in the case of the  Bengal Immunity Ltd.(1) and held that "in interpreting an enactment the Court should ascertain the intention of the  legislature not merely from a literal meaning of the words used but also from  such  matters as the history of the  legislation,  its purpose  and  the  mischief  it  seeks  to  suppress".   For considering the intention of Parliament not merely from  the literal meaning of the definition in sec. 2(d) but also from the  history  of the legislation the Court looked  into  the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948,  how  it could be and was evaded by the  promoters  of lotteries  by  shifting the venue of their business  to  the neighbouring State of Mysore, the concerted action taken  by the adjoining States, the resolutions passed by each of them calling  upon Parliament to undertake legislation, the  fact of  Parliament  having  passed  the  law  and  its  preamble reciting the fact of the State legislatures having asked  it to pass such a law.  Having done that, the Court observed at p. 938               "Having  regard  to  the  circumstances  under               which the resolutions came to be passed, there                             cannot  be any reasonable doubt that the,  law               which the State legislatures moved  Parliament               to enact under Art. 252(1) was one to  control               and regulate prize competitions of a  gambling               character.   Competitions  in  which   success               depended substantially on skill could not have               been  in the minds of the  legislatures  which               passed those resolutions.  Those  competitions               had not been the subject of any controversy in               Court.   They  had not done any  harm  to  the               public  and had presented no problems  to  the               States  and  at  no time had  there  been  any               legislation directed to regulating them". Though the Court refused to look at the statement of objects and  reasons  for the, purpose of construing sec.  2(d),  it held that "having regard to the history of the  legislation, the declared object thereof and the wording of the  statute" the words had to be, given a restricted meaning.  In Central Bank  of India v. Their Workmen (2 the Court  in  construing sec.  10(1)  (b) of the Banking Companies Act, 10  of  1949, again looked at the legislative history to ascertain Jr  the object  of  passing the Act and the mischief  it  sought  to remedy,but  declined  to use the statement  of  objects  and reasons  to  construe  the section on the  -round  that  the statement  could  not control the actual words used  in  the section.  (Cf.  also  State  of  West  Bengal  v.  Union  of India(3).   In S. Azeez Basha & Ors. v. Union  of  India(4), the,  petitioners  challenged the validity  of  the  Aligarh Muslim.   University  (Amendment) Act, 62 of  1951  and  the Aligarh  (1) [1955] 2 S.C.R. 603. (3) [1964] 1 S.C.R. 371, 382. (2)  [1960] 1 S.C.R. 200, 216-17. (4)  [1968] 1 S.C.R. 833. 372 Muslim  University (Amendment) Act, 19 of 1965 as  violating Art.  30(1)  of the Constitution. this Court went  into  the history of the establishment of the University to  ascertain whether  it  was set up by the Muslim minority and  as  such entitled  to rights under Art. 30 and held that it  was  not

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set  up  by  the minority but in  fact  established  by  the Government of India by passing the Aligarh Muslim University Act, 1920 of.  Crawford on Statutory Construction (3rd  Ed.) pages  482-483].  There is thus sample authority  justifying the  Court in looking into the history of  the  legislation, not  for  the  purpose of construing the  Act  but  for  the limited   purpose  of  ascertaining  the   background,   the conditions  and the circumstances which led to its  passing, the  mischief it was intended to prevent and the  remedy  it furnished  to  prevent  such mischief.   The,  statement  of objects  and  reasons  also can  be  legitimately  used  for ascertaining  the object which the legislature had in  mind, though not for construing the Act. What were the conditions prevailing at the time when the Act was  passed and what was the object which Parliament had  in mind  in  passing it ? Bonus was originally  regarded  as  a gratuitous  payment  by an employer to his  employees.   The practice  of  paying bonus as an ex gratia payment  had  its early roots in the textile industry in Bombay and Ahmedabad. In  1917  and 1918 an increase of 10 and 15%  of  wages  was granted  as  War  bonus  to  the  textile  workers  by   the employers.   In October, 1920, a Committee appointed by  the Bombay Millowners recommended to the member mills payment of bonus  equal  to  one  month’s  pay.   Similarly  bonus  was declared  in  1921  and  1922.   It  appears  that   trading conditions  in the industry having deteriorated,  the  mill- owners  declared in July 1923 that they would be  unable  to pay  bonus for 1923.  Thereupon a strike began which  became general towards the end of January 1924.  In February  1924, a bonus dispute Committee was appointed by the Government of Bombay  to  consider the nature of, the conditions  and  the basis  of bonus which had been granted to the  employees  in the  textile mills and to declare whether the employees  had established  any  enforceable  claim,  customary,  legal  or equitable.  The Committee held that they had not established any enforceable claim, customary, legal or equitable, to  an annual  payment of bonus which could be upheld in  a  court. The  years  that followed were years of  depression  and  no major dispute about bonus arose, although bonuses were given on  ad hoc basis by a few industrial  undertakings.   During the Second World War, managements of textile mills paid cash bonus  equivalent  to a fraction of the surplus  profit  but this  was also voluntary payment to keep  labour  contented. Disputes  for payment of bonus for the years 1948  and  1949 arose  in the Bombay textile industry.  On the said  dispute having  been  referred to the Industrial Court,  that  Court expressed  the  view  that since  both  labour  and  capital contributed to the profits of the 373 industry  both were entitled to a legitimate return  out  of the profits and evolved a formula for charging certain prior liabilities on the gross profits of the accounting year  and awarded   a  percentage  of  the  balance  as  bonus.    The Industrial Court excluded the mills which had suffered  loss from  the  liability to pay bonus.  In appeals  against  the said awards, the Labour Appellate Tribunal approved  broadly the  method of computing bonus as a fraction of the  surplus profit.   According  to this formula, which has  since  been referred to as the Full Bench formula, the surplus available for distribution is to be determined after debiting  certain prior  charges  from gross profits, viz. (1)  provision  for depreciation  (2) reservation for rehabilitation (3)  return of 6% on paid-up capital, and (4) return on working  capital at  a  rate lower than the one on the paid-up  capital.   In Muir  Mills Company v. Suti Mills Mazdoor Union,  Kanpur(1),

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Baroda  Borough  Municipality v. Its Workmen(2),  The  Shree Meenakshi  Mills Ltd. v. Their Workmen(3) and The  State  of Mysore v. The Workers of Gold Mines(4) this Court laid  down (1)  that bonus was not a gratuitous payment nor a  deferred wage,  and  (2) that where wages fall short  of  the  living standard and the industry makes profit part of which is  due to the contribution of labour, a claim for bonus may legiti- mately be made by the workmen.  The Court, however, did  not examine the propriety nor the order of priorities as between the several charges and their relative importance nor did it examine  the desirability of making any alterations  in  the said  formula.  These questions came to be examined for  the first  time  in  Associated Cement  Companies  Ltd.  v.  Its Workmen(5)  where the said formula was  generally  approved. Since  that  decision, this Court has  accepted  in  several cases  the  said formula.  The principal feature,,,  of  the formula  are that each year for which bonus is claimed is  a self-contained  unit,  that bonus is to be computed  on  the profits  of  the establishment during that  year,  that  the gross profits are to be determined after debiting the  wages and dearness allowance paid to the employees and other items of  expenditure against total receipts as disclosed  by  the profit and loss account, and that against such gross profits the  aforesaid  four  items  are to  be  deducted  as  prior charges.   The formula was not based on any legal  right  or liability, its object being only to distribute profits after reasonable allocations for the aforesaid charges.   Attempts were  thereafter  made from time to time to  have  the  said formula  revised  but they were rejected first  in  A.C.C.’s case(5) and again in The Ahmedabad Miscellaneous  Industrial Workers  Union  v. The Ahmedabad Electricity  Co.  Ltd.  (6) where  it was observed that the plea for revision raised  an issue  which affected all industries and, therefore,  before any change was made all industries and their workmen had      (1) [1955] 1 S.C.R. 991. (2) [1957] S.C.R. 33.      (3) [1958] S.C.R. 878.   (4) [1959] S.C.R. 895.      (5) [1959] S.C.R. 925.   (6) [1962] 2 S.C.R. 934. 374 to  be  heard  and  their  pleas  considered.   The   Court, therefore,  suggested  that  the question  of  revising  the formula  should  be "comprehensively considered  by  a  high powered  Commission".  Taking up  the-aforesaid  suggestion, the  Government  of India appointed a:  Commission,  by  its resolution  dated December 6, 1961, the terms  of  reference whereof were, inter alia,               1.    to  define the concept of bonus  and  to               consider in relation to industrial  employment               the  question  of payment of  bonus  based  on               profits    and   recommend   principles    for               computation  of  such  bonus  and  methods  of               payment;               2.    to  determine  what  the  prior  charges               should  be in different circumstances and  how               they should be calculated.               3.    to  determine  conditions  under   which               bonus   payment  should  be,  made   unitwise,               industrywise and industry-cum regionwise;               4.    to  consider  whether there  should  be,               lower   limits   irrespective   of   loss   in               particular establishment and upper limits  for               distribution  in  one  year and,  if  so,  the               manner to carry forward the profits and losses               over a prescribed period; and               5.    to suggest an appropriate machinery  and               method for settlement of bonus disputes.

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             After  an  elaborate enquiry,  the  Commission               made    the    following    -amongst     other               recommendations :               1.    That  bonus was paid to the  workers  as               share  in the prosperity of the  establishment               and that the basic scheme of the bonus formula               should  be  adhered to viz.  determination  of               bonus as a percentage of gross profits reduced               by  the following prior charges,  viz.  normal               depreciation allowable under the Indian Income               Tax  including  multiple  shifting  allowance,               income  tax  and  super  tax  at  the  current               standard  rate  applicable for  the  year  for               which  tax is to be calculated but  not  super               profits tax, return on paid up capital  raised               through  preference shares at the actual  rate               of dividend payable, on other paid-up  capital               at  7% and on reserves used as capital at  4%.               The Commission did not recommend provision for               rehabilitation.               2.    That 60% of the available surplus should               be  distributed as bonus and excess should  be               carried forward and taken into account in  the               next  year; the balance of 40%  should  remain                             with the establishment into which shou ld  merge               the saving in tax on bonus and the aggre-               375               gate  balance thus left to  the  establishment               should be used for payment of gratuity,  other               necessary reserves, rehabilitation in addition               to  the provision made by way of  depreciation               in  the  prior charges, annual  provision  re-               quired for redemption of debentures, etc.               3.    That  the distinction between the  basic               wages  and dearness allowance for the  purpose               of  arriving  at the bonus quantum  should  be               done away with and bonus should be related  to               wages and dearness allowance taken together;               4.    That  minimum bonus should be 4% of  the               total  basic wage and dearness allowance  paid               during  the year or Rs. 40 to  each  employee,               whichever  is  higher,  and  in  the  case  of               children  the minimum should be equivalent  to               4% of their basic wage and dearness allowance,               or Rs. 25  whichever is higher;               5.    That   the  maximum  bonus   should   be               equivalent               to 20%     of   the  total  basic   wage   and               dearness allowance               paid during the year;               6.    That  the bonus formula proposed  should               be  deemed  to  include  bonus  to   employees               drawing   a  total  basic  pay  and   dearness               allowance  up to Rs. 1600 p.m.  regardless  of               whether  they were workmen as defined  in  the               Industrial   Disputes  Act,  1947   or   other               corresponding  Act  provided that  quantum  of               bonus payable to employees drawing total basic               pay and allowance over Rs. 750/p.m. should  be               limited  to what it would be if their pay  and               dearness allowance were Rs. 750 p.m.               7.    That the formula should not apply to new               establishments  until they recouped all  early               losses    including    arrears    of    normal

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             depreciation  subject to the time limit  of  6               years; and               8.    That the scheme should be applied to all               bonus matters relating to the accounting  year               ending  on any day in the calendar  year  1962                             except  in those matters in  which  se ttlements               had been reached or decisions had been given. The fact that the Government of India accepted the  majority of  the  Commission’s  recommendations  is  clear  from  the Statement of objects and reasons attached to Bill No. 49  of 1965  which  they sponsored in Parliament.   The  Statement, inter alia, states that a "tripartite Commission was set  up by the Government of India by resolution dated 6th  December 1961  to  consider in comprehensive manner the  question  of payment  of bonus based on profits to employees employed  in establishments and to make recom- 37 6 mendations to the Government.  The Commission’s report  con- taining  the recommendations was received by the  Government on  24th January, 1964.  By resolution dated 2nd  September, 1964,  Government announced acceptance of  the  Commission’s recommendations  subject  to  a few  modifications  as  were mentioned therein".  To implement these recommendations  the Payment of Bonus Ordinance, 1965 was promulgated on May  29, 1965.   Since the Ordinance was replaced by the present  Act published  on  September  25, 1965,  it  is  unnecessary  to examine its provisions.  Thus, bonus which was originally  a voluntary payment acquired under the Full Bench formula  the character  of  a  right  to share  in  the  surplus  profits enforceable through the machinery of the Industrial Disputes Act,  1947  and  other corresponding Acts.   Under  the  Act liability to pay bonus has now become a statutory obligation imposed   on  the  employers.   From  the  history  of   the legislation  it  is clear (1) that the Government set  up  a Commission  to consider comprehensively the entire  question of  bonus  in all its aspects; and (2) that  the  Commission accordingly Considered the concept of bonus, the, method  of computation,  the machinery for enforcement and a  statutory formula   in  place  of  the  one  evolved   by   industrial adjudication. We  proceed next to examine some, of the provisions  of  the Act and its scheme. The  preamble  of the Act states that it is to  provide  for payment  of bonus in certain establishments and for  matters connected  therewith.  Section 1(3) provides that  it  shall apply  "save as otherwise provided in the Act" to (a)  every factory  and  (b) every other establishment in which  20  or more  persons are employed on any day during the  accounting year.   We  may note that this subsection is  in  consonance with one of the Commission’s recommendations, viz. that  its bonus  formula  should  not be applied to  small  shops  and establishments which are not factories and which employ less than 20 persons.  Having made clear that the Act is to apply only  to  those establishments mentioned in  sub.-sec.  (3), sub.-sec.  (4)  provides that the Act shall have  effect  in respect  of  the accounting year 1964 and  every  subsequent year.  "Allocable surplus" under S. 2(4) means 67% in  cases falling  under  cl.  (a)  and 60%  in  other  cases  of  the available surplus.  Sec. 2(6) defines ’available surplus’ to mean available surplus as computed under sec. 5. Sec.  2(15) defines "establishment in private sector" to mean any estab- lishment other than an establishment in public sector.  Sec. 2(16)  defines "establishment in public sector"  as  meaning (a)  a  Government  company  as defined in  S.  617  of  the

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Companies Act, 1956, and (b) a Corporation in which not less than  40%  of  it-- capital is held  by  Government  or  the Reserve  Bank of India or a Corporation owned by  Government or  the Reserve Bank of India.  "Gross profits" a-,  defined by sec. 2(18) means oross profits cal- 377 culated under sec. 4. Sees. 4 and 5 provide for  computation of  gross  profits  and available  surplus  after  deducting therefrom the sums referred to in sec. 6 viz.,  depreciation admissible under 32(1) of the Income Tax Act or the relevant Agricultural   Income   Tax  Act,  development   rebate   or development  allowance Admissible under the Income  Tax  Act and such other sums as are specified in the third  Schedule. Sec. 7 deals with calculation of direct tax.  Sees. 8 and  9 deals   with  eligibility  of  and   disqualification   from receiving bonus.  Sees. 10 to 15 deal with minimum and maxi- mum  bonus  and the provisions for ’set off’ and  ’set  on’. Sees. 18, 19, and 21 to 31 deal with certain procedural  and allied  matters.  Sec. 20 deals with certain  establishments in  public  sector to which the Act is  made  applicable  in certain events.  Sec. 32 exclude from the application of the Act   certain   categories   of   employees   and    certain establishments therein specified.  Sec. 34 provides for  the overriding effect of the Act notwithstanding anything incon- sistent  therewith contained in any other law for  the  time being  in  force  or  in  terms  of  any  award,  agreement, settlement or contract of service made before May 29,  1965. Sec.  35 saves the provisions of the Coal  Mines,  Provident Fund  and  Bonus  Schemes  Act,  1948  or  any  scheme  made thereunder.   Sec.  35 empowers  an  appropriate  Government having  regard to the financial position and other  relevant circumstances    of   any   establishment   or   class    of establishments  if it is of opinion that it would not be  in public interest to apply all or any of the provisions of the Act  thereto, to exempt for such period as may be  specified by it such establishment or class of establishments from all or  any of the provisions of the Act.  Sec. 39  provides  as follows :-               "Save  as  otherwise expressly  provided,  the               provisions of this Act shall be in addition to               and  not  in  derogation  of  the   Industrial               Disputes  Act, 1947 or any  corresponding  law               relating  to investigation and  settlement  of               industrial disputes in force in a State". It  will be noticed that sec. 22 provides that where a  dis- pute  arises between an employer and his employees (1)  with respect  to  the bonus payable under the Act,  or  (2)  with respect to the application of the Act, such a dispute  shall be deemed to be an industrial dispute within the meaning  of the  Industrial Disputes Act, 1947 or any corresponding  law relating  to  investigation  and  settlement  of  industrial disputes in force in a State and the provisions of that  Act and  such law, as the case may be, shall, save as  otherwise expressly   provided,  apply  accordingly.   An   industrial dispute under the Industrial Disputes Act would be between a workman  as  defined in that Act and his  employer  and  the dispute can be an industrial dispute if it is one as defined therein.   But  the definition of an "employee"  under  sec. 2(13)  of this Act is wider than that of a  "workman"  under the Industrial Disputes 378 Act.   A  dispute;  between an  employer  and  an  employee, therefore,  may not fall under the Industrial  Disputes  Act and in such a case the Act would not apply and its machinery for  investigation  and settlement would not  be  available.

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That  being  so,  and  in  order  that  such  machinery  for investigation  and settlement may be available, sec. 22  has been  enacted  to  create a legal  fiction  whereunder  such disputes  are  deemed to be industrial  disputes  under  the Industrial Disputes Act or any other corresponding law.  For the  purposes  of  such  disputes  the  provisions  of   the Industrial   Disputes  Act  or  such  other  law  are   made applicable.   The effect of sec. 22 thus is (1) to make  the disputes referred to therein industrial disputes within  the meaning   of   the   Industrial  Disputes   Act   or   other corresponding  law  and  (2) having so  done  to  apply  the provisions  of  that  Act or  other  corresponding  law  for investigation  and  settlement of such  disputes.   But  the application of sec.  22 is limited only to the two types  of disputes  referred  to therein and not to  others.   Section 39,  on  theother  hand, provides that  "save  as  otherwise expressly  provided" the provisions of the Act shall  be  in addition  to  and  not  in  derogation  of  the,  Industrial Disputes   Act   or  any  corresponding  law   relating   to investigation and settlement of industrial disputes in force in a State.  Except for providing for recovery of bonus  due under a settlement, award, or agreement as an arrear of land revenue  as laid down in sec. 21, the Act does  not  provide any  machinery  for  the  investigation  and  settlement  of disputes between an employer and an employee.  If a dispute, for  instance,  were  to arise as  regards  the  quantum  of available  surplus,  such a dispute not  being  one  falling under  sec.  22,  Parliament had to  make  a  provision  for investigation and settlement thereof.  Though such a dispute would  not  be  an  industrial dispute  as  defined  by  the Industrial Disputes Act or other corresponding Act in  force in a State, sec. 39 by providing that the provisions of this Act  shall  be in addition to and not in derogation  of  the Industrial  Disputes  Act or such  corresponding  law  makes available the machinery in that Act or the corresponding Act available  for  investigation and settlement  of  industrial disputes thereunder for deciding the disputes arising  under this  Act.  As already seen sec. 22 artificially  makes  two kinds  of disputes therein referred to  industrial  disputes and having done so applies the provisions of the  Industrial Disputes Act and other corresponding law in force for  their investigation and settlement.  But what about the  remaining disputes  ?  As the Act does not provide any  machinery  for their  investigation and settlement, Parliament by  enacting sec. 39 has sought to apply the provisions of those Acts for investigation  and  settlement of  the  remaining  disputes, though such disputes are not industrial disputes as  defined in  those  Acts.  Though, the words "in force  in  a  State" after  the  words  "or any  corresponding  law  relating  to investigation  and settlement of industrial disputed  appear to qualify the words "any corresponding law" and not the 379 Industrial  Disputes  Act, the Industrial  Disputes  Act  is primarily a law relating to investigation and settlement  of industrial   disputes  and  provides   machinery   therefor. Therefore  the distinction there made between that  Act  and the  other  laws does not seem to be of much point.   It  is thus clear that by providing in s. 39 that the provisions of this  Act shall be in addition to and not in  derogation  of those  Acts,  Parliament wanted to avail of those  Acts  for investigation  and  settlement of disputes which  may  arise under  this Act.  The distinction between sec. 22  and  sec. 39, therefore, is that whereas sec. 22 by fiction makes  the disputes referred to therein industrial disputes and applies the  provisions  of the Industrial Disputes  Act  and  other

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corresponding  laws  for the  investigation  and  settlement thereof,  Sec.  39  makes  available for  the  rest  of  the disputes  the  machinery  provided in  that  Act  and  other corresponding  laws  for adjudication  of  disputes  arising under this Act.  Therefore, there is no question of a  right to  bonus  under  the  Industrial  Disputes  Act  or   other corresponding Acts having been retained or saved by sec. 39. Neither  the  Industrial Disputes Act nor any of  the  other corresponding laws provides for a right to bonus.  Item 5 in Schedule  3  to  the  Industrial  Disputes  Act  deals  with jurisdiction  of tribunals set up under ss. 7, 7A and 7B  of that Act, but does not provide for any right to bonus.  Such a  right is statutorily provided for the first time by  this Act. Mr. Ramamurti and Mr. Gokhale for the respondents,  however, sought to make the following points :               1.    The   Act   applies  only   to   certain               establishments and its preamble and sec.  1(3)               show  to  which of them it is  expressly  made               applicable;               2.    Under   sec.  1(3),  the  Act  is   made               applicable to all factories and establishments               in  which  20  or more  persons  are  employed               except those "otherwise provided in the  Act".               It  means that the Act does not apply  (i)  to               factories    and   establishments    otherwise               provided    in   the   Act,   and   (ii)    to               establishments which have less than 20 persons               employed.   The  Act,  therefore,  is  not   a               comprehensive   Act   but  applies   only   to               factories  and establishments covered by  sec.               1(3);               3.    There is no categorical provision in the               Act  depriving the employees of factories  and               establishments  not  covered by  or  otherwise               saved in the Act of bonus which they would  be               entitled to under any other law;               4.    That   being   so,  the   employees   of               establishments  to which the Act is  not  made               applicable  would still be entitled  to  bonus               under  a law other than the Act although  they               are not entitled to the benefit of the Act;               380               5.    Parliament  was aware of the  fact  that               employees  in establishments other than  those               to  which, the Act aplies were  getting  bonus               under adjudication provided by the  Industrial               Disputes  Act and other similar Acts.   If  it               intended to deprive them of such bonus  surely               it would have expressed so in the Act;               6.    Sec.  39 in clear terms saves the  right               to  claim bonus under the Industrial  Disputes               Act or any corresponding law by providing that               the  provisions  of  this  Act  shall  be   in               addition  to  and  not in  derogation  of  the               provisions of those Acts. It  is  true  that the preamble states that the  Act  is  to provide for payment of bonus to persons employed in  certain establishments  and  sec. 1(3) provides that the Act  is  to apply, save as otherwise provided therein, to factories  and every  other establishments in which 20 or more persons  are employed.  Sub-sec. (4) of sec. 1 also provides that the Act is  to  have  effect  in  relation  to  such  factories  and establishments  from the- accounting year commencing on  any day in 1964 and every subsequent accounting year.  But these

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provisions  do not, for that reason, necessarily  mean  that the  Act  was  not  intended  to  be  a  comprehensive   and exhaustive law dealing with the entire subject of bonus  and the  persons  to whom it should apply.  Even  where  an  Act deals comprehensively with a particular subject-matter,  the Legislature  can  surely  provide that  it  shall  apply  to particular  persons  or groups of persons  or  to  specified institutions  only.  Therefore, the fact that  the  preamble states  that the Act shall apply to  certain  establishments does  not necessarily mean that it was not intended to be  a comprehensive  provision dealing with the subject-matter  of bonus.   While dealing with the subject-matter of bonus  the Legislature can lay down as a matter of policy that it  will exclude from its application certain types of establishments and  also  provide for exemption of certain other  types  of establishments   even  though  such   establishments   would otherwise  fall within the scope of the Act.  The  exclusion of establishments where less than 20 persons are employed in sec.  1(3)  therefore  is not a  criterion  suggesting  that Parliament  has not dealt with the subject-matter  of  bonus comprehensively in the Act. As  already seen, there was until the enactment of this  Act no  statute  under which payment of bonus  was  a  statutory obligation on the part of ,in employer or a statutory  right therefore  of  an employee.  Under the  Industrial  Disputes Act,   1947  and  other  corresponding  Acts,   workmen   of industrial establishments as defined therein could raise  an industrial   dispute   and  demand  by  way   of   bonus   a proportionate  share  in profits  and  Industrial  Tribunals could  under those Acts adjudicate such disputes and  oblige the  employers  to  pay bonus on  the  principle  that  both capital and 381 labour  had  contributed to the making of the  profits  and, therefore, both were entitled to a share therein.  The right to  the payment of bonus and the obligation to pay it  arose on  principles  of  equity and  fairness  in  settling  such disputes under the machinery provided by the Industrial Acts and  not as a statutory right and liability as provided  for the  first  time  by the present  Act.   In  providing  such statutory  liability, Parliament has laid down  a  statutory formula on which bonus would be calculated irrespective,  of whether   the  establishment  in  question  has   during   a particular  accounting  year  made profit or  not.   It  can further  lay  down that the formula it has evolved  and  the statutory liability it provides in the Act shall apply  only to  certain establishments and not to all.  Since there  was no  such statutory obligation under any previous Act,  there would  not  be any question of Parliament having  to  delete either  such  obligation or right.  In  such  circumstances, since   Parliament  is  providing  for  such  a  right   and obligation  for the first time, there would be  no  question also  of  its  having  to insert  in  the,  Act  an  express provision  of  exclusion.   In other words, it  has  not  to provide  by express words that henceforth no bonus shall  be payable  under  the Industrial Disputes Act  or  other  cor- responding  Acts as those Acts did not confer any  statutory right to bonus. It  will be noticed that though the Industrial Disputes  Act confers  substantive  rights on workmen with regard  to  lay off, retrenchment compensation, etc., it does not create  or confer  any  such statutory right as to  payment  to  bonus. Bonus was so far the creature of industrial adjudication and was  made  payable  by the  employers  under  the  machinery provided under that Act and other corresponding Acts enacted

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for   investigation  and  settlement  of   disputes   raised thereunder.  There was, therefore, no question of Parliament having  to delete or modify item 5 in the third Schedule  to Industrial  ’Disputes Act or any such provision in any  cor- responding Act or its having to ’exclude any right to  bonus thereunder by any categorical exclusion in the present Act. But  the argument was that if the Act were to be held as  an exhaustive statute dealing with the subject of bonus,  three results  would follow which could never have  been  expected much less G intended by Parliament.  These results would  be : (1) that employees in establishments engaging less than 20 persons  would get no bonus at all either under the  Act  or under industrial adjudication provided for by the Industrial Disputes  Act  and  other corresponding  Acts.   Since  such employees  were  so  far  getting  bonus  as  a  result   of industrial   adjudication,  Parliament  could   never   have intended  to  deprive  them  of  such  benefit;  (ii)   that employees in public sector Corporations and Companies  would get  no bonus either under the Act or under  the  Industrial Disputes Act or other corresponding law; and (iii) that such a construction would have -12 Sup CI/68-10 382 the,   effect  of  impliedly  repealing  and  negating   the provisions   of  the  Industrial  Disputes  Act  and   other corresponding laws. Though sec. 1(3) excludes an establishment other than a fac- tory  having less than 20 employees from the application  of the Act, all establishments which are factories irrespective of   the  number  of  persons  employed  therein   and   all establishments which are not factories but are having 20  or more  employees  are covered by the  Act.   Therefore,  only small establishments having less than 20 employees and which are  not factories are excluded.  Even in such cases if  any establishment  were  to  have 20 or  more  persons  employed therein  on  any day in any accounting year, the  Act  would apply  to  such an establishment.  It is,  therefore,  clear that  Parliament by enacting sec. 1(3) excluded  only  petty establishments. We  are  not impressed by the argument  that  Parliament  in excluding such petty establishments could not have  intended that employees therein who were getting bonus under the Full Bench  formula  should  lose that  benefit.   As  aforesaid, Parliament  was  evolving  for the first  time  a  statutory formula  in  regard to bonus and laying down  a  legislative policy  in regard thereto as to the classes of  persons  who would  be  entitled to bonus thereunder.  It laid  down  the definition  of  an  ’employee’  far  more  wider  than   the definition of a ’workman’ in the Industrial Disputes Act and the  other  corresponding  Acts.  If,  while  doing  so,  it expressly  excluded  as  a matter of  policy  certain  petty establishments   in  view  of  the  recommendation  of   the Commission in that regard, viz., that the application of the Act  would  lead  to harassment  of  petty  proprietors  and disharmony  between them and their employees, it  cannot  be said that Parliament did not intend or was not aware of  the result   of   exclusion   of   employees   of   such   petty establishments. It is true that the construction canvassed on behalf of  the appellants leads, as argued by counsel for the  respondents, to  employees  in public sector concerns being  deprived  of bonus which they would be getting by raising a dispute under the   Industrial  Disputes  Act  and   other   corresponding statutes.   But such a result occurs in consequence  of  the exemption  of establishments in public sector from the  Act,

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though  such  establishments but for sec. 32(x)  would  have otherwise fallen within the purview of the Act.  It  appears to  us  that  the exemption is  enacted  with  a  deliberate object,  viz.,  not to subject such  establishments  to  the burden  of  bonus  which are conducted  without  any  profit motive  and  are run for public benefit.  The  exemption  in sec. 32(x) is, however, a limited one, for, under sec. 20 if a public sector establishment were in any accounting year to sell goods produced or manufactured by it in IF  competition with an establishment in private sector and the income  from such  sale is not less than the 20% of its gross income,  it would  be liable to pay bonus under the Act.  Once again  it is clear 383 that  in exempting public sector establishments,  Parliament had a definite policy in mind. This  policy  becomes  all the  more  discernible  when  the various other categories of establishments exempted from the Act by sec. 32 are examined.  An insurer carrying on general insurance  business  is exempted under cl. (i)  in  view  of certain  provisions  of  the Insurance  Act,  1936  and  the Insurance   (Amendment)  Act,  1950.   In  view   of   these provisions  the Full Bench formula could not be and was  not in  fact  applied at any time to such  insurance  establish- ments.  The Life Insurance Corporation of India is  exempted under  clause  (1)  because of its  being  a  public  sector concern  having  no Cl. (ii) of sec. 32  profit  motive  and conducted  in  public  interest.exempts  shipping  companies employing  seamen  in view of sec.. 159(9) of  the  Merchant Shipping  Act, 1958 under which the Industrial Disputes  Act was  inapplicable  to such seamen,  the  disadvantages  that Indian   Shipping  Companies  vis-a-vis  foreign   companies engaged in shipping would be put to if they were made to pay bonus  and the obvious difficulties in applying the  Act  to such   foreign  companies  engaging  Indian   seamen.    The exemption  in respect of stevedore labour contained  in  cl. (iii)  also seems to have been provided for in view  of  the peculiar   nature   of  employment,,   the   difficulty   of calculating  profits  according to the  normal  methods  and other  such  difficulties.  The rest of  the  categories  of establishments  set  out  in sec. 32  appear  to  have  been exempted on the ground of (a) absence of any profit  motive, (b) their being of educational, charitable or public nature, and (c) their being establishments in public sector  carried on in public interest.  Building contractors appear to  have been exempted because of their work being contract job work, the unfeasibility of applying the formula evolved in the Act and the problem of employees of such contractors being  more of  evolving  and enforcing a proper wage  structure  rather than of payment of bonus to them. It seems to us that if we were to accept the contention that the. object of sec. 32 was only to exempt the establishments therein enumerated from the application of the bonus formula enacted  in  the  Act,  but  that  the  employees  of  those establishments  were left at liberty to claim and get  bonus under the machinery provided by the Industrial Disputes  Act and  other corresponding Acts, them very object of  enacting sec.  32 would be frustrated.  Surely, Parliament could  not have intended to exempt these establishments from the burden of  bonus payable under the Act and yet have left  the  door open for their employees to raise industrial disputes and ,- ,get  bonus  under  the  Full Bench  formula  which  it  has rejected by laying down a different statutory formula in the Act.  For instance, is it to be contemplated that though the Act by sec. 32 exempts institutions such as the Universities

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or the Indian Red Cross Society or hospitals, or any of  the establishments  set  out in cl. (ix) of that  section,  they would still be liable to pay bonus if the employees, 384 of  those  institutions were to raise a  dispute  under  the Industrial  Disputes Act and claim bonus in accordance  with the Full Bench formula ? The legislature would in that  case be  giving exemption by one hand and taking it away  by  the other, thus frustrating the very object of sec. 32.   Where, on the other hand, Parliament intended to retain a  previous provision of law under which bonus was payable or was  being paid  it  has expressly saved such provision.   Thus,  under sec. 35 the Coal Mines Provident Fund and Bonus Schemes Act, 1946  and  any  scheme  made  thereunder  are  saved.    If, therefore,  Parliament wanted to retain the right  to  claim bonus  by way of industrial adjudication for those  who  are either excluded or exempted from the Act it would have  made an  express saving provision to that effect as it  has  done for employees in Coal Mines. Besides,  the  construction  suggested  on  behalf  of   the respondents, if accepted, would result in certain anomalies. Take  two establishments in the same trade or industry,  one engaging 20 or more persons and the other less than 20.  The Act would be applicable to the former but not to the latter. If the respondents were to be right in their contention  the employer in the former case would be liable to, pay bonus at the  rates  laid  down by the Act, i.e. at the  rate  of  4% minimum  and  20% maximum, but in the latter  case  the  Act would  not apply and though his establishment is  a  smaller one, on the basis of the Full Bench formula there would be a possibility of his having to pay bonus at a higher rate than 20%,  depending  upon  the quantum of profit  made  in  that particular accounting year. Section  32(vii) exempts from the applicability of  the  Act those employees who have entered before May 29, 1965 into an agreement or settlement with their employers for payment  of bonus  linked  with production or productivity  in  lieu  of bonus  based  on profits and who may enter after  that  date into  such agreement or settlement for the period for  which such  agreement  or settlement is in operation.  Can  it  be said  that  in  cases where there is such  an  agreement  or settlement  in  operation,  though  this  clause   expressly excludes  such employees from claiming bonus under  the  Act during  such period, the employees in such cases  can  still resort to the Industrial Disputes Act and claim bonus on the basis of the Full Bench formula ? The answer is obviously in the negative for the object in enacting cl. (vii) is to  let the  parties work out such an agreement or  settlement.   It cannot  be that despite this position,  Parliament  intended that those employees had still the option of throwing  aside such  an agreement or settlement raise a dispute  under  the Industrial Disputes Act and claim bonus under the Full Bench formula.   The  contention, therefore,  that  the  exemption under  sec. 32 excludes those employees from claiming  bonus under the Act only and not from claiming bonus under the 385 Industrial  Disputes Act or such other Act is  not  correct. This  conclusion is buttressed by the provisions of sec.  36 which  empower  the appropriate Government to exempt  for  a specified period an establishment or class of establishments from the operation of the Act, if it is of. the opinion that it  is  not in public interest to apply all or  any  of  the provisions  of  the Act to such establishment  or  class  of establishments.  Since the appropriate Government can exempt such  an establishment or establishments from the  operation

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of the Act on the ground of public interest only, it  cannot surely be that Parliament still intended that the  employees of  such exempted establishment or establishments can  claim bonus  through industrial adjudication under the  Industrial Disputes Act or any such corresponding law. We  are also not impressed by the contention that  the  fact that sec. 39 provides that the provisions of this Act are in a  addition  to  and not in  derogation  of  the  Industrial Disputes  Act  or  any other corresponding  law  shows  that Parliament did not wish to do away with the right to payment of bonus altogether to those who cannot either by reason  of exclusion  or exemption from the Act claim bonus  under  the Act.   Such  a  construction is fallacious  on  two  ground. Firstly  because  it  assumes wrongly  that  the  Industrial Disputes  Act or any other law corresponding to it  provided for  a statutory right to payment of bonus.  All that  those Acts provided for, apart from rights in respect of lay  out, retrenchment   etc.,  a  machinery  for  investigation   and settlement  of  disputes arising between workmen  and  their employers.   It  is, therefore, incorrect to  say  that  the right  to bonus under this Act is in addition to and not  in derogation   of  any  right  to  bonus  under  those   Acts. Secondly, sec. 39 became necessary because the Act does  not provide  any  machinery or procedure for  investigation  and settlement of disputes which may arise between employers and employees.  In the absence of any such provision  Parliament intended  that the machinery and procedure under those  Acts should  be made available for the adjudication  of  disputes arising  under  or  in the operation of the  Act.   If,  for instance,  there  is  a dispute as  to  the  computation  of allocable  surplus or as to quantum of bonus, or as to  whe- ther in view of sec. 20 an establishment in public sector is liable  to  pay bonus, such a dispute is to  be  adjudicated under the machinery provided by the Industrial Disputes  Act or other corresponding Acts. Considering  the history of the legislation, the  background and  the  circumstances in which the Act  was  enacted,  the object  of  the Act and its scheme, it is  not  possible  to accept   the  construction  suggested  on  behalf   of   the respondents  that the Act is not an exhaustive  Act  dealing comprehensively with the subject-matter of bonus in all  its aspects  or that Parliament still left it open to  those  to whom  the  Act does not apply by reason  of  its  provisions either as to exclusion or exemption to raise a dispute  with regard to bonus 386 through   industrial  adjudication  under   the   Industrial Disputes Act or other corresponding law. We  are, therefore, of the view that the construction  given to  the Act by the Tribunals was not correct and the  orders passed  by  them  have to be set  aside.   The  appeals  are allowed,  but as the question as to the scope of the Act  is raised in these appeals for the first time, there will be no order as to costs. V.P.S.                            Appeals allowed. 387