Industrial Disputes Act, 1947 - Section 10(2)
1. This is a reference made by the Government of Bombay under S. 10(2) of the Industrial Disputes Act, 1947 (XIV of 1947). The reference concerns a dispute raised by the Colgate-Palmolive Employees' Union, Bombay, on behalf of the employees of the said company regarding bonus for the year 1954. The union claimed bonus equivalent to six months' basic salary of the employees concerned and from that amount, it stated, two months' bonus already paid as annual gratification under the company's notice, dated 21 December, 1954, might be deducted. The company was not willing to pay anything in addition to what it had already paid. At the stage of conciliation both the parties agreed to submit the dispute for adjudication. Government, therefore, made the present reference.
2. Colgate-Palmolive (India), Ltd., is a private limited concern carrying on business in India in soap and other toilet requisites. The company has its head office and three warehouses in Bombay. It has also ware-houses at Calcutta and Madras. At New Delhi it carries on business though its authorized agents. The company gets its products manufactured in factories of other concerns in Bombay. As the company itself does not carry on the manufacturing operations it states that its business consists only in the sale and distribution of products mentioned above. But the union's case is that as the products are manufactured at the instance of the company, the company must be deemed to be a manufacturing concern. But whether this company is a manufacturing concern or only a selling and distributing concern is of little relevance in this case as the employees who have claimed bonus are members of the staff who are not concerned with the manufacturing side of the company's business.
3. The union states that Colgate-Palmolive International of U.S.A. is the parent company of Colgate-Palmolive (India), Ltd., and owns almost all the shares of the company in India. The number of workmen concerned with the present dispute is estimated to be about 80 in the joint statement submitted by the parties to Government.
4. The company has produced its audited balance sheet and profit and loss account for the years 1953 and 1954 under a seal of secrecy. The year for which bonus is claimed in the present reference is the calendar year 1954.
The company does not dispute that the profit made in that year will leave a sufficient surplus even after the entire amount of bonus claimed by the union is paid. But Sri Marr who appeared for the company invited my attention to the fact that the Tata Oil Mill Company which manufactures soap and shaving sticks for this company paid bonus equivalent to 1(1/2) months' basic wages to their employees for the year 1953-54 and one month's basic wages for the year 1954-55. He also stated that Kemp & Co. which manufactures toilet requisites such as hair oils, tooth paste, tooth powder, face powder, etc., for this company paid bonus equivalent to 15 days' basic wages to their employees for the year 1954 and the Aryan Brush Company which manufactures tooth brushes for it paid bonus equivalent to two months' basic wages to its employees for the year 1954. If regard be had to what the above concerns paid to their employees, it was urged, there is no case for awarding any more bonus than what is already paid by the company. The bonus which the above concerns paid to their employees was based upon the profits earned by them in the particular year. The bonus payable to the employees of this company must have relation to the profits earned by it during the year 1954. Merely because the three concerns manufacture certain articles for this company under a contract entered into with them it does not follow that the workmen of this company must be awarded bonus equivalent to that awarded or paid by those three concerns. It was urged by Sri Marr that if a very high amount of bonus is awarded to the workmen of this company it might lead to discontent among workers of the concerns which actually manufacture the toilet and other articles for this company. The contention is palpably untenable. The profits which this company makes depends not only on the reputation of its own products but also on the efforts put in by its employees in the matter of distribution and sale. The earnings of the concerns whose workmen manufacture the articles required by this company can have no bearing on the earnings of this company which supplies not only its own materials but also its own formula for the process of manufacture.
5. Although the profits of the company are such as to leave a sufficient surplus after meeting the labour's demand in full for bonus, Sri Marr contended that an excessive quantum of bonus should not be awarded. He relied on the following observations of the Labour Appellate Tribunal in the Oil Companies case 1953 II L.L.J. 246 :
'Let us first examine the true nature of bonus. It is a payment given to the workmen of a concern on the basis of their participation in the prosperity of the concern in any year to which they had contributed; it is intended to shorten the gap between the wages paid and the ideal of a living wage, to aid the workman to achieve a frugal measure of comfort for himself and his family. The wages themselves are fixed according to well-established standards and the duties and responsibilities of the workmen in the concern; dearness allowance plus the wages represent fair total emoluments taken on region-cum-industry basis and its fixation has already taken into account the prevailing wages of like or other concerns in the area as also the capacity of the industry to pay. Bonus must therefore have some relation to wages; it is intended to supplement wages and not to double or multiply it for wages are not fixed solely on the capacity of a concern to pay. Care must also be taken to see that the bonus which is given is not so excessive that it creates fresh problems in the vicinity, that it upsets emoluments all round, or that it creates industrial discontent and the possible emergence of a privileged class. Furthermore we must not be unmindful of the impact of an unduly high bonus on the community as a whole.'
It is quite clear from the above that bonus is primarily intended to shorten the gap between the living wage and the actual wage including dearness allowance paid to the employees, and it must have some relation to wages. The wages and other conditions of service in the oil industry are better than those available to the workmen of this company and still the Labour Appellate Tribunal granted bonus equivalent to 3(1/2) months' basic wages to clerks serving under the oil companies. In the case of this company on a dispute raised by the union the wage-scales and other service conditions were improved by the company with effect from 1 December, 1954, i.e., almost since the end of the year for which bonus is claimed in this reference. Even after this improvement the wage-scales and other conditions of service of this company are not on par with those of the clerks employed in the oil companies. There is, therefore, a wider gap between the living wage and the actual wage of the employees of this company. A higher bonus than that awarded to the employees in oil industry is, therefore, called for in this case. A Bombay Bench of the Labour Appellate Tribunal while following the decision in the Oil Companies case cited above, awarded bonus equal to five months' wages to the employees of Lever Bros. for the year 1951 II L.L.J. 723. The conditions of service of Lever Bros. are better than those of the employees of this company. The rate of contribution to employees' provident fund in Lever Bros. is 10 per cent as against 6(1/4) per cent in this company. Even the rate of gratuity in Lever Bros. is one month's basic wages from every year of service as against three-fourth month's basic wages in this company. Similarly, this company grants leave for three weeks as against one month in the case of Lever Bros. The dearness allowance in Lever Bros. is also higher than the dearness allowance paid by the company (see Ex. U. 1). If therefore the gap between the living wage and actual wage in the case of Colgate-Palmolive is wider than that in Lever Bros., certainly the bonus to be awarded to the workmen of this company cannot be less than that awarded to the employees of Lever Bros.
6. It is important to bear in mind that Lever Bros. is a manufacturing concern. There is a difference between the responsibilities and duties of the employees of this concern which is primarily a selling and distributing concern and those of Lever Bros. which is mainly a manufacturing concern. Besides, the reputation which the Colgate-Palmolive International Inc. enjoys in the world market contributes to a considerable extent to the earning of profits by this company. Colgate-Palmolive (India), Ltd., being a subsidiary of the parent concern in America, has not to employ a large capital. I, therefore, think that the ends of justice will be met if bonus equivalent to 5/12 of the basic earnings of the employees is awarded to the employees of this company for the year in question. I direct the company to grant bonus equivalent to 5/12 of the basic earnings of the workmen concerned within one month of the date this award becomes enforceable on the following terms :-
The amount of gratification equivalent to two months' basic salary already paid may be adjusted against the amount of bonus payable under this award.
Workmen who have been dismissed for misconduct causing financial loss to the company shall not be entitled to the amount of bonus to the extent of the financial loss caused to the company.
Those workmen who are entitled to receive bonus but who are no longer in the service of the company shall be paid bonus on their claims being submitted in writing within six months of the date of this award provided that no such claim can be enforced within one month of the date this award becomes enforceable.