http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 23  

PETITIONER: THE CENTRAL BANK OF INDIA

       Vs.

RESPONDENT: THEIR WORKMEN(and connected appeals)

DATE OF JUDGMENT: 12/05/1959

BENCH: DAS, S.K. BENCH: DAS, S.K. DAS, SUDHI RANJAN (CJ) IMAM, SYED JAFFER WANCHOO, K.N. HIDAYATULLAH, M.

CITATION:  1960 AIR   12            1960 SCR  (1) 200  CITATOR INFO :  R          1960 SC 653  (4)  R          1961 SC 853  (7)  RF         1962 SC 171  (9)  D          1962 SC1221  (22)  R          1964 SC 864  (19)  R          1969 SC 530  (2A)  R          1986 SC1760  (35)  R          1987 SC2310  (11)  RF         1988 SC 782  (29,40)

ACT:        Industrial  Dispute-Bonus-Banking Companies-Bank  Employees-        Whether  disentitled  to bonus-" Remuneration "  meaning  of        -Banking  Companies  (Amendment)  Act, 1956  (95  of  1956),        amended s.     10, whether retrospective-Banking  ’Companies        Act, 1949, (1O Of 1949), s. 10.

HEADNOTE:        Section  10(1)(b)(11)  of the Banking  Companies  Act,  1949        provided:" No banking company shall employ any person  whose        remuneration  or  part  of  whose  remuneration  takes   the        form  ...  of a share in the profits of  the  company."        The dispute between the appellant Banks and their  employees        related, inter alia, to the question whether the  provisions        of  the Banking Companies Act, 1949, prohibit the  grant  Of        bonus to bank employees.  The Labour Appellate Tribunal took        the  view that s. 10 of the Act did not stand in the way  of        granting bonus to bank employees, because bonus according to        it  was  not  a share in the profits  of  the  company.   On        appeal, it was contended for the appellant Banks that  bonus        as  awarded by the Industrial Courts is remuneration  within        the meaning of s. 10        201        read with s. 2 of the Banking Companies Act, 1949, and  that        it  was also a share in profits, and therefore, the  express        provisions  of s. 10 read with S. 2 override the  provisions        of  the  Industrial Disputes Act, 1947, so  far  as  banking        companies are concerned, and prohibit the award of bonus  to        employees of Banks.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 23  

      Held : (1) that the expression " shall employ any person  in        s. 10 of the Banking Companies Act, 1949, means and includes        "  shall  have in employment any person " and that  in  this        respect  the amendment of 1956, merely makes clear what  was        already meant by the section ;        (2)  that the word " remuneration " in s. 10 of the Act  has        been used in the widest sense and includes bonus ;        (3)  that  bonus  in the industrial sense comes out  of  the        available  surplus of profits, and when paid, it  fills  the        gap,  wholly  or in part, between the living  wage  and  the        actual wage.  It is labour’s share in the profits, and as it        is  a  remuneration  which  takes the form  of  a  share  in        profits, it comes within the mischief of s. 10 of the Act;        (4)  The  Banking Companies (Amendment) Act, 1956, is not  a        declaratory  Act,  and  except in the small  matter  of  the        expression  " shall continue to employ " in sub-s.  (1),  it        does  not purport to explain any former law or declare  what        the  law  has always been.  Consequently, though  s.  10  as        amended by the Act Of I956 does not stand in the way of  the        grant  of industrial bonus, for the period relating  to  the        present  appeals, the amended section had  no  retrospective        effect.        Accordingly,  s. 10 of the Banking Act, prior to the  amend-        ment  of 1956, prohibited the grant of industrial  bonus  to        bank employees inasmuch as such bonus is remuneration  which        takes  the  form of a share in the profits  of  the  banking        company.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 56 to 62 of        1957.        Appeals  by special leave from the judgment and order  dated        April  28.  1954 of the Labour Appellate Tribunal  of  India        (Special Bench-Banks), Bombay,in Appeals Nos. 122, 129, 130,        142,  144, 145, 152, 153, 154, 155, 162, 169, 217 &  218  of        1953.        N.   A. Palkhiwala, J. B.  Dadachanji and S. N. Andley,  for        the appellants in C. As, Nos. 56 & 60 of 1957.        M. C. Setalvad, Attorney-General for India, J. B.        Dadachanji and S. N. Andley, for the appellants in        C.   As. Nos. 57, 58, 59 & 61 of 1957,        6        202        M.   C. Setalvad Attorney-General for India and Naunit  Lal,        for the appellant (Punjab National Bank) in C. A. No. 62  of        1957.        N.   V.  Phadke, T. S. Venkataraman, K. R. Sharma and K.  R.        Choudhury, for respondent No. 1 in C. A.        No.’ 56 of 1957.        N.   C.  Chatterjee, Sadhan Chandra Gupta, Janardan  Sharma,        M. K. Ramamurthi and M. R. K. Pillai, for respondents in  C.        As.   Nos. 57 to 61 of 1957 (Represented by All  India  Bank        Employees Association)        B.   P. Maheshwari, for respondent No. 3 (Association of the        Punjab National Bank Employees) in C. A. No. 62 of 1957.        B.P. Maheshwari, for Surat Bank Employees Union.        B.   C. Ghose, and I. S. Sawhney, for All India Central Bank        Employees’ Association.        1959.  May 12.  The Judgment of the Court was delivered by        S.   K.  DAS  J.-These  are  seven  appeals  on  behalf   of        different  Banks working in this country, some  incorporated        in  India and some outside India.  It is necessary  that  we        should  very briefly state the background of the  industrial

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 23  

      dispute  which has given rise to these appeals.  It  is  now        well-known  that  there was a sharp rise in  the  prices  of        commodities during and after World War No. 11.  This rise in        prices very seriously affected salaried employees  belonging        to the middle class including such employees in the  banking        industry. In or about the year 1946 trade unions of bank em-        ployees presented demands for higher salaries and allowances        and better conditions of service.  In some cases notices  of        threatened  strike were also served on the  employers.   The        unrest became particularly acute in the provinces of Bombay,        the  United Provinces, and Bengal as they were  then  known.        The  local  Governments of those  provinces  referred  these        industrial disputes for adjudication: this resulted in  some        regional  awards  which came to be known in  Bombay  as  the        Divatia Award, in the United I Provinces as the B B. Singh        203        Award  and  in  Bengal as the  Gupta,  Chakravarty  and  Sen        Awards.   Notwithstanding these awards, the  general  unrest        amongst Bank employees continued and there was a clamor  for        control  of the banking industry by the Central  Government.        On  April  30,  1949, was  passed  the  Industrial  Disputes        (Banking and Insurance Companies) Ordinance (Ordinance VI of        1949)  under the provisions of which all  banking  companies        having  branches  or other establishments in more  than  one        province   came  under  the  jurisdiction  of  the   Central        Government for the purposes of the Industrial Disputes  Act,        1947 (XIV of 1947).  By a notification dated June 13,  1949,        the  Central  Government  constituted  an  ad  hoc  Tribunal        consisting of Shri K. C. Sen, a retired Judge of the  Bombay        High  Court, as Chairman, with two other persons as  members        to  adjudicate  upon an industrial dispute  between  several        banking  companies and their workmen.  On the same day,  the        industrial  dispute  was  referred  to  the  Tribunal  by  a        separate order.  The dispute covered several items, and some        more  were  added  from  time to  time.   For  the  sake  of        convenience,  we shall hereafter refer to this  Tribunal  as        the  Sen Tribunal and its award as the Sen Award.   After  a        very  exhaustive  enquiry, the Sen Tribunal made  its  award        which was published on August 12, 1950.  Some of the leading        Banks  being dissatisfied with the award applied to  Supreme        Court and obtained special leave to appeal against the  said        award,   as  it  had  been  specially  exempted   from   the        jurisdiction  of the Labour Appellate  Tribunal  constituted        under the Industrial Disputes (Appellate Tribunal) Act, 1950        (XLVIII of 1950).  This Court ultimately held that the award        of the Sen Tribunal was void in to for want of jurisdiction,        but  did not go into the merits of the award With regard  to        any  of the matters dealt with therein.  The consequence  of        this  decision was that the dispute in the banking  industry        remained  unresolved.   Soon after there were  some  strikes        consequent  on  certain action taken by some of  the  Banks.        The result was that the Central Government had to take steps        afresh to settle this long standing dispute.  Attempts  were        at first made through the machinery of        204        conciliation  to  settle  the dispute,  but  these  attempts        failed.   On  June  26, 1951,  was  enacted  the  Industrial        Disputes (Amendment and Temporary Provisions) Act, 1951  (XL        of  1951) which had the effect of temporarily freezing  some        of  the gains of labour under the Sen Award.  In  July  1951        the  Central  Government  made  a  fresh  reference  to   an        Industrial  Tribunal  consisting of Shri H.  V.  Divatia,  a        retired  Judge as.  Chairman and two other members, but  the        Chairman  and the members resigned within a short time.   On        January  5,  1952,  two notifications  were  made.   By  one

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 23  

      notification a new Tribunal was constituted to be called the        All India Industrial Tribunal (Bank Disputes).  The Chairman        of  this  Tribunal  was Shri  Panchapagesa  Sastry,  another        retired Judge.  The other two members were Shri M. L. Tannan        and  Shri V. L. D’Souza.  Hereafter we shall refer  to  this        Tribunal as the Sastry Tribunal.  By another notification of        the  same date the Central Government referred  the  matters        specified  in such.  II of the notification,  which’..  were        the matters in dispute between the employers and workmen  of        the  banking companies specified in sch. 1, to the  Tribunal        for  adjudication.   We need not set out  here  the  matters        specified  in  sch. 11, but shall presently refer  to  those        items  only  with which we are concerned in  these  appeals.        The  Sastry Tribunal made its award which was  published  on        April  20, 1953.  This award came up for consideration of  a        Special  Bench of the Labour Appellate Tribunal  on  appeals        preferred  by the employees of banks all over India  and  of        the Banks themselves.  The decision of the Labour  Appellate        Tribunal  was  given on April 28, 1954.  Some of  the  Banks        moved  this  Court  for special leave  to  appeal  from  the        decision  dated  April  28, 1954, of  the  Labour  Appellate        Tribunal and such leave was granted on October 4,1954.   The        same  order which granted special leave also  directed  that        the appeals be consolidated.  These seven appeals on  behalf        of different Banks against their workmen have been filed  in        pursuance of the aforesaid leave granted by this Court.        In  Civil Appeal No. 56 of 1957 in which the  Imperial  Bank        (now substituted as the State Bank of India) is        205        the  appellant,  a preliminary objection has been  taken  on        behalf  of the respondent workmen of the Bank to the  effect        that the appeal is incompetent.  We shall presently consider        this preliminary objection, but before we do so, it will  be        convenient  to indicate the principal questions which  arise        for consideration in these seven appeals.        These questions have been formulated under four heads :        (1)  what  is  the  scope of item 5 of schedule  II  of  the        notification dated January 5, 1952, the item being expressed        in the following words-" Bonus, including the qualifications        for eligibility and method of payment ";        (2)  does s. 10 of the Banking Companies Act, 1949 (prior to        its amendment by Act 95 of 1956) prohibit the grant of bonus        to Bank employees;        (3)  whether  an industrial tribunal is entitled in  law  to        compel  Banks  to disclose " secret reserves " and  "  other        necessary  provisions"  made  by them, for  the  purpose  of        adjudication;        (4)  whether the Full Bench formula laid down by the  Labour        Appellate  Tribunal in Mill Owners’ Association,  Bombay  v.        Rashtriya Mill Mazdoor Sangh, Bombay (1) for the payment  of        bonus to employees in the textile industry is applicable  to        Banks.        Of the aforesaid four questions, the first two directly fall        for decision in the appeals before us.  For reasons which we        shall presently give, we consider that questions (3) and (4)        do not call for any decision at the present stage.        We  shall now state how the Sastry Tribunal and  the  Labour        Appellate  Tribunal dealt with the first two questions.   We        have  stated  that item 5 of sch.  II  of  the  notification        dated  January  5, 1952, referred to the claim of  bonus  by        Bank  employees.  We have also quoted earlier the  words  in        which item 5 was expressed.  The Banks contended before  the        Sastry  Tribunal that the dispute referred to in item 5  did        not  contemplate the determination of the quantum  of  bonus        payable by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 23  

      (1)  [1952] L.A.C. 433.        206        any  of  the  Banks for any particular year,  but  the  item        merely  referred  to the question of bonus in  general  with        special  reference  to qualifications  for  eligibility  and        method of payment.  This contention of the Banks was  upheld        by the Sastry Tribunal which said:        "  The  primary duty is on the Government  to  be  satisfied        subjectively whether a reference should be made or not.   In        the circumstances aforesaid, we hesitate to hold that we are        concerned  with  the  question of quantum  of  benefits  for        particular banks and for particular years in the past in the        light  of  profits of such banks durina those  periods.   We        ruled  out  a  request that evidence  should  be  taken  for        determination  of the question.  It may yet be open  to  the        concerned  parties  where  there  is  a  real  grievance  to        approach the Government to get a suitable reference for  the        future  as  well  as for the account years  1949,  1950  and        1951."        What  the Sastry Tribunal did was to consider  the  question        whether  there could be a bonus scheme for future years  and        whether  it should be made to apply retrospectively  to  all        Banks  and for all years; and as to the  guiding  principles        for   the  ascertainment  of  bonus,  the  Sastry   Tribunal        suggested certain lines of approach and recommended them for        the  earnest consideration of both the parties.  The  Labour        Appellate Tribunal, however, came to, a different conclusion        with regard to the scope of item 5 and held that it embraced        the claims to bonus for the relevant years.  Accordingly, it        said :-        "  It follows, therefore, that the claims to bonus made  for        the  relevent years have not yet been adjudicated  upon  and        that  the  terms of the reference have not  been  exhausted.        The  ad hoe Tribunal to which this reference was made is  no        longer  in existence and some other Tribunal will  have  -to        decide  what bonus, if any, is payable by the Banks  to  its        employees for the relevant years.  "        The  correctness of this part of the judgment of the  Labour        Appellate Tribunal has been seriously contested before us on        behalf  of  the appellants and this is  the  first  question        which we have to decide.        207        On  the second question, namely as to the interpretation  of        s.  10  of  the Banking Companies Act, 1949  (prior  to  its        amendment in 1950) there was again a difference between  the        Sastry  Tribunal  and the Labour  Appellate  Tribunal.   The        Chairman  of the Sastry Tribunal was of the view that s.  10        of the Banking Companies Act, 1949, did not stand in the way        of a grant of bonus to Bank employees, but the other members        of  the Sastry Tribunal apparently felt that the matter  was        not free from doubt and the Tribunal as a whole  recommended        to Government that the alleged legal difficulty by reason of        s. 10 of the Banking Companies Act, 1949, should be  removed        by  suitable -legislation.  Perhaps, it was as a  result  of        this recommendation that s. 10 of the Banking Companies Act,        1949,  was amended in 1956.  The Labour Appellate  Tribunal,        however, by a majority of 2 to I came to the conclusion that        s.  10  was no bar to a claim for bonus by  Bank  employees.        One  member  of the Appellate Tribunal,  Shri  D.E.  Reuben,        recorded  a note of dissent in which he held that by  reason        of s. 10 of the Banking Companies Act, 1949, as it stood  at        the  relevant  time, the Industrial Courts could  not  grant        bonus to the workmen of a Bank.  On behalf of the appellants        it  has been contended that the view of the majority of  the        Labour  Appellate  Tribunal  with regard to  s.  10  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 23  

      Banking  Companies Act, 1949, is not correct.  This  is  the        second  question for our decision.  As we are  not  deciding        the other two questions, no useful purpose will be served by        setting out the findings of the Tribunals below with  regard        to them.        We  now proceed to consider the preliminary objection  taken        on  behalf of the respondent workmen in Civil Appeal No.  56        of  1957.  Some more facts must be stated with reference  to        this  preliminary  objection.   After the  decision  of  the        Labour   Appellate   Tribunal  and  before   it   could   be        implemented,  several  Banks appealed to Government  to  set        aside the decision of the Labour Appellate Tribunal as  they        felt that the total burden imposed by it was entirely beyond        their  capacity  to bear.  Therefore, the  Reserve  Bank  of        India, under directions of the Central Government        208        carried  out  a rapid survey of the possible effect  of  the        decision of the Labour Appellate Tribunal on the working  of        a few typical banks which were parties to the dispute.  On a        study  of the evidence so collected, the Central  Government        concluded that it; was inexpedient on public grounds to give        effect  to parts of the decision.  Consequently, the  Labour        Appellate  Tribunal’s  decision was modified by them  by  an        order  dated August 24, 1954.  This decision was debated  in        Parliament   and  ultimately  Government   announced   their        decision  to  appoint  a Commission  (known  as  Bank  Award        Commission) to help them assess more fully the effect of the        award.   The  Commission submitted its report  on  July  25,        1955, and with regard to the claim for bonus it said:        "  In regard to the claim for bonus, no  general  principles        can  be invoked and the case of each individual  bank  would        have to be considered on its merits.  Since this dispute has        not  been resolved so far, it is likely that it may have  to        be  dealt with in the near future.  The claim for  bonus  is        not  within the terms of my reference and I do not  wish  to        trespass  in  the  area of this  dispute.   I  am,  however,        referring incidentally to this aspect of the matter  because        the fixation of a wage structure is likely to have an effect        on employees’ claim for bonus." (see paragraph 51 at page 34        of the Commission’s report).        Thereafter,  the  Industrial  Disputes  (Banking  Companies)        Decision  Act, 1955 (XLI of 1955) was passed to provide  for        the  modification  of the decision of the  Labour  Appellate        Tribunal  in  accordance  with the  recommendations  of  the        Commission.   This Act in so far as it is relevant  for  our        purpose said in s. 3 thereof that the decision of the Labour        Appellate Tribunal shall have effect as if the modifications        recommended in Ch.  XI of the report of the Commission dated        July 25, 1955, had actually been made therein and the appel-        late  decision as so modified shall be the decision  of  the        Appellate  Tribunal  within the meaning  of  the  Industrial        Disputes (Appellate Tribunal) Act, 1950 and the award  shall        have  effect accordingly.  It is clear that  the  Commission        did not make any recommendation in                                    209        respect  of  the  bonus claim and  the  Industrial  Disputes        (Banking Companies) Decision Act, 1955, does not affect  the        present  appeals;  that  Act  merely  gave  effect  to   the        modifications  recommended  by the Commission, but  did  not        give  the  decision  of the Labour  Appellate  Tribunal  any        higher   sanctity  as  a  statutory  enactment.   Now,   the        preliminary  objection  taken on behalf  of  the  respondent        workmen  is  that  the  decision  of  the  Labour  Appellate        Tribunal  merely  says  that the claims  to  bonus  for  the        relevant  years have not been adjudicated and therefore  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 23  

      terms of the reference have not been fully worked out; it is        contended  that this means that some other  Tribunal  -"-ill        have  to decide what bonus, if any, is payable by the  Banks        to their employees, and no sucr Tribunal having been so long        appointed,  there  is at the present  stage  no  enforceable        award  within  the meaning of the  Industrial  Disputes  Act        1947,   and   the  appeal  accordingly  is   premature   and        incompetent.   We  are unable to accept this  contention  as        correct.   On  behalf  of the appellant Banks  it  has  been        submitted  that the Labour Appellate  Tribunal  misconceived        the scope of item 5 of sch. 11 of the relevant  notification        and on that misconception it came to the conclusion that the        terms of reference had not been exhausted, a conclusion  the        correctness   of  which  the  appellants  are  entitled   to        challenge by way of appeal or else they will be bound by the        decision  that  the reference is still pending  and  can  be        worked out by another Tribunal.  This submission we think is        correct.   In the Industrial Disputes Act, 1947, an  ’award’        means  an  interim or final determination by  an  Industrial        Tribunal  of  any  industrial dispute  or  of  any  question        relating  thereto.  The dispute between the parties  in  the        present case related to bonus: on behalf of the banks it was        contended (a) that item 5 of sch. 11 did not include  claims        of bonus for particular years in respect of particular banks        but   related  to  a  general  scheme  of  bonus   including        qualifications  for eligibility and method of  payment,  and        (b) that even a general scheme cf bonus could not be made by        reason of the provisions of s. 10 of the Banking        27        210        Companies Act, 1949; on behalf of the Bank employees it  was        contended  that  (a) item 5 included claims  for  bonus  for        particular  years in respect of particular banks and (b)  s.        10 of the Banking Companies Act, 1949, did not stand in  the        way  of  such  claims.  These rival contentions  led  to  an        industrial  dispute  which  the  Labour  Appellate  Tribunal        determined by its decision dated April 28, 1954.  We do  not        see  why that decision is not an ’award’ within the  meaning        of the Industrial Disputes Act, 1947.  In our opinion, in no        sense   can  the  appeals  be  said  to  be   premature   or        incompetent.   It is worthy of note that these appeals  have        been  filed  in pursuance of special leave granted  by  this        Court  tinder  Art. 136 of the Constitution.   That  Article        enables  this  Court to grant, in  its  discretion,  special        leave  to appeal from any judgment,  decree,  determination,        sentence  or order in any cause or matter passed or made  by        any court or tribunal in the territory of India.  The powers        of  this  Court  under the said Article  are  wide  and  are        subject  to such considerations only as this Court has  laid        down  for  itself for the exercise of its  discretion.   The        argument  before us is not that these appeals do  not  come,        within  those  considerations and special leave  should  not        have  been  granted;  but  the argument  is  that  they  are        incompetent  for  other  reasons.  Even  those  reasons,  we        think,  are not sound.  Learned counsel for  the  respondent        workmen  has cited before us some decisions, one  Australian        ’In  re the Judiciary Acts, etc. (1)); and another  American        (David  Muskrat  v.  United States (2)) in  support  of  his        contention.   We  consider, however, that the  point  is  so        clear  and beyond doubt that it is unnecessary to embark  on        an  examination  of  decisions  which  relate  to   entirely        different facts.  There is, in our opinion, no substance  in        the preliminary objection which must be overruled.        Now, we proceed to consider the true scope of item 5 of sch.        11  of the notification dated January 5, 1952.  Schedule  11

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 23  

      of  the  notification  dated  June  13,  1949,  by  which  a        reference  was  made  to  the  Sen  Tribunal  contained   an        identical item which was item 6. That        (1) (1921) 29 C.L.R. 257.        (2) (1910) 219 U.S. 346 ; 55 L. Ed. 246.             211        item was expressed exactly in the samewords  as item 5  of        sch. 11 of the notification underour  consideration.   The        Sen Tribunal dealt with thescope  of that item  and  said        that a large number ofdemands had been made by the unions        for  bonus  for particular years in  respect  of  particular        banks.  The Sen Tribunal then said:-        " We have been unable to deal with such individual  demands,        except such matters as were pending in the different  States        at  the time of our appointment and have  been  specifically        referred to us under the provisions of s. 5 of Ordinance  VI        of  1949 or Act LIV of 1949.  Apart from the great  deal  of        time that we should have to spend on such questions, had  we        to  hear and dispose of every application for  a  particular        year  in respect of a particular bank, we believe  that  the        kind of disputes regarding bonus that have been referred  to        us  are  disputes  of  a  general  nature,  e.g.,  questions        regarding  ’qualifications  for eligibility  and  method  of        payment’."        Thus  it is clear that the Sen Tribunal also understood  the        item as a reference, of a dispute of a general nature  which        did  not include demands for bonus for particular  years  in        respect  of particular banks.  The Central Government  which        made   the   reference  to  the  Sastry  Tribunal   by   the        notification  dated  January  5, 1952,  had  before  it  the        interpretation which the Sen Tribunal had made in respect of        the  self-same item.  Having that interpretation before  it,        the  Central Government used identical language  to  express        the dispute which it referred to the Sastry Tribunal in item        5 of sch. 11.  This, in our opinion clearly shows that  item        5  of  sch. 11 of the notification relating  to  the  Sastry        Tribunal  has the same meaning as item 6 of sch. 11  of  the        notification relating to the Sen Tribunal as interpreted  by        that Tribunal.  The various items in sch. 11 of the relevant        notification  are  not items in legislative lists,  but  are        items  in an administrative order and it would not be  right        to apply the same canon of interpretation to the items in an        administrative order as is applied to items in a legislative        list.  It is worthy of note that some of the items in        212        the   Sen  reference  were  modified  when  the   subsequent        reference  was made to Sastry Tribunal.  Item 38 of the  Sen        reference read as follows:-        In  what manner and to what extent do the decisions  of  the        Tribunal  require modification in the case of  employees  of        banks in liquidation or moratorium ?"        This  item was dealt with by the Sen Tribunal at pp. 157  to        160  of its award and it pointed out certain defects in  the        wording  of the item.  When a similar item was  referred  to        the  Sastry  Tribunal, necessary changes were  made  in  the        wording of the item to remove the defects pointed out by the        Sen  Tribunal  (see item 11 of sch. 11 of  the  notification        relating  to  the  Sastry Tribunal.  Another  example  of  a        similar character is item 5 of sch. 11 of the Sen reference,        an  item  which related to " other allowances "  payable  to        bank employees including conveyance allowance for clerks for        journeys  to  and from the clearing house.   A  point  taken        before the Sen Tribunal was that by conveyance allowance was        meant  an  allowance for journeys to and from the  place  of        work.   The  Sen Tribunal confined conveyance  allowance  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 23  

      expenditure incurred for going out on the Bank’s work  while        the  Bank employee was on duty.  The scope of the  reference        was  made  clearer by changing the phraseology of  the  item        when  the  subsequent reference to the Sastry  Tribunal  was        made;  see in this connection the phraseology of item 28  of        sch. 11 of the notification relating to the Sastry Tribunal.        It would thus appear that we have two kinds of examples: (1)        in  some cases the phraseology of the items is changed  when        the  subsequent reference is made taking into  consideration        the  criticisms made by the Seti Tribunal and (2) there  are        other  cases  where no change in phraseology  is  made  even        though the Sen Tribunal has understood a particular item  in        a particular sense.  Judged in the light of these  examples,        it  seen-is to us that the true scope of item 5 of -,ch.  11        is  what the Sastry Tribunal understood it to  be,  namely.,        whether bonus was payable to Bank employees and, if so, what        were the qualifications for eligibility and method of        213        payment.   The  reference in item 5 of schedule 11  did  not        include  within itself claims of bonus for particular  years        in respect of particular banks.  The Sastry Tribunal further        pointed out that there were specific references with  regard        to  the  claims for bonus in respect of some  Banks.   Those        reference  did not, however, come within item 5 of sch.  11.        If they did, it was completely unnecessary to make  separate        and specific references with regard to such claims.  Item  5        was  not  the  only item which raised  a  general  question.        There  were  many other items of a similar nature,  such  as        items 3, 6, 9 etc.        The Labour Appellate Tribunul itself realised the difficulty        of  deciding under item 5 of sch. 11 the  particular  claims        for bonus for particular years.  The Sastry Tribunal pointed        out that there were 129 banks before it and no evidence  was        given  to substantiate the claims for bonus  for  particular        years  in respect of particular banks.  The Sastry  Tribunal        said:-        "We  cannot assume that, for all these 129 banks  before  us        and for all these years there were live disputes about  this        matter which the Government had considered fit and proper to        be referred to us after applying their minds to the  problem        whether  such  a reference should be made to  an  industrial        tribunal.   There is also this additional circumstance  that        there  had been two special and specific references  by  the        Govern  cut  in  relation to the payment  of  bonus  by  the        central  bank of India, the Allahabad Bank and the,  Unitted        commercial Bank for the years 1951 and 1951.  Moreover, even        apart from the general character of the various heads of  of        disputes in the reference to us individual cases pertaining)        only  to Some banks Wherever the Government wanted  to  make        such a reference have been particularised and set out,  e.g,        absorption of Bharat Bank employees-itein 31 in schedule  It        of  the,  notification. . . . It may be mentioned  that  the        claim before us in connection with the bonus payable I)v the        Imperial  Bank of India for the years 1948, lb49,  1950  and        1951  would  involve  a payment of very nearly  a  crore  of        rupees over and above the        214        payments  already made for these years.  It is not  possible        for  us to affirm what the attitude of the Government  would        have  been  on the question of referring a dispute  of  this        character to us under s. 10 of the Industrial Disputes  Act,        1947.  "        Faced  with  the  difficulty  referred  to  by  the   Sastry        Tribunal,  the Labour Appellate Tribunal also said  that  it        could  not  deal  with individual claims for  bonus  in  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 23  

      present proceedings.  The Labour Appellate        Tribunal  said  that  it  would be acting  in  vacuo  if  it        attempted  to  decide individual claims  for  bonus  without        having before it specific cases of bonus, particularly  when        there were no materials on the record on which the  Tribunal        could make a decision as to the quantum of bonus payable  by        a  particular bank for a particular year.   This  difficulty        instead of leading the, Labour Appellate Tribunal to give  a        proper interpretation to the true scope of item 5 of sch. 11        led  it  to the conclusion that item 5 of sch.  11  embraced        within  itself  individual claims for bonus  for  particular        years  and  those  claims  must be  dealt  with  by  another        tribunal  on  the footing that the reference  had  not  been        completely  worked out.  We consider this to be  a  complete        non sequitur.  Item 5 of sch.  IL must be interpreted as  an        item  in an order of reference in the context in  which  the        item has been used, the words in which it has been expressed        and against the background in which the dispute has  arisen.        The  practical  difficulty  which  may  arise  in   deciding        individual  claims for bonus in respect of particular  banks        is merely a circumstance to be taken into consideration.  It        cannot  be decisive on the question of  determinination  the        true scope and effect of item 5 of sch. 11.        On a consideration of all relevant circumstances and  having        regard to the context and the words in which item 5 of  sch.        11  has been expressed, we are of the view that  the  Labour        Appellate  Tribunal  was wrong in its  conclusion  that  the        reference had not been worked out and that individual claims        for bonus in respect of particular banks must be  determined        by  another tribunal on the basis of the reference  made  in        1952.                                    215        We  now  proceed to a consideration of  the  more  important        question, as to the effect of s. 10 of the Banking Companies        Act, 1949.  We have stated earlier that s. 10 of the Banking        Companies Act, 1949, hereinafter called the Banking Act, was        amended in 1956.  We shall first read the unamended section,        the provisions whereof were in force at the time relevant to        these appeals.  We shall later read also the amended section        in  connection with an arguement presented on behalf of  the        Bank  employees that the Banking Companies (Amendment)  Act,        1956  (XCV  of  1956) was not remedial  in  nature  but  was        declaratory of the law as it always was.        Section  10  of the Banking Act prior to  its  amendment  in        1956, was in these terms-        "  S.  10.  (1) No banking Company(a)  shall  employ  or  be        managed by a managing agent or,        (b)  shall employ any person-        (i)who  is or at any time has been adjudicated  insolvent,        or  has  suspended  payment  or  has  compounded  with   his        creditors,  or  who is or has been convicted by  a  criminal        court of an offence involving moral turpitude; or        (ii)whose remuneration or part of whose remuneration  takes        the  form of commission or of a share in the profits of  the        company; or        (iii)whose  remuneration  is, according to  the  normal        standards  prevailing  in  banking  business,  on  a   scale        disproportionate to the resources of the Company; or        (c)  shall be managed by any person:-        (1)who  is  a director of any other company, not  being  a        subsidiary company of the banking company; or        (ii)who is engaged in any other business or vocation ; or        (iii)who  has  a  contract with  the  company  for  its        management  for  a period exceeding five years  at  any  one        time:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 23  

      216,        Provided  that  the  said  period of  five  years  shall  in        relation  to  contracts subsisting on the 1st day  of  July,        1944,  be computed from that date Provided further that  any        contract with the company for its management may be  renewed        or extended for a further period not exceeding five years at        a time if and so often as the directors so decide.        (2)If  any question arises in any particular case  whether        the  remuneration  is,  according to  the  normal  standards        prevailing in banking business, on a sctle  disproportionate        to  the  resources of the company for the  purpose  of  sub-        clause  (iii) of clause (b) of subsection (1), the  decision        of the Reserve Bank thereon shall be final for all purposes.        "        Before we proceed to a consideration of the construction  of        the section, a little history may not be out of place.   The        Companies (Amendment) Act, 1936 introduced a new Ptrt XA  in        the  Indian  Companies  Act, 1913 (VIl of  1913).   Part  XA        contained  certain special provisions applicable to  banking        companies only.  The section with which we are concerned was        s. 277HH, and that section was introduced by an amending Act        of  1944.  It was the precursor of s. 10 of the Banking  Act        and it may, perhaps, be advisable to read s. 277HH in so far        as it is relevant for our purpose:        "  277HH.  No banking company...... shall, after the  expiry        of  two years from the commencement of the Indian  Companies        (Amendment)  Act, 1944, employ or be, managed by a  managing        agent,  or  any person whose remuneration or part  of  whose        remuneration takes the form of commission or a share in  the        profits of the company, or any person having a contract with        the  company for its management for a period exceeding  five        years at any one time ;        Provided  that  the  period of five  years  shall,  for  the        purposes of this section, be computed from the date on which        this section comes into force;                                    217        Provided further that any such contract may be be renewed or        extended for a further period not exceeding five years at  a        time if and so often as the directors think fit."        Obviously, the most undesirable feature in the structure and        management  of banking companies which the section tried  to        remedy was the appointment of managing directors or managers        on  long  term  contracts  on  payment  of  remuneration  by        commission or a share in the profits.  However, the  section        was not confined to a managing agent or manager only, though        by  a reference to the statement of objects and  reasons  in        relation to the amendment of 1944 it was suggested on behalf        of  the respondents that the section was so  confined.   The        statement of objects and reasons is not admissible, however,        for  construing  the section; far less can  it  control  the        actual  words used.  The section in express terms said  that        ’no  banking company . . . . shall employ any  person  whose        remuneration  or part of whose remuneration takes  the  form        of . . . a share in the profits of the company’.        Then,  in 1949 came the Banking Act.  As its long title  and        preamble indicate, it is an Act to consolidate and amend the        law relating to banking companies.  It repealed the whole of        Part XA of the Indian Companies Act, 1913 including s. 277HH        referred to above, but s. 2 said:        " S. 2. The provisions of this Act shall be in addition  to,        and  riot,  save  as  hereinafter  expressly  provided,   in        derogation of the Indian Companies Act, 1913, and any  other        law for the time being in force."        The Indian Companies Act, 1913 itself stood repealed by  the        Indian Companies Act, 1956 (I of 1956).

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 23  

      We  now  come back to s. 10, the  proper  interpretation  of        which is the immediate problem before us.  Shorn of all such        details as are unnecessary for our purpose, the section says        that  no  banking  company shall employ  any  person,  whose        remuneration or part of whose remuneration takes the form of        a  share in the profits of the company.  The  section  opens        with a negative,        218        and  says that no banking company shall employ  any  person;        the  expression ’any person’ is followed by  the  adjectival        clause descriptive of the person who shall not be  employed.        The adjectival clause says that the person, who shall not be        employed,  is  one  whose  remuneration  or  part  of  whose        remuneration takes ’- the form of a share in the profits  of        the  company.  Two questions at once confront us: (1)  is  I        bonus remuneration; and (2) is it a share in the profits  of        the company.  The argument on behalf of the appellant  Banks        is  that  I  bonus’  as  awarded  by  Industrial  Courts  is        remuneration  within the meaning of s. 10 and it is  also  a        share in profits; therefore. the express provisions of s. 10        read with s. 2 of the Banking Act override the provisions of        the  Industrial  Disputes  Act,  1947  so  far  as   banking        companies are concerned, and prohibit the award of bonus  to        employees  of  Banks.  On behalf of the Bank  employees  the        argument  is that bonus as awarded by Industrial  Courts  is        not  ’remuneration’  within  the meaning of  s.  10  of  the        Banking  Act,  nor  is it a share in  profits  in  its  true        nature.   The argument on both sides hinges on the  two  key        expressions:  I remuneration’ and’ share in  profits’.   The        meaning  of  these  expressions we shall  consider  in  some        detail.   But it is convenient at this stage to get  rid  of        some minor points.        Section  10  in  its operative part says  that  ’no  banking        company shall employ any person etc.’ The amendment of  1956        says that I no banking company shall employ or continue  the        employment  of  any person’.  The question has  been  mooted        before  us  if  the  expression  ’shall  employ’  means  and        includes,  prior to the amendment of 1956,  ’shall  continue        the  employment of’.  We think it does; otherwise  the  very        purpose of the section is defeated.  Take, for example,  the        case of an insolvent.  The section says that no banking com-        pany shall employ any person who is or at any time has  been        adjudicated  insolvent.  Suppose that at the time  the  bank        employs   a  person,  he  has  not  incurred  any   of   the        disqualifications  mentioned  in s.  10;  but  subsequently,        there  is  an order of adjudication against him  and  he  is        adjudicated an insolvent, The section                                    219        obviously means that such a person can no longer be employed        by  the bank.  If subsequent disqualification is not  within        the  mischief of the section, then the very purpose  of  the        section which must be the safety and well-being of the  bank        will  be rendered nugatory.  We must, therefore,  hold  that        the  expression ’shall employ a person’ in s. 10  means  and        includes ’shall have in employment’ and in this respect  the        amendment of 1956 merely makes clear what was already  meant        by the    section.        We may also dispose of here an argument based on s. 2.  When        an industrial dispute as to bonus between an employer    and        his workmen is referred to a tribunal for adjudication,  the        tribunal  has the power to resolve the dispute by an  award.        Such  an  award  may  grant bonus  to  workmen,  if  certain        conditions  are fulfilled.  The argument before us  is  that        the provisions of the Banking Act are not to be  interpreted        in  derogation of the provisions of the Industrial  Disputes

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 23  

      Act, 1947, but in addition thereto.  This argument, however,        ignores an essential qualification embodied in s.  2-namely,        the  qualification  in the clause ’save as  hereinafter  ex-        pressly  provided’.   If s. 10 expressly  provides  that  no        banking company shall employ a person whose remuneration  or        part  of  whose remuneration takes the form of  a  share  in        profits,  and I bonus’ is both remuneration and a  share  in        profits,  then  s.  2  can  be  of  no  assistance  to   the        respondents.   The  express provisions of s.  10  must  then        override  any other law for the time being in force, so  far        as banking companies are concerned.        This brings us back to the two key expressions remuneration’        and   ’share   in   profits’.   We   take   the   expression        ’remuneration’ first.  The dictionary meaning of the word is        reward,  recompense,  pay  for  service  rendered  (see  the        Concise  Oxford  Dictionary)  ; and  that  is  the  ordinary        meaning  of the word.  The word was judicially noticed in  a        very  early decision (R. v. Postmaster General (1);  and  on        appeal  (2);  Blackburn,  J., said: " I  think  the  word  ’        remuneration..........  means,,  a quid pro quo.  If  a  man        gives  his  services. whatever consideration  lie  gets  for        giving his services seems to        (1) (1876) 1 Q.B.D. 658.        (2) (1878) 3 Q.B.D. 428.        220        me  a  remuneration for them.  Consequently, I  think  if  a        person  was  in  receipt of a payment, or in  receipt  of  a        percentage,  or  any kind of payment which would not  be  an        actual  money payment, the amount he would receive  annually        in  respect  of this would be remuneration."  The  word  was        again  noticed  in several English decisions  in  connection        with  s. 13 of the Workmen’s Compensation Act,  1906,  which        enacted  that  a workman did not include a  person  employed        otherwise than by way of manual labour whose "  remuneration        "  exceeded pound, 50 ; and in Skiles v. Blue, Anchon  Line,        Ltd.(’)  it was observed that remuneration was not the  same        thing as salary or cash payment by the employer but involved        the  same  considerations as earnings.  This was a  case  in        which  the  purser of a ship received, in  addition  to  his        regular  wages, at the end of each voyage, at a  fixed  rate        per month, a bonus or extra wages; he also made a profit  by        the  sale on board ship of whisky in nips.  The majority  of        Judges held that both the bonus and the profit on the whisky        ought  to be taken into account in estimating  the  purser’s        remuneration.   In an earlier decision, Penn v.  Spiers  and        Pond Limited (2), the gratuities and tips which the deceased        workmen, employed as a waiter on a restaurant car,  received        from  passengers using the restaurant car were held to be  I        earnings  in  the  employment of the  same  employer’.   The        decision in Penn v. Spiers and Pond, Limited (supra) (2) was        approved  by the House of Lords in Great Western Railway  v.        Helps (a).  In his speech Lord Dunedin repelled the argument        addressed  for the appellants of that case that the  meaning        of the expression " earnings " should be limited to what the        workman  gets  from  direct contract from  his  employer  by        saying  that the simple answer to the argument was that  the        statute did not say so; it used the general term I earnings’        (in our case the general term ‘remuneration) instead of  the        term  "  wages" or the expression " what he  gets  from  his        employer  ".  It  is,  we  think,  unnecessary  to  multiply        decisions.   In  a recent Australian  decision,  Conally  v.        Victorian -Railways        (1) [1911] 1 K.B- 36o.          (2) [1908] 1 K.B. 766.        (3)[1918] A.C. 141.        221

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 23  

      Commissioner,s  (1)  the  matter has  been  tersely  put  as        follows:  " It (the word remuneration) should be  given  its        natural  meaning  unless there is reason to  do  otherwise."        This  is  a  salutary rule of construction  and  should,  we        think, be adopted in the present case.        Is  there  anything  in the Banking Act  to  give  the  word        ’remuneration’  a restricted meaning?  Three  meanings  have        been canvassed before us.  The widest meaning for which  the        learned Attorney-General appearing for some of the banks has        contended is the natural meaning of the word  ’remuneration’        in  the  sense  of any  recompense  for  services  rendered,        whether   the  payment  is  voluntary  or  under   a   legal        obligation.   The  second  meaning,  which  is  intermediate        between the widest and the narrowest, is that it means  what        is  payable  under  any legal obligation,  whether  under  a        contract,  statute, or an award.  The narrowest meaning  for        which   Shri  N.C.  Chatterjee,  learned  counsel  for   the        respondent workmen, has canvassed is that remuneration in s.        10 of the Banking Act means contractual wages, viz., what is        payable under the terms of the contract of employment  only.        He  has put his argument in the following way:  section  10,        when it says that I no banking company shall employ a person        etc.’,  refers to the contractual relationship  of  employer        and  employee created by an act of parties, and its  purpose        is  to put a, ban on one kind of employment of a person  who        is  to be paid a particular remuneration under the terms  of        his  employment.   It  is stated  that  the  prohibition  is        against  any  remuneration in the nature of  profit  sharing        being fixed under a contract of service between the bank and        its employees and it is contended that the legislature  made        the-prohibition dependent on the terms of employment.  It is        submitted that the adjudication of an industrial tribunal in        awarding  bonus  does not create any obligation  by  act  of        parties,  and even if it imports some kind of implied  term,        it  is de hors the contract of employment and is the  result        of a judicial verdict under the industrial law.        The argument is attractive but does not in our opinion stand        the test of close scrutiny.  Lot us look a        (1)  (1957)  V.R.  466  (also 1957  Australian  Law  Reports        1097).        222        little  more closely to s. 10 of the Banking Act.   It  says        inter  alia  that  no banking company  shall  employ  or  be        managed by a managing agent or shall employ a person who  is        or  has  been convicted by a criminal court  of  an  offence        involving  moral  turpitude  etc; see  el.  (b)(1).   It  is        obvious that when the section says ’shall employ’, it  means        ’shall  have in the employment of. It is not suggested  that        the disqualifications mentioned in cl. (b) (1) refer only to        the  contract of employment.  If that were so,  the  section        would  hardly serve the purpose for which it must have  been        meant.   We  may take another example which brings  out  the        meaning  of the section even more clearly.  Let  us  suppose        that  the  Bank employs a manager on a contract  of  service        which  makes  no  mention of bonus or  commission.   On  the        argument of learned counsel for the respondents, s. 10  does        not  stand in the way of the bank to pay voluntarily and  ex        gratia  any  amount to the manager by way of  commission  or        bonus,  as long as the contract of service does not  contain        any  term as to such payment.  This, in our  opinion,  makes        nonsense   of   the  section.   Learned  counsel   for   the        respondents  had  himself  suggested in the  course  of  his        arguments  that having regard to the legislative history  of        the  enactment,  the section was intended to  prevent  banks        from having managers, by whatever name they might be called,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 23  

      who  were paid by commission or a share in the profits;  and        yet  the  Bank  can  make such  payment  if  it  adopts  the        subterfuge of not saying anything about such payment in  the        contract of service.        There  are,  in our view, clear indications in  the  section        itself  that  the word ’remuneration’ has been used  in  the        widest  sense.   Firstly, cl. (b) (iii) also uses  the  word        remuneration.  It says-" whose remuneration is, according to        normal standards prevailing in banking business, on a  scale        disproportionate  to  the resources of the company  ".  Sub-        section (2)-unamended-states inter alia that if any question        arises  in any particular case whether the  remuneration  is        according  to  the normal standards  prevailing  in  banking        business on a scale disproportionate to the resources of the        company etc., the decision of the Reserve Bank        223        shall be final.  It is clear that in cl. (b) (iii) of sub-s.        (1)  and also in sub-s. (2), the word,remuneration has  been        used  in the widest sense.  We may invite attention in  this        connection  to  r. 5 of the Banking  Companies  Rules,  1949        (which are statutory rules) which requires a banking company        to send periodically to the principal office of the  Reserve        Bank  a  statement in Form I showing the  remuneration  paid        during the previous calendar year to officers of the company        etc.   Form  I  has a footnote which  says:  "  Remuneration        includes      salary,     house     allowance,      dearness        allowance,  .  .  . . bonus . . .  fees  and  allowances  to        directors  etc."  We do not say that a  statutory  rule  can        enlarge the meaning of s. 10; if a rule goes beyond what the        section  contemplates, the rule must yield to  the  statute.        We have, however, pointed out earlier that s. 10 itself uses        the  word ’remuneration’ in the widest sense, and r.  5  and        Form I are to that extent in consonance with the section.        Shri Phadke appearing for some of the respondents has  urged        a  somewhat  different  contention.   He  has  argued   that        assuming  that the word ’remuneration’ has been used in  the        widest sense in s. 10 and therefore includes bonus, r. 5 and        Form  1, show that payment of bonus is permissible: this  is        intelligible  only on the footing that the provisions of  s.        10 are restricted in their application to such employees  of        a banking company as are employed in a managerial or admini-        strative capacity; they do not apply to ’workmen’ as defined        in the Industrial Disputes Act, 1947.  We find it  difficult        to accept this argument.  The section says that ’no  banking        company shall employ any person’, and we do not see how  the        expression  ’any person’ can be restricted to those  on  the        managerial   or  administrative  staff  only.    We   cannot        arbitrarily cut down the amplitude of an expression used  by        the legislature.        It is necessary to refer here to the decision in  Wrottesley        v.  Regent  Street Florida Restaurant (1) on  which  learned        counsel   for  the  respondent  workmen  has  placed   great        reliance.  It is necessary to refer to the        (1)  [1951] 2 K.B. 277.        224        facts  of the case, which are stated in the  headnote.   The        waiters  employed  at an unlicensed restaurant, by  an  oral        agreement  amongst  themselves and between  them  and  their        employers,  paid into a pool all the tips received  by  them        during the course of their employment.  The tips were placed        in a locked box, and the contents were distributed weekly in        shares  calculated  in accordance with the  agreement.   The        total weekly sum received by each waiter including the share        of  the  tips  exceeded, but the weekly  wage  paid  by  the        employers was itself less than, the minimum wage  prescribed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 23  

      by  the Wages Regulations (Unlicensed Place of  Refreshment)        Order,  1949.   The  proprietors  of  the  restaurant   were        prosecuted for failing to pay the minimum wage.  It was held        that the sums paid from the pool were riot remuneration, and        the  earlier  decisions relating to the calculation  of  the        earnings  of  a  waiter in  connection  with  the  Workmen’s        Compensation  Acts were distinguished.  Lord Goddard,  C.J.,        thus explained the distinction:        "  The amount of a man’s earnings in an employment  and  the        amount  of remuneration which his employer pays to  him  are        not  necessarily the same thing.  The section  creating  the        offence, and under which the proceedings are taken, is s. 9,        sub-s.  2,  of the Catering Wages Act, 1943.   That  section        provides  that, if an employer fails to pay to a  worker  to        whom a wages regulation order applies remuneration not  less        than  the  statutory  minimum  remuneration  clear  of   all        deductions,  he shall be guilty of an offence.   Section  10        contains  somewhat elaborate provisions for the  computation        of remuneration.  Not only the short title but the structure        of  the Act -setting up a wages commission,  permitting  the        establishment  of  wages  boards,  and  providing  for  wage        regulation  orders-clearly indicates that it is  with  wages        that  the  Act is intended to deal.  The use of the  word  "        remuneration " in both s. 9 and s. 10 and, indeed, in  other        sections,  is probably because there are certain  deductions        from   wages  which  are  authorized  by  s.  10,  so   that        remuneration is an apt word to indicate the net payment,                                    225        What we have to decide is whether, when a waiter, receives a        payment from the tronc in the manner found in the case, that        sum  can be regarded as remuneration paid to him by,  or  as        remuneration obtained by him in cash from, his employer.  In        our  opinion,  when a customer gives a tip to a  waiter  the        money becomes the property of the latter."        We  think  that  the decision itself  shows  that  the  word        remuneration’  must be given its meaning with  reference  to        the context in which the word occurs in the statute.  In the        context  of the Catering Wages Act, 1943, it meant  the  net        payment  after  certain deductions from wages  paid  by  the        employer;  and in the Workmen’s Compensation Acts, it  meant        the  amount of a man’s earnings in an employment.   We  have        pointed  out that in the Banking Act with which we are  con-        cerned, the word I remuneration’ has been used in the widest        sense.  In that. sense, it undoubtedly includes bonus.        We  proceed  now  to  a  consideration  of  the  second  key        expression for our purpose, viz., ’takes the form of a share        in   the  profits  of  the  company’.   The  conception   of        industrial bonus (that is, profit bonus claimed by employees        and granted amicably, through conciliation or as a result of        an  industrial award) has had a chequered  development.   In        some   of  the  earlier  Bombay  decisions   of   Industrial        Adjudicators,  it  was  held that the  grant  of  bonus  was        entirely a matter of grace and not of right; some  decisions        characterized  bonus  as  a  gift,  a  sort  of  bakshis  or        pourboire (see D. G. Damle’s Labour Adjudications in  India.        p. 408). By 1948, however, the conception had  crystallised,        and it    was judicially recognised that the claim of profit        bonus  could  not  any longer be regarded as  an  ex  gratia        payment.   In Millowner’s Association, Bombay  v.  Rashtriya        Mill  Mazdoor Sangh Bombay (1) the Full Bench of the  Labour        Appellate  Tribunal evolved the formula for determining  the        quantum  of bonus, and the general principles governing  the        claim of bonus were also laid down.  These are,: (1) as both        capital        (1)  1950 L.L.J. 124.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 23  

      29        226        and  labour  contribute to the earnings  of  the  industrial        concern, it is fair that labour should derive some  benefit,        if  there  is  a surplus after meeting  prior  or  necessary        charges;  (2) the claim of bonus would only arise  if  there        should  be  a residue after making provision for  (a)  prior        charges  and  (b) a fair return on paid up  capital  and  on        reserves  employed  as working capital .and (3) bonus  is  a        temporary  satisfaction, wholly or in part, of the needs  of        the employee where the capacity of the industry varies or is        expected  to  vary from year to year, so that  the  industry        cannot  afford to pay ’living wages’.  The Labour  Appellate        Tribunal recognised that where the goal of living wages  had        been  attained, bonus like profit sharing in the  technical,        narrow  sense  would represent more the  cash  incentive  to        greater  efficiency and production.  The conception  of  the        living wage itself is a growing conception, and the goal has        been  reached  in  very  few industries,  if  any,  in  this        country.  The general principles laid down by the  aforesaid        Full  Bench decision of the Labour Appellate  Tribunal  were        generally  approved by this Court in Muir Mills Co. Ltd.  v.        Suti  Mills Mazdoor Union, Kanpur (1), and have  been  fully        considered again and approved in Civil Appeals Nos. 459  and        460  of  1957  (Associated Cements) in  which  judgment  was        delivered on May 5, 1959.        We  have  to consider the expression I takes the form  of  a        share  in the profits of the company’ in the context of  the        meaning  of  the  word bonus’ as  explained  above.   It  is        necessary  to  state that we are not  considering  here  the        question  of production bonus or Puja bonus, which  may  not        necessarily  come  out  of  profits and  these  stand  on  a        different footing.  There can be now no doubt, however, that        profit  bonus,  in  the industrial sense  in  which  we  now        understand it, is a share in the profits of the company;  it        is  labour’s share of the contribution which it has made  in        the earning of the profits.  The two grounds on which it has        been contended that bonus is not a share in the profits  are        (1)  that  it is not a fixed or certain  percentage  of  the        available surplus of profits and (2) it partakes of the        (1)  [1955] 1 S.C.R. 991                                    227        nature  of  a  contingent, supplementary  wage.   These  two        grounds weighed considerably with the majority of members of        the Labour Appellate Tribunal who expressed the view that s.        10  of the Banking Act did not stand in the way of  granting        bonus to bank employees, because bonus according to them was        not a share in the profits of the company.  We do not  think        that either of these two grounds is valid.  The first ground        arises out of a confusion between the expression ’takes  the        form  of  a  share in profits’ and  the  expression  ’profit        sharing’   used  in  a  narrow,  technical  sense.   It   is        undoubtedly  true that the bonus formula does not  lay  down        any  fixed percentage which should go to labour out  of  the        available  surplus.   The share of labour will depend  on  a        number of circumstances; but once the amount which should go        to  labour  has  been  determined,  it  is  easy  enough  to        calculate  what proportion it bears to the whole  amount  of        available  surplus of profits.  There is thus no  difficulty        in  identifying  bonus  as a share in  the  profits  of  the        company.   It  is true that the  International  Congress  on        Profit-sharing held in Paris in 1889 adopted the  definition        of  ’profit sharing’ in the technical, narrow  sense.   That        definition said that profit sharing was an agreement (formal        or  informal)  freely entered into, by which  the  employees

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 23  

      receive  a  share, fixed in advance, of the profits  "  (see        Encyclopaedia of the Social Sciences, Seligman and  Johnson,        Vol.  XII, p.487). But that is not the sense in which  bonus        has been understood in our industrial law, and it is  worthy        of  note  that  s. 10 of the Banking Act does  not  use  the        technical  expression ’profit-sharing’ but the more  general        expression I takes the form of a share in the profits etc.’.        We  are  unable to hold that this general expression  has  a        technical  meaning  in the sense that the share  in  profits        must  be fixed in advance, as in  technical  profit-sharing;        such  a  meaning would, without sufficient  reason,  exclude        from its purview schemes under which the workers are granted        regularly  a  share in the net profits of industry,  but  in        which  the share to be distributed among the workers is  not        fixed in advance but is decided from time to time on ad hoc,        228        basis by an independent authority such as an industrial        court or tribunal.        The  second  ground  also  appears  to  us  to  be   equally        untenable.  Bonus in the’ industrial sense as understood  in        our  country  does  come out of  the  available  surplus  of        profits, and when paid, it fills the gap, wholly or in part,        between  the  living  wage and the actual wage.   It  is  an        addition  to  the wage in that sense, whether it  be  called        Contingent and supplementary.  None the less, it is labour’s        share’  in  the profits, and as it is a  remuneration  which        takes  the form of a share in profits, it come’s within  the        mischief  of S. 10 of the Banking Act.  It may be asked  why        should  the legislature seek to deprive bank employees,  who        are not on the managerial or administrative staff, of  their        industrial  claim  to  bonus when  they  contribute  to  the        prosperity  of  the  banks?  This really is  a  question  of        policy  on which we are not permitted to speculate.  On  the        one  side  there  is  the  necessity  for  safeguarding  the        integrity and stability of the banking industry, and on  the        other  side there is the claim of employees for a  share  in        the  profits.   Which  claim  has a  greater  urgency  at  a        particular  time is really a matter for the  legislature  to        say.  We may refer here by way of contrast to S. 31A of  the        Insurance Act, 1938. - That section’ is in terms similar  to        S.  10 of the Banking Act, but has some marked  differences.        Firstly, it specifically mentions bonus, along with a  share        in profits, in cls. (b) and (c) of sub-S. (1); secondly,  it        has  a proviso which says inter alia that nothing  in  subS.        (1)  shall  prohibit the payment of bonus in any year  on  a        uniform  basis  to all salaried employees I  etc.,  or  such        bonus  which  in the opinion of the  Central  Government  is        reasonable  having regard to the circumstances of the  case.        This  merely shows that it is for the legislature to  decide        how  to  adjust the claim of employees with the  safety  and        security  of  the  business in which the  employees  are  in        employment.        The  learned  Attorney-General  has relied on  a  number  of        decisions  in  support of his contention  that  bonus  comes        within  the  expression  ’takes  the  form  of  a  share  in        profits’.  In re Young, Ex Parte Jones (1) it was held        (1)  [1896]2Q.B.484.                                    229        that  a contract that a person shall receive a fixed  sum  "        out  of  the  profits" of a business  was  equivalent  to  a        contract  that  he shall receive "a share  of  the  profits"        within the meaning of sub-s. 3(d) of s. 2 of the Partnership        Act,  1890.   A similar question arose  in  Admiral  Fishing        Company  v. Robinson (1) in connection with s. 7, sub-s.  2,        of  the Workmen’s Compensation Act, 1906 which said: "  This

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 23  

      Act  shall  not  apply to such members of the  crew  as  are        remunerated  by shares in the profits or gross  earnings  of        the  working  of  such vessel." The  claimant  who  was  the        engineer of a fishing smack was entitled to one share of the        net  profits of the working of the vessel on the  particular        voyage.   The question was-was he remunerated by  shares  in        the  profits ? The answer given was that he clearly  was  so        remunerated.   In Costello v. Owners of Ship Pigeon (2)  the        claimant  was  employed as a boatswain on  a  steam  fishing        trawler  and  was  remunerated by  wages,  maintenance,  and        poundage dependent on the profits of the fishing expedition.        The  House of Lords decided by a majority that the  claimant        was remunerated by a share in profits within the meaning  of        s. 7, sub s. 2, of the Workmen’s Compensation Act, 1906.        Shri N. C. Chatterjee has invited our attention to  Newstead        v. Owners of Steam Trawler Labrador (3).  That was a case of        a  claim  for compensation by the widow of a member  of  the        crew  of  a fishing vessel, which was lost with  all  hands.        The claim was resisted by the owners on the ground that  the        deceased was remunerated by a share in the profits or  gross        earnings  of  the  vessel  within s.  7,  sub-s.  2  of  the        Workmen’s  Compensation Act, 1.906, and therefore  that  the        Act did not apply to him.  He was employed as chief engineer        on board a steam trawler at a fixed weekly wage of pound  2.        5s.  It was the custom of the owners when the gross earnings        of  the boat exceeded pound 100 for any one trip (each  trip        being usually of about a week’s duration) to allow a sum  of        pound  2  by  way of bonus, of which pound, I  went  to  the        captain  and 2s. 6d. to each of the remaining eight  members        of the crew.  If the gross earnings of the        (1) [1910] 1 K.B. 540.           (2) [1913] A.C. 407.        (3)  [1916] 1 K. B. 166.        230        boat  exceeded  pound  125  the  bonus  was  proportionately        increased and so on, but it was not further increased if the        gross earnings realised more than pound, 175.  The  decision        proceeded on the footing that the bonus in that case was not        a  share  in  profits  but  an  additional  sum  for   wages        determined by the amount of the gross earnings.  Lord Cozens        Hardy,  M.  R., expounded the ratio of the decision  in  the        following words :-        "   The   question  is  whether,  having   regard   to   the        circumstances,  that  can be said in the present  case.   It        seems   that  by  the  custom  of  this  firm  and  by   the        understanding  and arrangement between the parties,  if  the        vessel made pound, 100 the skipper was entitled to pound  1,        and  in  that particular case each member of  the  crew  was        entitled  to  half  a crown.  If the vessel  made  more  the        skipper and crew were entitled to larger sums.  Now what was        the  effect .of that?  The bonus was not, as it seems to  me        any  part  of the profits, nor was it a share in  the  gross        earnings of the vessel.  There was an obligation on the part        of  the  owners of the trawler to pay the half a  crown  (to        take  that as one instance) in a certain event, which  event        was to be determined by the gross earnings of the vessel.  I        see  no ground for holding that it was in any sense  of  the        word  a  share of the gross earnings of the working  of  the        vessel any more than the actual wages which were payable  to        the  seamen could be treated as being a share of  the  gross        earnings  of the vessel, although the bonus as well  as  the        wages  would  figure in the ship’s accounts as  against  the        receipts on the other side."        It seems clear to us that the ratio of the decision does not        apply  here.   The  bonus we are dealing with  here  is  not        additional  wage determined by the amount of profits; it  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 23  

      really part of the availiable surplus of profits distributed        to labour for its contribution to the earnings.  It does not        arise  out  of  any contract to pay,  though  the  claim  is        recognised as one based on social justice.        Shri  Phadke  has relied on the decision In re  The  Spanish        Prospecting Company Limited That        (1)  [1911] 1 Ch. 92.        231        decision proceeded on the meaning of the word ’profits’,  of        which a classic definition was given by Fletcher MOUITON, L.        J.  In  view  of the decisions of  this  Court  referred  to        earlier,  it  is  now  beyond  dispute  that  bonus  in  the        industrial  Sense comes out of profits.  If it does,  we  do        not  see  how  it  can be held that it is  not  a  share  in        profits.  Shri Phadke suggested that the concept of a  share        in profits pre-supposes the idea of either a definite amount        or  a  definite  proportion  determined  in  advance.   This        submission  we  have dealt with at an earlier stage  and  no        useful purpose will be served by repeating what we have said        already.        We must now notice two other arguments advanced on behalf of        the  respondent workmen.  These arguments are based  on  the        amendments  made  in  1956.  Section 10 as  amended  by  the        Banking Companies (Amendment) Act, 1956 (XCV of 1956) reads,        in so far as it is relevent for our purpose-        S. 10. No Banking Company        (a)shall employ or be managed by a managing agent ; or        (b)  shall employ or continue the employment of any    person        (i)  who is, or at any time has been, adjudicated        insolvent  or has suspended payment or has  compounded  with        his  creditors,  or  who is, or has  been,  convicted  by  a        criminal Court of an offence Involving        (ii)whose remuneration or part of whose remuneration  takes        the  form of commission or of a share in the profits of  the        company:        Provided  that nothing contained in this clause shall  apply        to  the  payment  of any bonus by  any  banking  company  in        pursuance of a settlement or award arrived at or made  under        any  law  relating to industrial disputes or  in  accordance        with  any  scheme  framed  by such  banking  company  or  in        accordance  with  the usual practice prevailing  in  banking        business ; or        (iii)whose  remuneration  is,  in the  opinion  of  the        Reserve Bank, excessive; or        (        c)  ........................................................        232        Explanation.- For the purpose of sub-clause (iii) of  clause        (b), the, expression "remuneration", in relation to a person        employed  or continued in employment, shall include  salary,        fees and perquisites but shall not include any allowances or        other amounts paid to him for the purpose of reimbursing him        in  respect of the expenses actually incurred by him in  the        performance of his duties.        (2)................................        (3)If  any question arises in any particular  case  wither        the  remuneration  is excessive within the meaning  of  sub-        clause  (iii) of clause (b) of subsection (1), the  decision        of  the  Reserve  Bank  thereon  shall  be  final  for   all        purposes."        It  will be noticed that the amended section has  a  proviso        which makes it clear that nothing in the relevent clause  in        subs-s.  (1) shall apply to the payment of any bonus by  any        banking  company  in  pursuance of  a  settlement  or  award        arrived  at  or made under any law  relating  to  industrial

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 23  

      disputes  or  in accordance with any scheme framed  by  such        banking  company  or in accordance with the  usual  practice        prevailing  in  banking  business.  It  is  clear  that  the        amended  section does not stand in the way of the  grant  of        industrial bonus.  It was, however, not in force at the time        relevent  in  these  appeals, and there is  nothing  in  the        Banking’  Companies (Amendment) Act, 1956, which would  make        it  retrospective in operation.  Shri N. C. Chatterjee  has,        however,  contended that the amending Act is declaratory  of        the law as it always was, and Shri Phadke has contended that        the  amending  Act is parliamentary exposition of  the  true        meaning  of  s.  10 of the Banking Act.  We  are  unable  to        accept  any  of  these two contentions.   The  amending  Act        states  in  its long title that it is an Act  to  amend  the        Banking Companies Act, 1949.  Section 2 states: "For section        10 of the Banking Companies Act, 1949, the following section        shall be substituted." There is nothing in the amending  Act        to indicate that it was enacted to remove any doubt, explain        any  former statute, or correct any omission or error,  What        is a declaratory Act The                                    233        following  observations  in Craies on  Statute  Law,  Fifth.        edition, pp. 56-57 are apposite:        " For modern purposes a declaratory Act may be defined as an        Act  to remove doubts existing as to the common law, or  the        meaning or effect of any statute. Such Acts are usually held        to  be  retrospective.   The  usual  reason  for  passing  a        declaratory  Act  is to set aside what Parliament  deems  to        have been a judicial error, whether in the statement of  the        common  law or in the interpretation of statutes.   Usually,        if not invariably, such an Act contains a preamble, and also        the  word  "declared"  as well as  the  word  ’enacted’.         A  remedial  Act,  on  the  contrary,  is  not  necessarily        retrospective; it may be either enlarging or restraining and        it  takes effect prospectively, unless it has  retrospective        affect by express terms or necessary intendment.  We are  of        the view that the amending Act of 1956 is not a  declaratory        Act, and except in the small matter of the expression ’shall        continue  to employ’ in sub-s. (1), it does not  purport  to        explain  any former law or declare what the law  has  always        been.  It is an ordinary remedial piece of legislation which        came  into  effect from January 14, 1957.   For  the  period        relating  to the appeals before us, the amended section  was        not in force.        This brings us to ail end of the two questions, (1) and (2),        which  directly  fall for decision in these  seven  appeals.        Contrary  to the findings of the Labour Appellate  Tribunal,        we have come to the conclusion that (1) the scope of item  5        of  sch.   II of the relevant notification is not  what  the        Labour Appellate Tribunal thought it to be and the reference        of 1952 is not pending for determining the quantum of  bonus        for  the relevant years in respect of particular  banks  and        (2)  in  any event, s. 10 of the Banking Act, prior  to  the        amendment of 1956, prohibited the grant of industrial  bonus        to  bank  employees inasmuch as such bonus  is  remuneration        which  takes  the  form of a share in  the  profits  of  the        banking company.        We  do not think that the other two questions, (3) and  (4),        require any decision at this stage.  It is to be  remembered        that we are exercising our appellate        234        jurisdiction  in  these seven appeals and not  our  advisory        jurisdiction.  These seven appeals stand completely disposed        of on the findings which we have given on the two  questions        already discussed.  On our findings the dispute as to  bonus

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 23  

      referred  to the Industrial Tribunal in 1952 has come to  an        end.   The  reference is no longer pending and in  the  view        which  we have expressed as respects the  interpretation  of        unamended  section 10 of the Banking Act no claim for  bonus        can  be adjudicated on for the past relevant years.  It  is,        therefore,  not  necessary  for us  to  decide  hypothetical        questions  which may arise in any future reference that  may        be  made under the amended section.  In the exercise of  its        appellate  powers  this  Court  does  not  give  speculative        opinions  on hypothetical questions.  It would be,  contrary        to  principle,  inconvenient and  inexpedient  that  opinion        should be given on such questions.  If and when, they arise,        they  must arise in concrete cases and to use the  words  of        the Earl of Halsbury, L. C., in Attorney General of  Ontario        v. Hamilton Street Railway (1):-        " It would be extremely unwise for any judicial Tribunal  to        attempt  beforehand to exhaust all possible cases and  facts        which  might  occur to qualify, cut down, and  override  the        operation of the particular words when the concrete case  is        not before it."        It is also to be remembered that no evidence was allowed  to        be given either by the banks or the bank employees as to the        claims  for  bonus  for  particular  years  in  respect   of        particular  banks.  The dispute was treated, rightly in  our        opinion,  as a dispute relating to the general  question  of        bonus.   That  general question is now disposed  of  on  the        findings which we have already given.  We are aware that  if        and  when  a future reference as to  an  industrial  dispute        relating to bonus is made by the appropriate Government  and        the  amended section falls for consideration, questions  (3)        and  (4) may fall for decision.  It would be time enough  to        decide those questions when they actually arise in  concrete        cases  and  we  consider  that it is  not  only  unwise  but        inexpedient  that  we should forestall questions  which  may        arise in future cases and decide        (1)  [1903] A.C.524, 529.                                    235        them  more or less in vacuo and in the absence of  necessary        materials  for the decision of those questions.   These  are        our  reasons for holding that questions (3) and  (4)  should        not now be decided.  It is necessary to state, however, that        any  observations  which the Tribunals below may  have  made        with regard to questions (3) and (4) would be in the  nature        of  obiter-  dicta and it would be open to both  parties  to        canvass  those  questions  if and when  they  arise  in  any        concrete case in future.  Therefore, we have not  considered        it  necessary  to state in detail  the  contentions  -raised        before us on behalf of the parties concerned with regard  to        questions (3) and (4).        A few words regarding Civil Appeal No. 62 of 1957 before  we        conclude.  Besides the question of bonus two other questions        were raised in this appeal: (1) whether the Labour Appellate        Tribunal  had jurisdiction to order cancellation and  refund        of  cash deposits and (2) whether the Tribunals  below  were        wrong  in  holding that the taking of  cash  deposits  etc.,        should  be restricted to workmen of three  categories  only.        When  it was pointed out that the cash deposits had  already        been refunded in accordance with the decision of the  Labour        Appellate Tribunal the learned Attorney-General who appeared        for the appellant in Civil Appeal No. 62 of 1957 (The Punjab        National   Bank,  Limited)  did  not  press  those   points.        Therefore,  in  Civil Appeal No. 62 of 1957  also  the  only        surviving question is the question of bonus on which we have        already given our decision.        Shri  Sadhan  Chandra  Gupta  appeared  on  behalf  of   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 23  

      respondents  in  Civil Appeal No. 62 of 1957  and  made  his        submissions on the question of bonus.  He has taken a  stand        on  s. 2 of the Banking Act and has contended that  even  if        bonus  is  remuneration which takes the form of a  share  in        profits,  s.  2 saves the power of industrial  tribunals  to        award  such bonus under the Industrial Disputes  Act,  1947,        and such award, if made, will impose an obligation on  banks        to  pay the bonus awarded and would not make them liable  to        penalty under s. 46 of the Banking Act.  We have dealt  with        this argument at an earlier stage and have pointed out  that        s. 2 is a saving provision with regard        236        to  any  other law for the time -being  in  force,  provided        there is no express provision to the contrary in the Banking        Act.   If, as we hold, unamended s. 10. of the  Banking  Act        expressly  prohibits the employment of any person by a  bank        whose remuneration takes the form of a share in the  profits        of  the company, then s. 2 of the Banking Act is of no  help        and cannot permit something which is expressly prohibited by        s. 10.        For the reasons given above, we allow these seven appeals to        the  extent already indicated, namely, (1) the reference  of        1952  is  not now pending for determining  the  question  of        bonus for the relevant years in respect of particular  banks        and (2) section 10 of the Banking Act prior to the amendment        of  1956  prohibits the grant of industrial  bonus  to  bank        employees  when such bonus is remuneration which  takes  the        form  of a share in the profits of the banking company.   In        the  circumstances  of these cases and in view of  the  long        drawn out nature of the dispute, we make no direction as  to        costs.        Appeals allowed in part.