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PETITIONER: THE GRAHAM TRADING CO. (INDIA) LTD.

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 07/05/1959

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

CITATION:  1959 AIR 1151            1960 SCR  (1) 107

ACT: Industrial  Dispute-Puja  Bonus-Customayy  and   traditional Payment of-Test.

HEADNOTE: The  appellant  had been paying puja bonus  to  its  workmen continuously  from 1940 to 1952 at the rate of  one  month’s wages.   From 1948 to 1952, the appellant whenever  it  paid this bonus, made it clear that it was ex gratia payment  and would  not  constitute any precedent in future  years.   The dispute  arose regarding the payment of bonus in 1953.   The workmen claimed that the sole object of bonus which had been granted to them upto that year was to meet puja expenses and that  the payment of this bonus had become customary  and  a term  of employment.  The appellant contended that  payments in  the past years had been entirely ex gratia and as  there was loss in 1953 no ex gratia payment could be made in  that year. Held, that the workmen were not entitled to puja bonus as an implied  term of employment for an implied  agreement  could not  be inferred when the appellant had made it  clear  that the payments from 1948 to 1952 were ex gratia; but they were entitled to puja bonus on the basis that it was a  customary and traditional payment.  In determining whether the payment was  customary and traditional the  following  circumstances have to be established : (i)  that the payment has been made over an unbroken  series of years ; (ii) that  it has been for a sufficiently long  period,  the period has to be longer than in the case of an implied  term of employment; (iii)     that  it has been paid even in years of  loss  and did not depend on   the earning of profits; and (iv) that the payment has been made at a uniform rate throughout. The  fact that the employer made the payment ex gratia  made no difference; nor did unilateral declarations of one  party inconsistent  with  the  course of  conduct  adopted  by  it matter.

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 161 of 1959. Appeal  by special leave from the judgment and  order  dated the  31st January 1956 of the Labour Appellate  Tribunal  at Calcutta in Appeal No. Cal. 301 108 of  1954,  arising out of the Award dated the  20th  October 1954, of the Second Industrial Tribunal, West Bengal. B.   Sen and S. N. Mukherjee, for the appellants. D.   N. Mukherjee, for the respondents. 1959.  May 7. The Judgment of the Court was delivered by WANCHOO  J.-This  is  an  appeal  by  special  leave  in  an industrial matter.  The appellant is the Graham Trading  Co. (India) Ltd. (hereinafter called the company).  There was  a dispute  between  the company and its workmen  about  bonus, which  was referred by the Government of West Bengal by  its order  of  December  17,  1953,  to  the  Second  Industrial Tribunal.  Though the order of reference did not specify the year for which the bonus was in dispute, it is common ground between the -parties that the dispute was for bonus for  the year  1953.   The case of the workmen, who  are  respondents before us, was that the company had been paying one  month’s bonus  invariably from 1940 to 1950.  In 1951,  one  month’s bonus  was paid in October and half a month’s further  bonus was  paid in December.  In 1952 one month’s bonus was  paid. The  demand that the workmen made in their letter of  August 27, 1953, was for three month’s bonus.  The company  replied that payments in past years had been entirely ex gratia  and as there was loss in 1953 it was not possible to make any ex gratia  payment  that year.  The workmen then  contended  in their  letter of September 21, 1953 that the sole object  of bonus  which  had, been granted upto that year was  to  meet puja expenses and that the payment of this bonus had  become customary and a term of employment.  The matter could not be settled between the parties and that is how the dispute  was referred for adjudication. The  company’s case was that payment of bonus had all  along been ex gratia depending upon profits except in a few years. But  in those years it was also made clear that the  payment was ex gratia and without creating any precedent for future. Therefore,  there was neither a term of employment  nor  any custom,                             109 which put any obligation on the company to pay any bonus  in a year of loss. The question was considered by the Industrial Tribunal  from three aspects.  Firstly, it considered whether any bonus was payable  for this year as profit bonus, on the basis of  the Full Bench formula evolved in The Mill-Owners’  Association, Bombay, v. The Rashtriya Mill Mazdoor Sangh, Bombay (1)  and it  came  to  the conclusion that  there  was  no  available surplus of profit to justify such bonus.  It then considered the remaining two aspects, namely, whether puja bonus  could be  awarded  -either  as  an  implied  term  of   employment according to the decision in Mahalakshmi Cotton Mills  Ltd., Calcutta  v. Mahalakshmi Cotton Mills Workers’ Union (2)  or on  the  basis  of custom.  It seems to have  mixed  up  the discussion   on  these  aspects  and  having  come  to   the conclusion that puja bonus could not be awarded in this case on  the basis of an implied term of employment it  proceeded to dismiss the claim on the basis of custom also. The  workmen then went up in appeal to the Labour  Appellate Tribunal,  which  allowed the appeal.  The decision  of  the Appellate  Tribunal has also mixed the two aspects  of  puja

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bonus,  namely,  whether it is based on an implied  term  of employment or on custom; but it came to the conclusion  that there  was  sufficient  evidence  to  establish  custom  and therefore ordered payment of one month’s basic wages as puja bonus.  It was also inclined to the view that the  company’s accounts showing loss were not reliable and there might even be  a case for profit bonus; but eventually it  granted  one month’s basic wages as customary puja bonus.  Thereupon  the company filed an application for special leave to appeal  to this  Court, which was allowed; and that is how  the  matter has come up before us. Puja  is  a  special festival of  particular  importance  in Bengal; and it has become usual with many firms there to pay their  employees  bonus  to  meet  special  puja   expenses. Disputes  have arisen with respect to this bonus which  were adjudicated upon by various tribunals.  As (1) 1950 L.L.J. 1247. (2) 1952 L. A. C. 370. 110 for back as 1949, in a dispute between The Bengal Chamber of Commerce,  Calcutta  and Its Employees (1),  the  Industrial Tribunal, which adjudicated upon the dispute, observed  that Durga  Puja  was a national festival in Bengal  and  it  was customary  to  make presents to near and dear  ones  and  to relatives at that time.  As it was difficult for poorly paid employees to make savings out of the monthly income for this purpose, it, therefore, had become traditional and customary in Bengal for employers to make a monetary grant at the time of  the pujas.  The Bengal Chamber of Commerce had not  been slow  in  appreciating  this and  had  been  granting  bonus equivalent  to  one month’s pay, and the tribunal  had  been assured  that  there  was no intention  to  discontinue  it. Later  the matter was considered in Mahalaxmi  Cotton  Mills case  (2),  where certain tests were laid down  which  would justify  the  inference that there was an  implied  term  of employment  for payment of bonus at the time of  the  annual Durga  Puja.   That case, however, was concerned  with  puja bonus  as an implied term of employment and not as a  matter of  tradition  or custom in Bengal.  It is,  however,  clear that  puja bonus which is usually paid in Bengal is  of  two kinds;  namely, (1) where it is paid as an implied  term  of employment  as explained in Mahalaxmi Cotton Mills case  (2) and  (2)  where, it is paid as a customary  and  traditional payment  as  stated  in  the  Industrial  Tribunal’s   award referred  to  above.   We have considered the  tests  to  be applied where it is a case of payment on an implied term  of employment in Messrs.  Ispahani Ltd. v. Ispahani  Employees’ Union  (3) and we need not repeat what we have  said  there. In  the present case it has been pointed out by the  company that  payments  which had been made in the past  years  from 1940 to 1952 could not be considered as based on an  implied term of employment in the circumstances of this cash.   This contention, in our opinion, is correct.  An implied term  of employment cannot be inferred in this case, for right from (1) Publication of Government of West Bengal, I Awards  made by the Tribunals for the quarter ending March 1949’, P. 116. (2)  1952 L.A.C. 370. (3)  [1960](1)1 S.C.R. 24. 111 1948 to 1952, the company whenever it paid this bonus,  made it  clear  that it was an ex gratia payment  and  would  not constitute  any precedent for future years.  In the face  of such notice year by year it would not be possible to imply a term of employment on the basis of an implied agreement, for agreement  postulates  a  meeting  of  minds  regarding  the

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subjectmatter of an agreement; and here one party was always making  it clear that the payment was ex gratia and that  it would  not  form a precedent for future years.   In  dealing with  the  question of an implied term of the  condition  of service,  it  would  be difficult to  ignore  the  statement expressly made by the employer while making the payment from year to year. The question, however, whether the payment in this case  was customary  and traditional, still remains to be  considered. In  dealing  with  puja bonus based on an  implied  term  of employment,  it was pointed out by us in  Messrs.   Ispahani Ltd.  v.  Ispahani Employees Union (1) that a  term  may  be implied,  even  though the payment may not have  been  at  a uniform rate throughout and the Industrial Tribunal would be justified in deciding what should be the quantum of  payment in  a  particular  year  taking  into  account  the  varying payments  made in previous years.  But when the question  of customary and traditional bonus arises for adjudication, the considerations  may be somewhat different.  In such a  case, the Tribunal will have to consider: (i) whether the  payment has  been over an unbroken series of years; (ii) whether  it has  been for a sufficiently long period, though the  length of  the  period might depend on the  circumstances  of  each case:  even so the period may normally have to be longer  to justify an inference of traditional and customary puja bonus than  may  be the case with puja bonus based on  an  implied term of employment; (iii) the circumstance that the  payment depended  upon  the  earning of profits  would  have  to  be excluded  and  therefore it must be shown that  payment  was made  in  years of loss.  In dealing with  the  question  of custom,  the fact that the payment was called ex  gratia  by the employer when it (1)  [1960(1)] S.C.R. 24. 112 was made, would, however, make no difference in this  regard because  the proof of custom depends upon the effect of  the relevant  factors  enumerated  by us; and it  would  not  be materially affected by unilateral declarations of one  party when the said declarations are inconsistent with the  course of  conduct  adopted by it; and (iv) the payment  must  have been  at a uniform rate throughout to justify  an  inference that the payment at such and such rate had become  customary and traditional in the particular concern.  It will be  seen that  these tests are in substance more stringent  than  the tests applied for proof of puja bonus as an implied term  of employment. Let  us  now see whether these tests are  satisfied  in  the present  case.   The practice in the present case  began  in 1940  and was unbroken upto 1950.  In between there  was  an adjudication  in 1948 to which the company was a party.   At that  time it was said on behalf of the company  before  the industrial tribunal that some bonus was being paid and  that there  was no intention to discontinue It  and  consequently the tribunal did not adjudicate upon the matter, which shows that  the company recognised the traditional  and  customary nature of the payment and it assured the tribunal that there was  no  intention  then to discontinue  the  payment.   The payment was continued from 1949 to 1951.  In 1952, there was some  dispute  and originally the company paid  one  month’s wages  as  advance  of pay and not as bonus.   Some  of  the workmen, however, accepted the payment while others did not, because  they were not satisfied with the amount being  paid as  advance of pay.  The chairman of the board of  directors of  the  company visited Calcutta in 1952 and  then  on  the representation of the workmen the advance was converted into

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one  month’s  bonus  and  even those  workmen  who  had  not accepted  the  advance were allowed to draw the  bonus.   It cannot  therefore  be said that there was any break  in  the payment of bonus from 1940 to 1952, for if the chairman  had not converted what was advance of pay into bonus in December 1952, the workmen might have raised the dispute even in that year and then 113 there  would  have been no break up to 1951.  So  there  has been  unbroken payment and the period has been  sufficiently long  to justify an inference of customary  and  traditional bonus.   It was pointed out that in four years  during  this period the payment was made in November and December and not about the time of the pujas; and, therefore, it could not be said  that  this was traditional and customary  puja  bonus. The delay in payment is not in our opinion material in  this case, for one of the directors of the company, who  appeared as  a witness, stated as to this one month’s bonus  that  it was paid by the company to help its staff during pujas. The  condition  that the payment should have  been  made  in years  of  loss also to exclude the hypothesis that  it  was paid  only  because  profits had been made,  has  also  been satisfied, for the evidence is that payments were made in at least two years of loss.  Lastly, the condition that payment should  have been at a uniform rate has also been  satisfied because one month’s basic wage is the quantum of bonus  from 1940  right up to 1952 without any change.  It is true  that in  December 1951 further bonus for half a month  was  paid; but that year was a year of profit in which cloth-bonus  for half  a month was specially paid.  Thus the rate so  far  as the  puja bonus is concerned has always remained uniform  at one month’s basic wage.  It is true that the workmen pitched their demand too high for three month’s bonus in 1953.   But that doe,-, not in our opinion detract from the inference to be  drawn  from  the facts proved in  this  case.   All  the conditions, therefore, of a customary and traditional  bonus are  satisfied  in  this  case and there  is  no  reason  to interfere  with the order of the Appellate Tribunal,  though we  should like to make it clear that we do not  agree  with the  observations  of the Appellate Tribunal  in  connection with  the  profit bonus aspect of the  matter.   The  appeal therefore  fails and is hereby dismissed.  As this  question has  arisen for the first time in this Court as  a  distinct issue and was not clearly considered before by the Appellate Tribunal, we order the parties to bear their own costs. Appeal dismissed, 114