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PETITIONER: WORKMEN OF M/S BATA SHOE CO., (P) LTD.

       Vs.

RESPONDENT: M/S BATA SHOE CO. (P) LTD.

DATE OF JUDGMENT01/05/1972

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. DUA, I.D.

CITATION:  1972 AIR 1436            1973 SCR  (1) 450  1972 SCC  (3) 627

ACT: Payment of Bonus Act 1965 -payment of profit bonus  Workers having  agreed  in writing to accept bonus in terms  of  the agreements Whether under s. 32(vii) (a) such agreements  bar further bonus.

HEADNOTE: A  dispute  arose  between the respondent  company  and  the appellants workmen as regards payment of profit bonus  under the  Payment  of  Bonus  Act 1965.   The  company,  and  the appellants, represented by its Union had been entering  into various  agreements  from time to time, the last  being  the agreement on August 30, 1962 (,Ex.  A-5).  As per Ex.   A-5, the  respondent  paid bonus for the year 1964 at  the  rates mentioned therein.  The appellants demanded that they should be paid the profit bonus as per the Act in addition to  what has  been  paid under the agreement, Ex.  A-5.  The  Company pleaded s. 32(vii) (a) of the Bonus Act as a bar to  further bonus.   On a reference to the Industrial Tribunal,  it  was held that in view of the general bonus paid under  agreement Ex.  A-5, it was an annual bonus, though paid quarterly, and it  was linked with production or productivity and  that  it was paid in lieu of bonus based on profits.  Therefore,  the workmen  are not entitled to claim bonus for the  year  1964 under  the Act.  On appeal to this Court, it  was  contended that  payments.  under  the agreement, Ex.   A-5,  was  made quarterly  and they do not have that character of an  annual bonus.   There  is no material or record to  show  that  the company  paid the amount in lieu of bonus based on  profits. The  amount paid under the agreement was only  an  ex-gratia payment and not a profit bonus under the Act. The  respondent, however, contended that in order to  decide the character of the general bonus paid under the  agreement of 1962, previous agreement must be referred to, which would clearly  show  that what was being paid by the  company  was production  bonus  or as an incentive wage and not  an  ex- gratia payment. Dismissing the appeal, HELD  :  The  general_  bonus paid under  Art.   VI  or  the agreement dated August, 30, 1962, Ex.  A-5, was a payment of annual  bonus based on profits.  Although Article VI of  Ex. A-5 does not throw much light as to the nature and character

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of  the general bonus payable under it, a reference back  to previous  settlements  and discussions between  the  parties will-  show  that the pattern of bonus paid to  the  workers weresometimes  called production bonus, later on called  ex- gratia  payment.,  but from 1951 called  as  general  bonus, which was paid quarterly, at the request of the workers,  at a  particular percentage based on salary excluding  dearness allowance, having this background in mind, it is clear  that what was being paid under Art.  VI of Ex.  A-5 was a payment linked  with  production  or  productivity.   The  principal emphasis was that the amount, was being paid as an incentive to production and therefore, it was paid as production bonus as  a wage incentive.  Further, it was an annual bonus  paid from  year to year not only during the period  of  agreement but  also for the succeeding year till the  required  notice was given under the agreement.  Even then, the agreement was to continue to have 451 force  notwithstanding  the notice till  a  fresh  agreement entered  into.  Therefore, it is clear that the  payment  of general   bonus  paid  quarterly  was  "annual   bonus"   as contemplated by s. 32(vii)(a) of the Act. [464 A-465 G] Smith  v. Smith, (1923) P.D. 191, and Moss’ Empires Ltd.  v. Inland   Revenue  Commissioners,  [1937]  3  All  E.R.   381 followed. Under  the  circumstances’  workers  could  claim  not   any additional bonus under the Art for the period for which  the agreement  was in operation and s. 32 (vii) (a) of  the  Act was a bar to their claim. [465 C] M/s  Titaghur Paper Mills Co. Its Workmen, [1959]  Supp.  2, S.C.R.  1012; The New Manek Chowk Spinning and  Weaving  Co. Ltd.    Ahmedabad   and  others  v.   The   Textile   Labour Association,  Ahmedabad,  [1961]  3  S.C.R.  I  and   Sanghi Jeevaraj  Chewar  Chand  and  others  v.  Secretary,  Madras Chillies, Grains Kirana Merchants Workers Union and another, [1969] 1 S.C.R. 366, referred to,

JUDGMENT: CIVIL APPELLATE JURISDICTION: C.A. No. 1040 of 1968. Appeal  by special leave from the Award dated September  16, 1967  of the Third Industrial Tribunal, West Bengal in  Case No. VIII-235/66. Debabrata  Mookherjee,  Janardan Sharma and Anil  Das  Chow- dhury, for the appellants. C. K. Daphtary and M. C. Bhandare, B. P. Maheshwari and Leila Sheth, for the respondent. The Judgment of the Court was delivered by Vaidialingam J. In this ’appeal, by special leave, the short question  that  arises  for  consideration  is  whether  the appellants  are precluded by s. 32 (vii) (a) of the  Payment of  Bonus Act, 1965 (hereinafter to be referred as the  Act) from  claiming bonus under the Act in view of the  agreement Ex.  A5 dated August 30, 1962. The  respondent Company is a fairly prosperous  concern  and one of the biggest of its kind in Asia.  It has factories at Batanagar  in West Bengal, Faridabad in the present  Haryana State,  Digha  and Mokamehghat in Bihar  and  Administrative Offices  in  Calcutta.   It  has  Central  Repair  shops  in Calcutta and other places and a Purchasing Depot in  Kerala. It has about 900 shops for retail sale scattered  throughout the country besides the wholesale agents.  Its branches have a  wide market both in this country as well as  abroad.   It

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employs  a  very  large number of workmen  in  its  factory, Administrative Office and Central Repair Shops.  The Company and  the  appellants, represented by its  Unions  have  been entering into various agreements from time to time, the last of  which was on August 30, 1962, Ex.  A.5. As per Ex.   A.5 the  respondent  paid bonus for the year 1964 at  the  rates mentioned therein.  The appellants demanded that they should be paid the profit bonus as per the Act in addition to  what has been paid as 452 per Ex.  A.5 The Company declined to accede to the demand of the workmen on the ground that the general bonus paid  under Ex. A.5 was an amount paid as production bonus or  incentive wages.  The Company also pleaded s. 32 (vii) (a) as a bar to the  workmen making a claim for payment of bonus  under  the Act.  During the conciliation proceedings the Union and  the Company agreed to have the dispute referred for adjudication to   the  Industrial  Tribunal.   Accordingly,   the   State Government   on  June  25,  1966,  referred  to  the   Third Industrial  Tribunal,  West  Bengal,  for  adjudication  the following dispute : "Whether  the employees of the Company represented  by  Bata Mazdoor Union are entitled to Bonus for the year, 1964 under the Payment of Bonus Act, 1965 in addition to the Bonus paid to them and whether in view of the Agreement dated the  30th August, 1962, between the Union and the Company for  payment of  Bonus, the Payment of Bonus Act, 1965 is  applicable  to such employees." Before the Tribunal the appellants’ plea was that the amount paid  under the agreement Ex.  A. 5 is an ad hoc or  an  ex- gratia  payment made out of charity and as a  supplement  to the wages and that it was not a bonus linked with production or  productivity.  It was not an annual payment, nor was  it paid  in  lieu  of  bonus based  on  profits.   The  workmen accepted the position that the general bonus paid under  the agreement  was neither customary nor a profit bonus;  nor  a bonus as an implied term of contract.  On all these grounds the workmen pleaded that s. 32 (vii) (a) is no bar to  their claim for bonus under the Act. The  Company  on the other hand, after a  reference  to  the various prior agreements, under which the amounts have  been paid  as bonus, though under different names,  pleaded  that the  general bonus paid under the agreement Ex.  A5  was  an amount  paid  as production bonus or incentive  wages.   The Company  placed considerable reliance on the minutes of  the discussions  that  took  place between  the  Union  and  the Company  whenever  demands were raised  and  the  agreements arrived  at  between  the  parties,  which  were  later   on incorporated as formal settlements from time to time.  These proceedings were relied on by the Company for the purpose of showing  that the demands for payment of bonus were as  pro- duction  bonus and that what was ultimately paid  under  the various  agreements including the one in  question,  namely, Ex.   A.5 were all understood by all parties  as  production bonus  or  incentive  wages.  As  the  necessary  conditions required  under s. 32 (vii) (a) were present in  this  case, according  to the Company, the claim for profit bonus  under the Act is not sustainable.                             453 The   Industrial   Tribunal,  after   a   fairly   elaborate consideration  of the various agreements as well the  record of  the  proceedings leading upto those agreements  and  the other  materials  on record has held in its award  that  the general  bonus that was being paid by the Company  including the payment of bonus under the agreement Ex.  A.5 was not  a

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profit  sharing  bonus.   The Tribunal has  found  that  the general bonus paid under the agreement of 1962 was an annual bonus linked with production or productivity and that it was paid  in  lieu  of bonus based on profits.   The  mere  cir- cumstance  that  the payment of bonus  was  made  quarterly, according  to the Tribunal, does not take it away  from  the nature  of an annual payment.  The Tribunal ultimately  held that  in view of the agreement Ex.  A.5 the workmen are  not entitled to claim bonus for the year 1964 under the Act. On behalf of the appellants Mr. D. Mookerjee, learned  coun- sel,  very strenuously criticised the reference made by  the Tribunal  to  the previous agreements for  interpreting  the nature of the payment under Ex.  A.5. It was contended  that the  Tribunal having held that the agreement of 1962  was  a self-contained agreement, committed a very serious error  in law  in interpreting the term "General Bonus"  occurring  in the said agreement by reference to the previous  agreements. According  to  Mr.  Mookerjee,  the  Tribunal  should   have considered the nature of the payment by a reference only  to the provisions contained in the agreement of 1962.  Read  in that  manner, it was pointed out, the inevitable  conclusion should be that the general bonus paid under the agreement of 1962  was  not  an  annual bonus, nor  was  it  linked  with production or productivity and it has not been paid in  lieu of bonus based on profits.  The general bonus paid does  not satisfy  the test of production bonus as laid down  by  this Court.  The payments admittedly being made quarterly do  not have the character of an annual bonus.  There is no material on record to show that the Company paid the amount under the agreement in lieu of bonus based on profits. the  contention taken  before  the Tribunal by the workmen that  the  amount paid  under the agreement was only an ex-gratia  payment  to supplement the wage bill of the workmen without any relation to production or productivity was also pressed before us  by the counsel. On  the other hand, Mr. C. K. Daphtary, learned counsel  for the  respondent  Company,  pointed  out  that  in  order  to appreciate  and decide about the character of  the  general, bonus  paid  under the agreement of 1962, it  was  not  only necessary but also obligatory on the part of the Tribunal to refer  to the previous agreements.  The counsel pointed  out that  the  various  demands made from time to  time  by  the workmen  as well as the minutes of the discussion that  took place between the parties which ultimately resulted in 454 the various agreements extending over a fairly long  period, win  ,clearly show that what was being paid by  the  Company was  production bonus or as an incentive wage.  As the  same payment was being continued under the agreement of 1962, the Tribunal  was  justified in holding that the  general  bonus that  was  being paid by the Company over a long  number  of years  was  by way of production bonus or  as  an  incentive wage.   Mr.  Daphtary  also  referred  us  to  the   various provisions contained in the several agreements regarding the duration of the agreements and also to their having  binding effect  till they were terminated by notice given in  accor- dance with the terms of the agreement.  All this,  according to the counsel, will clearly show that the intention of  the parties  was that ,the agreements under which  the  payments were  made  were to be throughout the year and  also  to  be continued  from  year  to year.   The  material  on  record, according  to the counsel, will also show that the  payments were made quarterly at the express desire and request of the workmen,  but as the payments extended throughout  the  year and will also continue year to year, they are in the  nature

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,of annual payment of bonus. Before  we consider the various contentions of  the  learned ,counsel  on  both sides, it is desirable to  refer  to  the material provisions of the Act.  All parties are agreed that the  additional claim for bonus for the year 1964 was  under the  provisions  of  the Act.   Section  2(21)  defines  the expression  "Salary or wage".  This definition  among  other things  includes  dearness allowance also.  Section  8  lays down the conditions for eligibility for bonus.  Sections 1 0 and  11 deal with the payment of minimum and  maximum  bonus respectively  in the circumstances mentioned therein.   Sec- tion  17  enables an employer to adjust the amount  paid  as pooja or customary bonus or interim bonus against the  final bonus payable under the Act.  Section 32 deals with  various classes  of employees to whom the Act does not  apply.   The relevant pro-vision with which were are concerned is section 32 (vii) which is as follows : "Section 32.  Nothing in this Act shall apply to (a)  who  have  entered before the 29th May, 1965  into  any agreement or settlement with their employers for payment  of an  annual bonus linked with production or  productivity  in lieu of bonus based on profits; or (b)  who have entered or may enter after that date into  any agreement or settlement with their employers for payment  of such  annual bonus in lieu of the bonus payable  under  this Act, 455 for the period for which such agreement or settlement is  in operation;" We  are  particularly concerned with sub-clause (a)  of  cl. (vii)  as the appellants claim is resisted on the  basis  of the agreement dated August 30, 1962.  In order to attract s. 32(vii) (a) the Company will have to establish : (1)  That there has been an agreement or settlement  entered into  between  the workmen and the Company  before  May  29, 1965; (2)  The said agreement or settlement was one for payment of annual bonus; (3)  The said payment of bonus was linked with production or productivity; and (4)  The said payment was in lieu of bonus based on profits. In this case there is no controversy that there has been  an agreement  Ex.   A.5  entered into between  the  parties  on August  30, 1962, which is anterior to May 29, 1965.   There is  also  no  controversy that the amount  paid  under  this agreement  is characterised as general bonus.  The  question then arises whether the said payment as general bonus was an annual bonus linked with production or productivity and paid in lieu of bonus based on profits. The  nature of production bonus has been discussed  by  this Court   in  M/s  Titaghur  Paper  Mills  Co.  Ltd.  v.   Its Workmen(1).   It has been stated that payment of  production bonus is by way of’ an incentive to higher production and is in  the  nature  of an incentive wage.   The  extra  payment depends  not on extra profit’ but on production.  From  this decision  it  is clear that the principals  element  in  the payment  of  extra  amount is to  provide  an  incentive  to production. In  The  New  Maneck Chowk Spinning  and  Weaving  Co.  Ltd. Ahmedabad  and  others v. The  Textile  Labour  Association, Ahmedabad(2),  it has been stated that there are four  types of bonus which have been evolved under the Industrial Law as laid  down  by this Court, namely, (1) Production  bonus  or Incentive wage, (2) Bonus  as  an implied term  of  contract between  the parties (3) Customary bonus in connection  with

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some festival, and (4) Profit Bonus which was evolved by the Labour Appellate Tribunal and approved by this Court.  Under the  Act  there is no controversy, what is  payable  is  the profit  bonus.  In the case before us, from the Award it  is seen that the Union conceded that the amount paid as general bonus under the agreement was neither customary (1) [1959] Supp. 2 S.C.R. 1012. (2) [1961] 3 S.C.R. 1. 456 nor profit bonus; nor bonus as an implied term of  contract. In  the nature of things the Union has not raised  the  plea that the amount paid under the agreement is a profit  bonus. Equally,  the Company could not also take up such a plea  as their attempt was to show that it is a payment as production bonus or incentive wages. In  Sanghi  Jeevaraj Ghewar Chand and others  v.  Secretary, Madras Chillies, Grains Kirana Merchants Workers’ Union  and another  (1), it has been held that where the bar of  s.  32 (vii)  (a) of the Act operates, the employees in such  cases so  long  as  the agreement or settlement  is  in  operation cannot  claim  bonus on the basis of Full Bench  Formula  or under the Act. Therefore,  it becomes essential to find out the  nature  of the  payment  made  under Ex.  A.5.  That  is  an  agreement entered  into  between  the  appellant  and  the  respondent Company on August 30, 1962.  The purpose of the agreement is stated to be to promote and improve industrial and  economic relationship  between the Company and its workmen  and  to establish and maintain satisfactory working conditions.   In Article  IV, among various other .,matters, the  Union,  has acknowledged that it is the exclusive right and function  of the Company to maintain among other matters the  efficiency. In Article V dealing with lock out and strikes, the Company, on  the one hand, has agreed not to declare any lock out  so long  as  the  workmen  do not  commit  any  breach  of  the agreement.   The Union, on the other hand, has  also  agreed while retaining its right to go on strike, not to permit its members individually or collectively to curtail or  restrict production  and certain other matters.  Article  VI  dealing with general bonus is as follows "Article VI-General Bonus: "Article VI--General Bonus: The  Company declares and makes a payment of  General  Bonus one  month after the end of each quarter at the rate of  20% of  the total salary  and/or wages paid to each workman  and               employee   during  the   quarter   immediately               preceding (such salary or wages are  exclusive               of  Dearness  Allowance or any  other  special                             allowances  or rewards granted to  him   during               such  period).  Such Bonus will be payable  to               those  who have completed six months  approved               service ending on the last day of the quarter;               and to those who have completed less than  six               months approved service on the last day of the               quarter, the Bonus will be payable at the rate               of  10%  of  their total salary  or  wages  as               aforesaid.   The Bonus will be available  only               to those who are in the employ of the (1)[1969] 1 S.C.R. 366. 457 Company  on the last date of the quarter and who have  given regular  and approved service during the quarter,  to  which the payment of Bonus is available." Under  Article VIII it is provided that the agreement is  to be  in  force  until December 31, 1965  and  that  it  shall

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continue  from year to year thereafter unless  either  party gives  notice  in  writing of its intention  to  enter  into negotiations for the purpose of amendin- the agreement.  The said  Article further provides for the period of  notice  as well  as  the  starting of negotiations  and  the  agreement continuing to be in force till a new settlement or agreement is arrived at. A mere reading of Article VI relating to general bonus  will not  by  itself throw much light on the  character  of  such payment.  But, it is clear that the payment is to be made at the end of each quarter at the percentage mentioned  therein of the total salary or wages which does not include Dearness Allowance.  The said Article also provides for the period of service necessary for qualifying to get the higher or  lower percentage of bonus as the case may be. The emphasis is also laid  on  the workmen giving regular  and  approved  service during  the  quarter  to  which  the  payment  of  bonus  is available. Normally,  it  is the agreement Ex.  A.5, which  has  to  be looked  into for the purpose of ascertaining the rights  and liabilities  of  the employer and employees.  That  is,  the agreement  will  have to be looked into for the  purpose  of ascertaining  the nature and character of the general  bonus payable  under Art.  VI, provided that clause gives  a  full and  clear  indication  regarding  the  character  of   such payment.   But, a mere reading of Article VI does  not  give any indication regarding the character of such payment.  The other clauses in the agreement also do not throw much  light on this aspect.  But it is not as if that agreement Ex.  A.5 has  been  entered into between the parties  for  the  first time.   The  expression "General Bonus" occurs, as  we  will show presently, in certain previous agreements.  Under those circumstances,   in  our  opinion,  in  order  to   properly appreciate the character and nature of the payment that  was being  made originally and that was continued under  Article VI  of  the agreement of 1962, it is not only  relevant  but also  necessary  to  consider the  various  settlements  and agreements  that  took place between the  parties  on  prior occasions. We  are  not inclined to agree with the  contention  of  Mr. Mookerjee  that  the Tribunal has committed a  very  serious error  in law when it tried to interpret the nature  of  the payment   under  Ex.  A.5  by  reference  to  the   previous settlements  and  discussions that took  place  between  the parties.    The   Tribunal  was   perfectly   justified   in considering those agreements as they, in our opinion, 458 give  a  complete  and clear picture of the  nature  of  the claims made by the Union, the stand taken by the Company and the  nature of the agreement ultimately arrived  at  between the parties regarding the payment of the amount in question. Hence we will also refer to the prior agreements as well  as the  events  leading upto those  agreements.   The  earliest agreement is Ex. A. dated May 16, 1946.  Under Article V the Company  agreed to pay Victory bonus of six weeks  pay,  for the  employees  mentioned therein.  Under  Article  VI,  the Company  agreed to pay bonus on production or special  bonus equivalent  to 10% of pay.  It is significant to  note  that the   payment   under  Art.   VI  of   this   agreement   is characterised  as a production or special bonus at  a  fixed percentage on the pay of the employees. On March 6, 1947, the Union addressed a letter Ex.  B to the Company requiring "Production Bonus" to be increased in  the manner  stated  therein.   In  fact  the  Union  wanted   an increased percentage depending upon the salary drawn by  the

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employees.  It is to be noted that the Union also understood the  payment made under Ex.  A. as a production  bonus;  and under Ex.  B it is the production bonus that they wanted  to be   increased.   In  view  of  this  demand,   there   were discussions between the parties and ultimately they  entered into  an agreement Ex.  C on July 12, 1947.  This  agreement states  that 10% production bonus given under Ex.  A is  not to be increased.  But an extra amount of 5% or 2% was  given as an Attendance Bonus. On  November 22, 1948, there was another agreement Ex.   A.1 entered into between the parties.  Article VI related to ex- gratia payment of bonus, which is as follows: ’Article VI-Ex-Gratia Payment of bonus The Company declares and makes an ex-gratia payment of Bonus one  month after the end of each quarter at the rate of 1  0 per  cent  of  the total salary and/or wages  paid  to  each employee  during  the quarter  immediately  preceding  (such salary  or wages are exclusive of dearness allowance or  any other  special  allowances or attendance  bonus  or  rewards granted  to him during the said period); such bonus will  be payable  only  to  those employees who  have  completed  six months’  approved  service  ending on the last  day  of  the quarter; and to those employees who have completed less than six months’ approved service on the last day of the  quarter the  exgratia  Bonus will be payable at the rate of 5  %  of their  total  salary or wages as aforesaid.   The  ex-gratia Bonus, will be available only to those employees who are  in the employ of the Company on the date fixed for payment                             459 and  who        have  given  regular  and  approved  service               during  the  quarter to, Which  the  ex-gratia               payments of Bonus is available.’ It  will be noted that while in the agreements Exs.A and  C, what was characterised as production bonus, has been changed in  Ex.  A. 1 as ex-gratia payment of bonus.   Article  VIII provided for the. agreement being in force till December 31, 1950 and to continue year to year unless either party  gives notice   in   writing  of  its  intention  to   enter   into negotiations for the purpose of amending the agreement. On May, 15, 1951, the Union made a representation for  modi- fying the agreement Ex.  A. 1. In respect of this demand  on October 3, 1951, agreed minutes of discussion and  agreement between the parties were recorded in Ex.  D. From  Ex.   D  it is seen that the Union  had  accepted  the position that the approximate living wage has been  attaired in this Company and therefore the bonus has to, be, paid  as an  incentive to greater efficiency, in production as.  well as     towards     labour’s     contribution     to      the prosperity  of  the  Company.  In view of  this  the  Union, represented that the, bonus that is being paid should not be regarded  as  ex-gratia  payment.   Hence  the  Company  was requested  to  delete  the  expression  "ex-gratia"  and  to substitute, the word "general".  The Union further suggested that  as the payment of bonus on the basis of earned  salary is  a  sufficient incentive for attendance,  the  attendance bonus, which was being paid at a flat rate discontinued  and that  a  general bonus is to be paid at a flat rate  of  15% every quarter to all the employees.  This representation was accepted  by,  the  Company and Ex.  D. shows  that  it  was agreed between the parties that the attendance bonus was  to be  discontinued  and that the term "ex-gratia"  was  to  be substituted  by the word "general".  It was also greed  that the   rate  should  be  increased  to  15%  and  7   1/2   % respectively.   The suggestion of the Union for  payment  of the amount every quarter was also agreed to by the  parties.

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It  was  also  agreed that  the  arrangements  entered  into between the parties are to continue till December 31, 1953. From Ex.  D. it is clear that the Union itself has  required the  payment  of  bonus to be made "   as  an  incentive  to greater  efficiency  in production "and the  workmen  wanted the   expression  "ex-gratia"  to  be  substituted  by   the word"general".  The Union accepted that approximiate  living wage  is  being  earned by the employees  of  this  Company. Further  the  Union wanted teh amount to be paid at  a  flat fixed rate every quarter.  It is also to be noted from Ex.D. that the changes agreed to between the parties were to  take effect from the first quarter of 1952.  On the basis of  the arrangement  recorded in Ex.  D. the parties entered into  a formal  agreement  Ex. A.2 on November 22,  1951.   This  is called Collective Agree L1286SupCI/72 460 ment  as  finally amended by the settlement  of  October  3, 1951,  evidenced  by  Ex.  D. Article  I  dealing  with  the purpose  of the agreement states that it was with a view  to promote  and  improve industrial and  economic  relationship between  the Company and its employees and to establish  and maintain   satisfactory  working  conditions.   Article   VI dealing with the general bonus is as follows : " Article VI--General Bonus The  Company declares and makes a payment of  General  Bonus one  month after the end of each quarter at the rate  of  15 per  cent  of  the total salary and/or wages  paid  to  each employee  during  the quarter  immediately  preceding  (such salary  or wages are exclusive of Dearness Allowance or  any other  special  allowance or rewards granted to  him  during such  period);  such  bonus will be payable  only  to  those employees  who have completed six months’  approved  service ending  on  the  last  day of  the  quarter;  and  to  those employees who have completed less than six months’  approved service  on  the last day of the quarter the Bonus  will  be payable at the rate of 7 1/2% of their total salary or wages as  aforesaid.   The Bonus will be available only  to  those employees  who are in the employ of the Company on the  last date of the quarter and who have given regular and  approved service during the quarter to Which the payment of Bonus  is available." It will be noted that this article is in substitution of the original Article VI in the 1948 agreement Ex.  A.1. What was characterised as ex-gratia payment of bonus in Ex.  A.1  was designated as general bonus in Ex.A.2. It must be noted that it  was  for  the first time that  the  expression  "general bonus"  has  found  a place in  the  agreement  between  the parties.  This change was effected due to the representation made  by  the  Union and accepted by  both  the  parties  as recorded in the minutes Ex.D. The rate has been increased to 15%  and 7 1/2% respectively depending upon the  service  of the employee.  This rate is on the basic wages; and dearness allowance  has  been excluded for purposes  of  calculation. Attendance  bonus was abolished and the rate in  Article  VI shows that it has combined the old production bonus as  well as  the  attendance bonus.  The payment is also to  be  made every  quarter  as  required by  the  Union.   Article  VIII provided that the agreement shall be in force upto  December 31,  1953 and was to continue from year to  year  thereafter unless either party gives notice in writing of its intention to  enter into negotiations for the purpose of amending  the agreement. 461 On  December  28, 1953 the Union made a  representation  for

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effecting  certain modification in the agreement  Ex.   A.2. This was followed by the proposals contained in Ex.  B. 3 on March  II, 1954.  Paragraph 3 of Ex.  B.3 relates to  bonus. After referring to the existing payment of general bonus  at the  rate mentioned in Ex. A.2, the Union made a request  to the  Company  to  revise  the rate  of  bonus  by  including dearness  allowance  also  in  the  wages  or  salaries  for purposes  of  calculation of bonus, the  reason  being  "the necessity of giving incentive to the employees and the  rate at  which  bonus  is  paid  to  employees  of  ’many   other comparable  concerns." There was also a demand for pooja  or festival bonus.  Ultimately, the demand with regard to bonus was  that : (a) the general bonus paid quarterly at the  end of  each quarter of the year should be increased to 20%  and 10% depending upon the length of service of the employee and the   payment  at  the  said  percentage  should  be  on   a calculation  of both the basic wages and dearness  allowance paid to an employee during the quarter; and (2) the  workmen should  be  paid  pooja bonus equal to  three  months  wages including dearness allowance besides the general bonus. There was a supplementary claim made on behalf of the  Union on  March  15, 1954 under Ex.  B.4, that the payment  to  be made  under Ex.  B.3, should have retrospective effect  from January  1, 1954.  Three points emerge from this  demand  of the  Union : (1) Increase in the rate of general  bonus  and percentage  to  be worked out on  wages  including  dearness allowance;  (2)  A claim for payment of  pooja  or  festival bonus;  and  (3) The payments of both (1) and  (2)  to  take effect  from January 1, 1954.  But the significant point  to be noted is that in Ex.  B. 3 the reason given by the  Union itself  for claiming general bonus at an increased rate  and for  working out the percentage of wages including  dearness allowance  was  "the necessity for giving incentive  to  the employe---.  .  .  .  " These  demands  of  the  Union  were discussed  and  agreed minutes of discussion  and  agreement were  recorded in Ex.  D. 1 dated February 18, 1955.  It  is seen  that  there were as many as 45  meetings  between  the representatives of the Union and the Company beginning  from April  9, 1954.  Ex.  D.1 shows that the demands in  letters dated  December 28, 1953, March 11, 1954 and March 15,  1954 were discussed thread bare between the parties.  The minutes show  that the Company was not willing to accede in full  to the  increased rates claimed by the Union regarding  general bonus:  nor  was it inclined to take into  account  dearness allowance for the purpose of calculation of bonus.  But  the Company was prepared to show some consideration by merging a part  of the dearness allowance in the basic wages  as  that will  result in a slightly higher amount being  received  as general  bonus  by  the workmen.  The  claim  for  pooja  or festival  bonus  was  not accepted  by  the  Company.   Both parties ultimately agreed that the gene- 462 ral  bonus will be paid at 17 1/2% instead of  the  original 15%  as  per  Ex.  A.2. The minutes further  show  that  all demands  made  by  the Union have  be-en  fully  settled  by increasing  the percentage of general bonus.  The  tentative agreement  recorded  in  Ex.   D.1  was  the  subject  of  a collective agreement between the parties under Ex. A.3 dated February  18,  1955.  Article VI deals with  general  bonus. Except for the difference in the rate of 17 1/2 % and 8.7  5 %  on  the, basic wages excluding  dearness  allowance,  the provision  regarding  payment of general  bonus  under  this Article was similar to those contained in Article VI of  Ex. A.2 of 195 1. Article Vill provided that the agreement is to be, in  force

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till  December  3 1, 1957 and that it was to  continue  from year  to  year  thereafter unless either  party  has,  given notice in the manner provided therein. On December 24, 1957 the Union sent a letter Ex.  B.5 to the Company  requiring the general bonus. to be paid at 50%  and 25%  respectively in place of the present rate of 17  1/2  % and  8.75%.  The demand was also to calculate this  rate  on salaries  including  the  dearness  allowance.   A   further request  was made that half of the bonus  as per the  demand be  paid "in four quarters in a year as at present  and  the remaining half at the time of pooja every year".  This again led to the parties discussing the demands and the minutes of discussion  and  conclusions arrived at, by the  parties  by agreement  are recorded in Ex.  D.2 dated October  6,  1958. The  minutes  disclose that the demands of  the  Union  were carefully  considered by the Company.  The Chairman  of  the Company  drew  the  attention of the, Union  to  the  agreed minutes of settlement Ex. D and pointed out "that bonus  was being  paid  as  an  incentive  to  greater  efficiency  in. ’production........  and  suggested that "bonus  payment  be linked with the generally accepted formula and be no  longer paid on percentage basis.  But the Union did riot accept the suggestion  of the Chairman and stated that "as a matter  of security they would like the continuation of the same to  be paid on a fixed percentage basis." After further discussion, the  Chairman  agreed  to a token increase in  the  rate  of bonus.   It  was agreed between both the  parties  that  the payment of general bonus will be increased from 171% to  18- 21%   on  the  wages  excluding  dearness  allowance.    The conclusions so arrived at were incorporated in the agreement Ex.   A.4  on October 6, 1948.  This again is  styled  as  a collective agreement.  Article VI relating to general  bonus is substantially the same as Art.  VI in Ex.  A.5  excepting that  the  rate  was 18 1/2% and 9.25%  depending  upon  the service of the workman.  The percentage was to be calculated only  on the total salary excluding dearness  allowance  and the  general  bonus  was  to be paid at  the  end  of  every quarter.  Article VIII provides that the claim was to be  in force- till December 31, 463 1965 and that it was to continue from year to year unless  a notice  was  given by either party in- the  manner  provided therein. This takes us to the agreement under consideration Ex.   A.5 dated August 30, 1962. This is the seventh agreement in the series.   We  have  in  the earlier  part  of  the  judgment referred  to  Articles VI and VIII.  Article VI  deals  with general  bonus  and  it  was  to be  paid  at  20%  and  10% respectively   on   the  basic  wages   excluding   dearness allowance.   It was to be paid at the end of  each  quarter. It  will  be seen that the rates ate  slightly  higher  than those  provided in the previous agreement Ex.  A.4 of  1958. We  have  very exhaustively dealt with the  various  demands made  by the workmen, the minutes recording  the  discussion that  took place between the patties regarding the  demands, the  conclusions  arrived at therein as well  as  the  final agreements  entered  into  on different  dates  between  the parties, as they furnish the background, so to say, for  the agreement under consideration Ex. A.5. It will be seen  that originally  in  1946 the payment was made as  production  or special  bonus.   Specific demand was made by the  Union  on March  6, 1947 to increase "production bonus".  The  Company did  not agree to this request.  On the other hand, Ex.  C., the agreement, clearly shows that there would be no increase in production bonus.  But an additional amount was given  as

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attendance bonus.  In 1948 what was originally characterised as  production  bonus  was  termed  "ex-gratia"  payment  of bonus.  The Union specifically desired in 1951 to substitute "exgratia   bonus"  by  "general  bonus"  and   to   abolish attendance bonus.  The demand also was for general bonus  to be  paid at a flat rate every quarter.  For the  first  time the expression "general bonus" occurs in the demand made  by the  Union  on  May 15, 1951 and in the  agreed  minutes  of October  3,  1951.  The same was incorporated in  the  final agreement  of November 22, 1951.  The Union   made a  demand on March 11, 1954 for increase in the rate of general  bonus so  as to provide an incentive to the employees.   This  was accepted and embodied final in the agreement dated  February 18, 1955.  In Ex.  B.5, the Union made a specific demand for further  increase  of the rate of general bonus  and  wanted half  the amount to be paid quarterly as at present and  the balance  at the time of pooja.  Though, the minutes  of  the discussion  in  respect  of  this  demand  shows  that   the Chairman.  of the Company wanted to alter what was given  as incentive  to  greater efficiency in production  to  one  on profit  basis,  the  Union  preferred  the  payment  to   be continued  as  was being done on a fixed  percentage  basis. The pattern of bonus paid sometimes called production bonus, later  on called ex-gratia payment, but from 1951 called  as general  bonus,  was being paid quarterly at  a  ’Particular percentage base on the salary excluding dearness  allowance. Having  this background in mind, it is clear that  what  was being paid under Art.VI 464 of  Ex.   A.5  was  a  payment  linked  with  production  or productivity.  The principal emphasis is that the amount  is being  paid as an ,incentive to production and therefore  it is paid as production bonus or as a wage incentive.  That it is   an  incentive  payment  in  order  to  secure   greater efficiency  in  production is clear from Exs.  D,  B.3,  and D.2.  We  have  already referred to the  contents  of  these exhibits  in  great detail.  Even the workmen  in  Ex.   B.3 required  the rate of general bonus to be increased in  view of the necessity of giving incentive to the employees.   But a   more  important  point  emerges  from  the  minutes   of discussion  recorded  on October 6, 1958 in  Ex.   D.2.  The Chairman of the Company emphasised that what was being  paid as  general bonus was as an incentive to greater  efficiency in production.  The Chairman specifically wanted this method of  payment  to  be changed and  suggested  that  the  bonus payment  be  linked  with the  generally  accepted  formula, namely,  of  profit bonus and that the payment  on  a  fixed percentage  be abolished.  But this suggestion to alter  the nature  of  the  payment  from  a  fixed  percentage  as   a production  bonus  for  providing an  incentive  to  greater efficiency  in  production was not accepted  by  the  Union, which  wanted  the fixed percentage basis to  be  continued. That is, the Union was not prepared to receive bonus on  the basis  of  profits,  but wanted  to  continue  the  existing arrangement of payment at a fixed percentage as an incentive to efficiency in production.  That is, the Union wanted  the character   of  the  payment  as  production   bonus   being continued.   Therefore, these circumstances clearly lead  to the  conclusion  that the payment that was  being  made  and continued  in  the agreement Ex.  A.5 was payment  of  bonus linked  with production or productivity.  It is  also  clear that  the  said payment was made in lieu of bonus  based  on profits  because  the  Union itself did  not  agree  to  the suggestion of the Chairman as contained in Ex.  D.2 to alter the  character  of payment to one of profit  sharing  bonus.

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Therefore,  this also shows that the payment under Ex.   A.5 was in lieu of bonus based on profits.  The expressions used in   s.  32  (vii)  (a)  are  "linked  with  production   or productivity"  and that test is satisfied in respect of  the payment made under Ex.  A.5. It is not the case of the Union that  the  character of payment which was designated  as  an incentive to greater efficiency in production even as  early as  1951  (vide  Ex.  D) has  been  altered  either  in  the subsequent  agreements or in the agreement Ex.  A.5. If  so, it  follows  that the payment of general bonus in  Ex.   A.5 retains  the  same  character  as a payment  by  way  of  an incentive to greater efficiency in production. As the minutes of the discussion that took place between the parties have been recorded then and there, they are items of evidence  which are more valuable and useful than  the  oral evidence  adduced  by the parties.  For  instance,  P.W.  1, Secretary of the Union, has deposed that the payment in  Ex. A.5 is not linked with 465 production.   On the other hand, the Labour Officer  of  the Company,  as  D.W.  I has stated that the  said  payment  is linked with production.  This type of evidence does not lead us any where.  That is why, we have placed more emphasis and reliance on the documentary evidence adduced by the parties, more especially when there is no controversy that the record of the meetings do not represent the actual facts. Then  the  question is whether the bonus paid is  an  annual bonus,  which is another requirement of S. 32 (vii)  (a)  of the  Act.   That  bonus has been paid at the  end  of  every quarter  at  any rate from 1948, is clear from  the  various settlements  and agreements, referred to earlier.  That  the Union  itself required that bonus should be continued to  be paid  quarterly,  is clear from the letters written  by  the Union,  particularly Ex.  B.5 dated December 24,  1957.   We have  already  referred to the various agreements  which  no doubt  prescribe  the normal duration of the period  of  the agreement,  which extends to over a year.  There is  also  a further provision to the effect that even after the date  of expiry mentioned therein, the agreement will continue to be. in  force till a notice is given in the manner provided  for in the agreement.  Therefore, it will be seen that it is not as if that bonus is paid for one quarter and does not  enure for  a succeeding quarter.  On the other hand,  the  amounts payable are not restricted to one particular quarter and the intention  is  made clear in the agreement that  it  has  to operate  throughout the year and also continue from year  to year.   It is not possible to accept the contention  of  Mr. Mookerjee that it is only when a payment is made at the  end of  the  year, it can be considered to be an  annual  bonus. The  essential  test  to be satisfied is  that  the  payment should  enure  throughout  the year and it  should  also  be continued from year to year.  As observed by Lord Maugham in Moss’  Empires, Ltd. v. Inland Revenue Commissioners(")  the expression  "annual"  must be taken to have the  quality  of being  recurrent or being capable of  recurrence.   Adopting this  test,  the  payments in the case  before  us  were  to continue the whole of the year and also were to be paid from year  to  year not only during the period of  agreement  but also  for the succeeding year till the required  notice  was given under the agreement Even then there is a provision  in the agreement to the effect that the agreement will continue to  have  force  notwithstanding the  notice  till  a  fresh agreement  or settlement is entered into.  Therefore  it  is clear that the payment of general bonus is "annual bonus" as contemplated  by s. 32 (vii) (a) of the Act.  The  Court  of

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Appeal  in  Smith v. Smith (2 ) had to  consider  whether  a payment  to be made weekly during the life time of a  person was an "annual payment".  It was held as follows (1)  [1937] 3 All.  E.R. 381.            (2) [1923]  Probate Division 191. 466 "It  is  no  doubt payable weekly, but that  fact  does  not prevent  it  from  being an annual  payment  if  the  weekly payments may extend beyond a year." The  position,  as pointed opt by us earlier,  in  the  case before, us, is also the same. It follows from the discussion above that the general  bonus paid  under  Article VI of the agreement  dated  August  30, 1962,  Ex.  A.5  is a payment of annual  bonus  linked  with production  or  productivity  in  lieu  of  bonus  based  on profits.  It further follows that as the agreement has  been entered into before May 29, 1965, the employees cannot claim any additional bonus under the Act for the period for  which the  agreement  is  in operation.  It is  the  case  of  all parties that the agreement Ex.  A.5 at the relevant time was in  operation.   If  so, it follows that  the  view  of  the Tribunal  that s. 32(vii) (a) of the Act is a bar  to  claim any additional bonus under the Act is correct. In  the  result,  the award of the  Industrial  Tribunal  is confirmed and this appeal dismissed.  There will be no order as to costs. S.C.                                                  Appeal dismissed 467