Holding

The award is not legally sustainable and is set aside; bonus liability is governed by the settlement under section 34(3) of the Payment of Bonus Act and only the minimum bonus is payable where no surplus exists.

Summary

Two power supply companies and their workmen disputed the bonus payable for the year 1971-72. The workmen claimed a customary bonus of three months' basic wages as on 31 March 1972, while the companies argued for only the statutory minimum bonus under the Payment of Bonus Act, 1965. The parties entered into a settlement before the Conciliation Officer under section 34(3) of the Act, agreeing to pay three months' basic wages as on 31 March 1970. The Ninth Industrial Tribunal, after finding no surplus and that only the minimum bonus was payable, nevertheless modified the settlement and awarded a higher bonus based on the 1972 basic wages, invoking its power to create a new contract for industrial peace. The Supreme Court held that the Tribunal could not override the statutory provisions of the Bonus Act, set aside the award, and declared that the parties' liability is governed by the original settlement and the minimum bonus where no surplus exists.

Issues considered

Whether an Industrial Tribunal can substitute a new contract or award imposing a bonus higher than the statutory minimum when the Payment of Bonus Act indicates no surplus.
Whether the award is consistent with the provisions of the Payment of Bonus Act, 1965.
Whether the settlement entered into under section 34(3) of the Bonus Act governs the bonus liability despite the Tribunal's award.
The scope of power of industrial courts to impose new obligations in the interest of industrial peace.

Legislation cited

Industrial Disputes Act, 1947s. 12(1)
Payment of Bonus Act, 1965s. 10, s. 34(3), s. 5

Subjects

Payment of Bonus ActIndustrial TribunalBonus liabilitySection 34(3) settlementMinimum bonusSurplus calculationIndustrial peaceStatutory limitation

Judgment

A

DISHERGARH POWER SUPPLY COMPANY LTD.,
CALCUTTA & ANR.
v.
B WORKMEN OF DISHERGARH
SUPPLY CO. LTD. & ORS.

JULY 15, 1986. .I
[V. BALAKRISHNA ERADI AND V. KHALID, JJ.] .!

c Payment of Bonus Act, !965, sections 5, JO and 34(3)-Bonus-
Paymen't of-Obligation of employer to pay higher bonus than the
minimum prescribed by the Act-When arises-Settlement before Con-
ciliation.Officer-Effect of-Power of Industrial Court to impose new
obligations on parties before it-Limitations-What are.
D
A dispute regarding bonus payable to the workmen-respondents
of the two companies-appe~lants for the year 1971-72 was referred to
conciliation under section 12(1) of the Industrial Disputes Act, 1947.
The workmen contended before the Conciliation Officer that they were

E
entitled to bonus equivalent to three months' basic wages as on 3 lst
March, 1972 as customary bonus or in any event as bonus payable
under the provisions of the Act. The appellant-companies, on the other
+
hand, argued that the workmen were entitled to only minimum bonus
as provided under the Act. The said dispute was ultimately settled
before the Conciliation Officer on the terms: (a) that each eligible work-
man will he paid an amount equal to three months' basic wages as on \.
F 31.3.1970; and (b) that the demand of the Union for bonus this year will
be referred to a Tribunal for adjudication. Accordingly, the Govern-
ment referred the dispute for adjudication to the ninth Industrial Tri-
bunal of West Bengal.

After a detailed discussion of the evidence produced before the
G Tribunal, it found (i) that the workmen had failed to make out the claim
of customary bonus or that they were entitled to maximum bonus of 20
per cent as provided under the Act; and (ii) that there was no available
surplus during the year in question and that only the minimum bonus
was payable under the provisions of the Act. However, after having
l'ecorded the aforesaid findings, it proceeded to hold that it was legally
H open to it to substitute for the agreement entered into between the
POWER SUPPLY CO. v. THE WORKMEN r ss
parties before the Conciliation Officer a new contract and pass an A
award on that basis, if such a step would be conducive to industrial
peace. On this basis the Tribunal, held that there would not be
material alteration in the financial liability of the companies in case
the agreement was modified by substituting for the words "that the
workmen will he paid the amount equal to three months' basic wages as B
on 31.3.1970" by the words "an amount equal to basic wages as on
31.3.1972" and accordingly it passed an award in those.terms.

I
\
In appeal to the Supreme Court, the appellants-companies chal-
lenged the legality of this award.

Allowing the appeal, c
HELD: I. The impugned award passed by the Ninth Industrial
Tribunal is not legally sustainable and has to be set aside. The rights of
the workmen for payment of bonus for the year in question will be
governed by the terms of the agreement entered into before the Concili- D
ation Officer on October 9, 1972. [190F]

2. The rights and liabilities of the parties regarding profit bonus
are governed by the provisions of the payment of Bonus Act, 1965 which
are exhaustive on the subject and the adjudication had to be conducted
by the Tribunal strictly in accordance with those provisions. I 189C-D[
E
In the instant case, the Tribunal has categorically found that there
was no "available surplus" in respect of the two companies for the year
in question on a computation made under section 5 of the Act. The
j settlement entered into before the Conciliation Officer constituted an
agreement under section 34(3) of the Act and but for the said agree- F
, ment, the liability of the appellants under the provisions of the Act
• would have been only to pay minimum bonus under section 10 of the
Act. [189E-F]

SanghiJeevraj Ghewar Chand and Ors. v. Secretary Madras Chil-
lies, Grains Kirana Merchants Workers" Union and Anr., [ 1969] 1 SCR G
366 and Mumbai Kamgar Sabha. Bombay v. M /s Abdulbhai Faizul-
labhai & Ors., [1976] 3SCR 591 referred to.

It is certainly open to an Industrial Court in an appropriate case
to impose new obligations on the parties before it or modify contracts in
the interest ofindnstrial peace or give awards which may have the effect H
186 SUPREME COURT REPORTS 11986] 3 S.C. R.

A of extending the agreement or making new one, but this power is con-
ditioned by the subject matter with which it is dealing and also by the
existing industrial law and it would not be open to it while dealing with I
a particular matter before it to overlook the industrial law relating to "
that matter as laid down by the legislature." l190B-D]
B
The New Maneck Chowk Spinning and Weaving Company Ltd.
Ahmedabad and Others v. The Textile Labour Association, Ahmeda-
bad, I1961] 3 SCR.1 relied upon.

In the instant case, in view of the finding recorded by the Tri-
.I
bunal that the result of the working of the companies during the con-
c cerned year was a loss and there was no available surplus, the Tribunal
contd not have legally proceeded to make an award directing payment
of bonus at any rate higher than the minimum bonus specified In section
10 of the Act. Therefore, the impugned award made by the Trilmnal is
clearly inconsistent with the provisions of the Payment of Bonus Act \
D which contemplate the imposition of an obligation for payment of only
the minimum bonus where the employer has no allocable surplus in the
concemed accounting year. However, inasmuch as the appellant-
companies had entered into the settlement before the Conciliation
Officer agreeing to pay bonus at a rate higher than the minimim bonus,
the said settlement would constitute an agreement under section 34 of
the Act and the terms of the settlement will govern the liability for
E
bonus for the year in question. I190D-EJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1935
(NL) of 1974.
\
F From the Award dated 8.5.1974 of the Ninth Industrial Tribunal
of West Bengal, Durgapur in Case No. X-4 of 1973. I
!

Dr. Shankar Gkosh and D.N. Gupta for the Appellants.

S.K. Nandy for the Respondents.
G
The Judgment of the Court was delivered by

BALAKRISHNA ERADI, J. This apppeal by Special Leave has f
been preferred against the Award dated May 8, 1974 made by the
Ninth Industrial Tribunal of West Bengal, Durgapur in Case No. X-4
H of 1973 on its file. The appellants are two companies incorporated
POWER SUPPLY CO. v. THE WORKMEN [ERADI, J.J 187

under the Indian Companies Act, 1913 havinjl their registered office in A
Calcutta. Both the appellants are engaged in the business of genera-
tion, transmission, distribution and sale of electricity in certain areas
of Bengal and Bihar under licences granted by the concerned Govern-
ments. Appellant No. 1 has a power station at Dishergarh and Appel-
!ant No. 2 has its power station at Sibpore. In connection with their
B
aforesaid business the two appellants were having at the relevant time
400 and 250 workmen respectively employed under them.

I
\
For the years 1965-66 to 1970-71 (inclusive) bonus was paid to
the workmen on the basis of agreements entered into each year under
Section 34(3) of the Payment of Bonus Act, 1965 (hereinafter referred
to as the 'Act'). Concerning the bonus payable for the year 1971-72, a c
dispute was raised by the workmen of the two companies and it was
referred to conciliation under Section 12(1) of the Industrial Disputes
(
Act, 1947. Tue contention of the workmen before the Conciliation
Officer was that they were entitled to bonus equivalent to three
months' basic wages as on March 31, 1972 as customary bonus or in any
event as bonus payable under the provisions of the Act. The appellant- D
companies, on the other hand, contended that the workmen were
entitled to only minimum bonus as provided under the Act on a com-
putation being made in the manner laid in the said Act. The said
dispute was ultimately settled before the Conciliation Officer inter alia
+ on the following terms:
E
"(1) Subject to usual adjustments made in 1969-70 and
1970-71, each eligible workmen will be paid an
amount equal to three months' basic wages as on
31.3.1970.
I
(2) A sum of Rs.20,000 will be distributed equally among F
~ all workmen who were on the rolls on 15.8.1972 and
have worked for at least 30 days. This will be 'Silver
Jubilee Year' payment.
(3) The demand of the Union for bonus this year will be
referred to as Tribunal for adjudication. G
(4) The payment should be made by 12.10.1971. Eligible
~.
workmen under terms ( 1) of this settlement-
(a) Permanent and probationers. Rest of workmen
will be paid bonus under the Payment of Bonus
Act." H
188 SUPREME COURT REPORTS [1986] 3 S.C.R.

A Although the said settlement was an agreement under Section 34(3) of
the Act since·under its very terms as incorporated in clause (3), the
parties had stipulated for a reference of the q~estion for adjudication
by a Tribunal. The issue was accordingly referred by the Government
of West Bengal for adjudication to the Ninth Industrial Tribunal of
B West Bengal by an orderof reference dated January 15, 1973.

In the written statement filed by the workmen before the Ninth
Industrial Tribunal they claimed three months' basic wages as on
March 31,.197Z-as customary bonus or in the alternative 20 per cent of
the salary or·wages as bonus payable under the Act. The appellants
reiterated. before the Tribunal the same contentions which they had
J
I
c put forward before the Conciliation Officer. The Tribunal allowed the
parties to adduce evidence. After a detailed discussion of the evidence
produced before it, the Tribunal recorded a clear finding that the
workmen had failed to make out the claim of customary bonus put
forward by them and that the said plea had therefore to fail. It was
D further found by the Tribunal that the plea put forward by the appel-
lant companies that there wa·s no available surplus during the year in
question and that only the minimum bonus was payable under the
provisions of the Act had to be upheld. The Tribunal, therefore, held
that the unions representing the workmen had failed to make out the
case put forward by the workmen that the workmen were entitled to I
E maximum bonus of 20 per cent as provided under the Act. After r
having recorded the aforesaid findings, the Tribunal, however, pro-
ceeded to accept the contention advanced before it by the Counsel
appearing for the workmen that it was legally open to ft to substitute
for the agreement entered into between the parties before the Concili-
ation Officer a new contract and pass an award on that basis, if such a
step would be conducive to industrial peace. On this reasoning the \
F
Tribunal proceeded to observe:

"In my opinion, there would not be material alteration in
the financial liability of the companies in case the agree-
ment was modified by substituting for the words tbat the
G workmen will be paid the amount equal to three months'
basic wages as on 31.3.1970 by the words an amount equal
to basic wages as on 31.3.1972 .................. I am,
therefore, in agreement with this contention of the learned
lawyer for the unions that the Tribunal should create a new
contract and that is pass an award of three months' basic
H wage as on 31.3.1972. This is in my opinion would be con-
POWER SUPPLY CO. v. THE WORKMEN [ERAQI, J.I 189

ducive to industrial peace and it would not violate any A
existing industrial law."

Accordingly, the Tribunal passed an award directing the appel-
lant companies to pay to the workmen the balance amount by way of
bonus as per the rates calculated by the Tribunal within a month from B
the date of publication of the award in the Calcutta Gazette. It is the
legality of this award that is under challenge in this appeal.

I
\
It has to be remembered that the claim of the workmen which the
Tribunal was considering while making the aforesaid observations was
one for Profit bonus only since the claim for customary bonus had been
rejected by it. The rights and liabilities of the parties regarding Profit c
bonus were governed by the provisions of the Act which are exhaustive
on the subject and the adjudication had to be conducted by the Tri-
bunal strictly in accordance with those provisions-See Sanghi Jeevraj
Ghewar Chand and Ors. v. Secretary, Madras Chillies, Grains Kirana
Merchants Workers' Union and Anr., [1969] 1 S.C.R. 366 and Mumbai
D
Kamgar Sabha, Bombay v. Mis Abdulbhai Faizullabhai & Ors., [1976]
3 S.C.R. 591.

As already noticed, the Tribunal has categorically found on a
consideration of the evidence adduced before it that there was no
+ "available surplus" in respect of the two companies for the year in
question on a computation made under Section 5 of the Act. The
settlement entered into before the Conciliation Officer constituted an
E

agreement under Section 34(3) of the Act and but for the said agree-
ment the liability of the appellants under the provisions of Act would
have been only to pay minimum bonus under Section 10 of the Act.
I
Since the parties were at,·variance on the question of existence of
F
liability for payment of customary bonus in the establishments as well
as on the question regarding the existence of available surplus, provi-
sion was made in clause (3) of the agreement for reference under the
industrial adjudication. If the Tribunal found that the claim for pay-
ment of customary bonus was substantiated it could have passed an
order in favour of the workmen for payment of such bonus. That claim
G
had been negatived. The only question which remained for determina-
tion for the Tribunal was whether the claim of the workmen for pay-
ment of 20 per cent of the salary or wages as bonus payable under the
Act was tenable or not. That depended essentially on the question of
existence of available surplus and its quantum, if any surplus was
available. In view of the finding recorded by the Tribunal accepting H
190 SUPREME COURT REPORTS [1986] 3 S.C. R.

A the plea put forward by the appellant companies that the result of the
working of the companies during the concerned year was a loss and
there was no available surplus, the Tribunal could not have legally
proceeded to make an award directing payment of bonus at any rate
higher than the minimum bonus specified in Section 10 of the Act. As
pointed out by this Court in The New Maneck Chowk Spinning and
B
Weaving Company Ltd. Ahmedabad and Others v. The Textile Labour
Association, Ahmedabad, [1961] 3 S.C. R. !,-while "it is certainly open
to an industrial court in an appropriate case to impose new obligations
on the parties before it or modify contracts in the interest of industrial
peace or give awards which may have the effect of extending Agree-
ment or making new one, but this power is conditioned by the subject
J }
c '
matter with which it is dealing and also by the existing industrial law
and it would not be open to it while dealing with a particular matter
before it to overlook the industrial law relating to that matter as laid
down by the legislature." It is manifest that the impugned award made
by the Tribunal is clearly inconsistent with the provisions of the Pay-
ment of Bonus Act which contemplate the imposition of an obligation
D
for payment of only the minimum bonus where the employer has no
allocable surplus in the concerned accounting year. However, in as
much as the appellant companies had entered into the settlement be-
fore the Conciliation Officer agreeing to pay bonus at a rate higher
than the minimum bonus, the said settlement would constitute an ag- \

E
reement under Section 34 of the Act and the terms of the settlement f"
will govern the liability for bonus for the year in question.

It follows from the foregoing discussion that the impugned award
passed by the Ninth Industrial Tribunal is not legally sustainable. The
appeal is accordingly allowed and the Award of the Industrial Tribunal
\
will stand set aside. The rights of the workmen for payment of bonus
F
for the year in question will be governed by the terms of the agreement (
enterd into before the Conciliation Officer on October 9, 1972. r

In view of the condition imposed by the order of this Court dated
November 21, 1974 while granting Special Leave, the appellants are
directed to pay the costs of the respondents in this appeal.
G
M.L.A. Appeal allowed.
\
t