Holding

The bonus paid does not possess the characteristics of a customary bonus and therefore the employees have no legal right to it under Section 33‑C(2) of the Industrial Disputes Act.

Summary

Two employees of United Bank of India claimed that the annual bonus paid on the eve of Pooja had become a customary bonus, unrelated to the bank's profits, and thus a condition of service giving them a legal right under Section 33‑C(2) of the Industrial Disputes Act, 1947. The bank contended that the bonus varied in rate, was linked to profits, and was paid only after negotiations, so it could not be deemed customary. The Labour Court held that no such right existed and dismissed the application. On appeal, the Supreme Court applied the tests for a customary/festival bonus laid down in Vegetable Products Ltd. v. Their Workmen, finding that the bonus was not paid over an unbroken series of years at a uniform rate, was profit‑linked, and varied each year. Consequently, the Court held that the bonus did not have the characteristics of a customary bonus and the employees had no legal right to it. The appeal was dismissed.

Issues considered

Whether the bonus paid on the eve of Pooja qualifies as a customary or festival bonus under law
Whether the employees are entitled to a legal right to such bonus under Section 33‑C(2) of the Industrial Disputes Act, 1947

Legislation cited

Industrial Disputes Act, 1947s. 33-C(2)

Subjects

customary bonusfestival bonusIndustrial Disputes ActSection 33-CUnited Bank of Indiaemployee rightscondition of serviceprofit‑linked bonusnationalised bankspublic interest

Judgment

tos7
A

UPENDRA CHANDRA CHAKRABORTY AND ANR.

v.

UNITED BANK OF INDIA B

April 30, 1985

[D.A. DESAI, V. BALAKRISHNA ERADI AND V.KHALID, JJ.]

Bonus-Custortiary bonus. concept of-Tests to be applied-Bonus paid to c
the employees of the respondent Bank during. the pooja period, whether has the
\ charaeteristic of customary bonus know to /aw-Applicability of section 33-C
(2) of the Industrial Disputes Act, 1947.

Two employees of the respondent Bank preferred a claim on the basis of
the existence of legal right in thent to the payment of a customary bonus on the
eve of pooja. Th-o;ir case was that the bonUs paid to them every year on the eve
D
of pooja at the rate of pay as on 1st September of the respective year was un-
related to any profit or loss niade by- the company and that the consecutive
·payment for more than 16 years without any break of such bonus bas_ developed
into a condition of service giving rise to a right and an e~pectancY which in
law assumed the characteristics of cu-stomary bonus. The claim was resisted
by the bank on the grounds, namely, (a) the application itself was not main.. E
tainable since the alleged right ple~ded by the workmen was not a condition of
service and that such a right·did not exist in fact also ; (b) the conditions of
se'rViCe of the employees of the Bank are governed _by various awards and settle-
ments ; (c) though there were ·agreements entered into between the bank and
its employees on several matters there was no agreement at any time on the
question of payment of bonus ; and (d) though the bonus was paid, as a result
of the employees demand every year .as per separate agreement for the: payment F
thereof the bonuspa id was related to profit and not based on any custom. After
considering the correspondence that passed between the -Bank and its em..
ployees, the La~our Court .dismissed the application:halding that on the basis
of the material on record, there was no existing right to customary bonus and
that t'1e Labour Court could not ~ither create or declare a right which . was
not in existence to stretch its jurisdiction under section 33-a(2) of the Indus
trial Disputes Act. Hence· the appeal by special leave. G

HELD : l. In the facts and circumstances of the case the bonus received
by the appellants did not. have the characteristic of customary boiius as known
to law and therefore they were not entitled to the quantification of that amount· ·
under section 33-c(2) of the Industrial Disputes Act, on the basis of the existence
of a lcaal right in them. [1063 F] ·a
. "
ioss SUPBRBME COUR ~ REPORT o9ssi 3 s.c.R.)
A 2. In Vegetable Products Ltd. v. Their Workmen, 1965 (1) LLJ 468, the
Supreme Court has laid down the tests to determine what exactly is custom3rY
or festival bonus. The tests laid down are ; (I) that the payment has been made
over an 'unbroken series of years ; (2) 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; (3) that it has been paid even in years of loss and did not depend
on the earning of profits ; and (4) that the payo1ent has been <it a uniform rate
B
throughout. ·In the instant case. the record shows that the bonus paid docs not
satisfy the requirements laid down by the Court. The n1ere fact the payments
were made in the month of September or thereabout every year, by itself will not
make the bonus paid a customary pooja bonus. The ~ate has not been uniform.
The management has at all times taken the definite stand that the payment was
c related to profits and that it was in anticipation of making profit. Further.the
payments were made .at all time pursuant to demands made by the employees.
[1061 C-F]
y
Vegetable Products Ltd. v. Their Workmen, (1965) I LLJ 468 applied.
I
3. The concept of any customery bonus is unkQ.Own to nationalised
D banks. All the nationalised banks are wholly owned undertakings of the
Goverllmeht of India. In the matter of bonus, the employees of the. nationalised
banks inust be dealt with on a common denominator. If therefore, the contention
of the appellants were to prevail the employees of the respondent •. which iS only
one a1nongst many nationalised banks, would enjoy an undeserved advantange
compared to their counterparts in other nationalised banks and even in the other
E branches of the respondent bank and may become a cause of disharmony and
inequality. Therefore, in Jarger public interest also, the demand for customary
bonus otherwise found to be untenable, must be negatived. [1063 C.EJ

. CIVIL APPELLATE JURISDICTION : Civil .Appeal No. 1416
of 1981.
F '
From the Judgment and Order. dated 28.l 2.1975 of the Cent'
· ral Govt. Labour Court at Calcutta in Application No L.C. 28 cif
1976.

G
M.K. Ramamurthi and Am/an Ghosh for the Appellants.
,~
'
G.B. Pai, V.S. Desai, D.N. Mukherjee, N.R. Chaudhary and
R. Mukherjee for the Respondent.

KHALID, J. This appeal, by special leave, by two employees
of the United Bank of India at Calcutta, is directed against a
decision given by the Central Government Industrial Tribun.al-
B
•

-,-
.~) U. C. CHAKRABQRTY V. UNITED BANK (K/ia/id,J.) 1059
'
cum-Labour, Court, Calcutta, on 2_8th December, 1979, in an appli- A
cation made under Section -33-C (2) of the Industrial Disputes Act,
1947. The claim made by them related to the bonus paid on the
eve of Pooja every year wbich according to them was customary in
nature, irrespective of profit or loss.

2- The Labour Court after considering the evidence placed B
before it held that the bonus claimed could not be characterised as
customary since it did not answer to the requirements of law to be
customary bonus and that in the asbence of an existing right to
customary bonus or bonus founded on an implied agreement as a
condition of service, the application made under section 33-C(2) c
was not maintainable and accordingly dismissed the same.

3. The petitioners' claim was attempted to be supported by
the fact that they were given one month's pay as bonus for the
years 1959 to 1963, one and half months' for the year 1964 _and
two months' pay for the years 1965 to 1974. Their further case was D
that this bonus was paid every yeat on the eve of Pooja at the rate
of pay as on !st September of the respective year and was unrela-
ted to.any profit made by the company. The payment of such
bonus consecutively for 16 years without any break and unrelated
to profit or foss, without its sanction either in law or any award
or any written settlement, payable on the ·eve of the Pooja, E
developed .into a condition of service giving rise to a right and an
expectancy which in law assumed the characteristics of customary
bonus. This claim was resisted by the Bank on the ground that ••
the application itself was riot maintainable since the alleged. riglit
pleaded by the workmen was not a condition of service and that
such a right did not exist in fact also. The conditions of service of F
the employees of the Bank are governed by various awards and
settlements. Though there were agreements entered into between
the bank and its employees on several matters there was no agree-
ment at any time ori the question of payment of bonus. Bonus was
paid to its employees every year as a result of demand raised G
separately by them and in respect of every year there was a separate
agreement with regard to bonus. It was further stated that the
bonus paid was related to profit and not based on any custom.

4. The Labour Court - considered the correspondence that
passed between the Bank and its employees and came to the con- H
1060 SUPEREME COURf REPORT (1985) 3 s.c.R. y
'
clusion that a right to customary bonus in favour of the employees
of the Bank did not er.isl. The application was dismissed holding
that on the basis of the material on record, there was· no existing
right to customary bonus and that the Labour Court could not
)
either create or declare a right which was not in existence to stretch
its jurisdiction under Section 33-C(2) of the Industria I Disputes Act.
B It is the correctness of this finding that we are called upon to decide
in this appeal. --
5. The Counsel on both sides took us through the various
letters that passed between the employees of the Bank and the Ban kt
and brought to our notice the past history relating to the paymcn >---
c of bonus for a co 1siderably long time. It is seen that the Bank had
i
been paying bonus at the rate of one month's sat ary from 1959 to
1963. This is period prior to the Bonus Act which came into force
in 1965. The payment continued even after c oming into force of
the Bonu~ Act. We fi~d from the m1terials on record that the
above paym~nts were not m1de by the bank unilaterally Without
D any demand, unrelated to profit or loss as a customary bonus. It
is true that payments were ma~e on the eve of the Pooja. The
bonus so paid was not called Pooja bonus except in 1972 when the
words 'Pooja' was mentio·ned..at the time when the payment was
made. The bonus in question was paid for the years 1958 and 1959
as a result of protracted negotiations. Bonus for the year 1962 was
E paid at the rate of one month's pay on the basis of Desai award.
This rate continued for the year 1963 also. In 1964, it was at the
rate of 45 days' pay. This rate was further increased for the year
1965 to two months' pay and this we find was as a· result of the dis-
cussions held on the subject between the management and the union
from time to time. The two months' rate continued till the year
F 1969. In 1969, the Bank was nationalised and till 1971 bonus at
the rate or'two months' basic salary was sanctioned by the Ministry
of Finance and was accordingly paid to the employees. In 1972,
the General Secretary of the Union claimed by a letter that the
employees were getting bonus at the rate of two months.' pay at the
time of Pooja, irrespective of profits and asked for an enhancement
G
of rate of bonus. Discussions were initiated and ultimately the
Bank agreed to pay an additional bonus for the year 1972 of an
additional four days pay and for the year 1973 two months and 12
days and for 1974 two months and 271/2 days .

. ti 6. We have ourselves gone through the letters which are on
· U. C. CHAK:RABORTY V. UNITED BANK: (Kha/id, J.) 106!

record that passed between the parties. Tbe correspondence shows A
that the bonus was paid from year to year pursuant to negotiations
that took place between the Union of th.e employees and the Bank
and that the rates of bonus were not uniform, but were fluctuating.
The Bank had a definite case that bonus was paid out of the pro-
fits made or in anticipation of profits. The claim of the Union
tl\at it was customary and unrelated to the pr ifits of the Bank was B
attempted to be made at a belated stage of the case.

7. Before deciding. the case on the above materials, it
would be useful to refer to the decision of this · Court in
Vegetable Products Ltd. v. Their Workmen(') where this Court has c
laid down the test to determine what exactly is customary or
festival bonus. The tests laid down by this Court are : (I} that the
payment has been made over an unbroken series of years ; (2) 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; (3) that
it has. been paid even in years of loss and did not depend on the :D
earning of profits ; and (4) that the payment has been made at a
uniform rate throughout. From the materials disclosed in the
records, reference to which was made by us earlier, it will be evident
that the bonus paid in this case .does not satisfy the requirements
laid down by this Court detailed above. It may be true that the
E
payments were made in the month of September or thereabout
every year, but that by itself will not make the bonus paid a
customary Pooja bonus. The rate has not been uniform. The
management bas at all times taken the definite stand tba~ ·the pay-
ment was related to profits and that it was in anticipation of mak.
ing profit. The payments were made at all times pursuant to F
demands made by the employees. We would like to refer to oniy
two or three letters to fortify our conclusion that the payment was
pursuant to the demands of th.e employees. In the letter dated 20th
September, 1958, addressed to the General Secretary, United Bank
of India's employees Association, the opening sentence reads a;.
follows : :G

"With reference to the several demands as stated in
your letter dated--we have agreed as follows :

(I) [1965] I LU 468. ·B
1062 SUPEREMB ·COURT REPORT (19&5) 3 ·S.C.R,

A (I) Annual bonus for the year 1958 ...•.. "

In the letter dated September 3, 1968, written to the. President of
the Association and marked as confidential, it is stated that "the
Bank tried to impress upon the President through a number of
discussions to persuade'him to revise the present system of paying
B bonus in September to a system after the year's results are available
and to pay the minimum.as provided for iu the Bonus Act then
and the balance if any after the year's profit figures are known and
since the Bank did not propose to strain its relationship with the
employees' and as the request made was not acceptable to the
employees, it was decided to pay the bonus at the rate of.two
c inonths' basic salary,· as existing on 1.9.1968." In the letter dated ~//'
December 29, 1972, addressed to the General Secretary of the ,
Association it is stated that "in case of this Bank, bonus is paid on
the basis of the agreement arrived at between your association and
the management equivalent to two months' basic pa:y .... .'.. "
D Reference may also be made to a letter dated 17th April, 1973, by
the Association to the Chairman and Managing Director of th·e
Bank which reads as follows :

" ...... As you know, bonus is being paid at the present
rate of two months basic pay as on September !st each year
E since 1964, when after a continuous struggle the original
pre-amalgamation rate was . restored gradually, beginning
with 15 days basic pay in 1958 ......... "

In the letter addressed to the General .secretary (dated 26th
. August, 1973) reference is again made to the demands made by the
F
association for additional bonus for 1972 and to the subsequent dis-.
cussions and agreement for payment of bonus at the rate of two
months and J2.days pay as on I.9.1973.

8. From the above letters it is evident that bonus was paid as
G a result of long discussion at every stage. No bonus was paid
for the years 1950 to.1958. From 1959 onwards, the rate has
not, been uniform. There is no evidence to show that this pay-
ment was unrelated to the pr-:ilits. The letters sent by the manage-
ment cleai;ly indicated that bonus payment was related to the pro-
fits and the Bank always wanied its employees to wait for the
financial position for computation of the bonus payable. The
U. C. CHAKRABORTY V. UNITED Bl.NK (Kha/id, J.) 1063

evidence in this case does not also justify inference of an implied A
agreement on the part of the Bank to pay bonus of a customary
nature· at the time of Pooja, without any relation to profits as a
condition of service. The Labour Court has noted the fact that it
was nobody's case that bonus was ever paid in any year of loss or
that there was any year of loss and that the bank bad consistently
B
taken the position that bonus was paid out of the year's profit in
anticipation.

9. There is one other aspect of the claim now put forward
which cannot be lost sight of, which affords an additional reason
to reject the contention of the appellants. The respondent is a c
~ nationalised bank. Roughly in all there are 25 nationalised banks.
~"J'he concept of any customary bonus is unknown to nationalised
banks. All the nationalised banks are wholly owned undertakings of
the Government of India; in the matter of bonus, the employees
of the nationalised banks must be dealt with. on a common denomil
D
nator. If therefore the contention of the appellant were to prevai-
the employees of the respondent, which is only one amongst many
nationalised bank, would enjoy an undeserved advantage compared
to their counterparts in other nationalised banks and even in the
other branches of the respondent bank and may become a cause Of
disharmony and inequality. Therefore in larger public interest E
also, the demaud for customary bonus otherwise found to be unten-
able, must be negatived .

. 10. On a careful consideration of the facts and circum-
stances of the case disclosed, we find that the appellants have not
succeeded in persuading us to disagree with the findings of the F
Labour Court or to satisfy us that the bonus that they received ·had
the characteristic of customary bonus as known to law and that
therefore they were entitled to the quantification of that amount
under Section 33-C (2) of the industrial Disputes Act, on the basis
of the existence of a legal right in them. The appeal has, therefore,·
to fail and is dismissed without any orcler as tQ costs, G

S.R, Appeal dismissed. ll