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New India Industries Employees' Assn., Bombay Vs. New India Industries Limited, Bombay (15.03.1976 - BOMHC) - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtMumbai High Court
Decided On
Case NumberComplaint (ULP) No. 121 of 1976
Judge
Reported in(1976)ILLJ528Bom
ActsMaharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971; Bonus Act; Payment of Bonus (Amendment) Act, 1976 - Sections 31A and 34(3)
AppellantNew India Industries Employees' Assn., Bombay
RespondentNew India Industries Limited, Bombay
Excerpt:
.....held, payment made under this scheme was incentive wage. - - this is a strong indication that what is paid under the scheme as dispatch bonus is really incentive..........act. proviso to s. 31a of the amended bonus act lays that no employee shall be entitled to be paid bonus under such settlement or agreement in excess of 20% of the salary/wages earned by him during the relevant year. 6. it is important to note that s. 31a of the amended bonus act lays down that agreements or settlements relating to bonus linked with production or productivity in lieu of bonus based on profits can be given effect to the extent indicated by the proviso to that section. the company relies on the proviso to contend that in no case bonus more than that 20% can be paid. on the wording of s. 31a of the amended bonus act, it is quite clear that the limit of 20% is placed on bonus which is based on profits. it is urged that s. 31a deals with bonus linked with production or.....
Judgment:
ORDER

1. This is a complaint filed by the New India, Industries Employees' Association, Bombay, against the New India Industries Ltd. (hereinafter referred to as the company) under S. 28 of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as the Act.) The grievance in the complaint is that the agreement in the form of despatch of material bonus scheme dated 18-1-1967, as subsequently modified, is not implemented by the company. In the complaint it is stated that the company put up notice dated 6-11-1975 stating that in view of the New Bonus Ordinance dated 25-9-1975 the company discontinues the above - mentioned bonus scheme, as according to the company it is not open to it to pay bonus as per despatch of material bonus scheme (hereinafter referred to as the scheme). The complainant alleges that the scheme is not covered by the said ordinance, hence the company is not justified in discontinuing the said scheme.

2. By its written statement the company contends that it has been paying 20% annual bonus to its employees as per the provisions of the Bonus Act. As under the Ordinance mentioned above, payment of bonus above 20% is forbidden, hence the company is justified in putting up the notice dated 6-11-1975, and discontinuing the said scheme.

3. On behalf of the complainant Dr. Kulkarni contends that if the provisions of the said scheme are properly considered, it would be obvious that although it is called a bonus scheme, it is really an incentive wage scheme, not depending on earning of profits by the company, hence the ordinance would not apply. As against this contention, Mr. Gagrat for the company submits that the scheme provided bonus as the production goes on increasing, the scheme is related to productivity, and consequently on profits also, hence in view of the abovementioned ordinance and the subsequent amendment to the Payment of Bonus Act, (hereinafter referred to as the Bonus Act), it would not be open for the company to pay bonus more than 20%. It is further urged that if the amended Bonus Act and the earlier ordinance forbid the payment of bonus above 20% the Income-tax Authorities would not allow the expenditure in that respect, if it is more than 20%.

4. The initial scheme is dated 18-1-1967, but admittedly the scheme was modified by subsequent settlements dated 20-9-1971 and 1-1-1973. The relevant portion of the scheme reads thus :

'The despatch bonus will be paid to employees every quarter on the following basis :

If the total despatches in a particular quarter exceed the standard target of 3 lakhs sq. meters of packed photo paper satisfactory manufactured, for every increase in despatches of 300 sq. metres, over the target of 3 lakhs metres, employees shall be paid in the subsequent quarter by way of despatch bonus an amount equivalent to 0.4% of the salary earned by them in the previous quarter, subject to the maximum of 20% of the salary and subject to the following conditions :

An employee shall be disqualified from receiving bonus under this scheme if he is dismissed from service for :

(i) Fraud, or

(ii) riotous or violent behaviour while on the premises of the establishment; or

(iii) theft, misappropriation of sabotage of any property of the establishment.

Explanation - 1 : Despatch means the actual despatches in any quarter as reduced by any returns that the Co's, customers may make in that quarter for any reason whatsoever.

Explanation - 2 : Salary means basic salary or wages and D.A. and does not include overtime wages or any other allowances paid for the time being by whatever name called.

Explanation - 3 : Quarter means a period of three consecutive months beginning on the 1st of January, the 1st of April, the 1st of July or the 1st of October.

The dispatches of the previous quarter shall be taken as basis for the payment of bonus in the subsequent quarter.'

The subsequent modifications dated 20-9-1971 and 1-1-1973 merely vary the quantum of dispatch, and the consequent rate of bonus. The nature of the payment is not changed by the subsequent modifications. From the relevant provisions of the scheme quoted above, it will be seen that the dispatch bonus is to be paid every quarter, and not annually, as under the Bonus Act. Mr. Gargat points out that the modification dated 1-1-1975 contains the following clauses :

'Upon request of the workmen and in order to avoid hardships cause by the speciality of our production, both parties as a special case, agree to interpret the Dispatch Bonus Clause in the settlement so as to allow averaging the dispatches of the four quarters comprising one calendar year.

In case the company obtains the Government's sanction to increase the capacity to 2.7 million sq. metres per year, the original DB scheme, dated January 18, 1967, shall apply to the workmen without any modification except that the maximum limit of DB payable shall be 55% of the workman's 'earnings' and averaging of the dispatches of the four quarters comprising a calendar year shall be permissible.'

These clauses are relied upon to contend that although the payments are made quarterly, the dispatches of the four quarters in the year are to be averaged. So also it is pointed out that the maximum limit of dispatch bonus is fixed at 55% of the workmen's earnings for the year. On the wording of the scheme quoted above, it is clear that under the scheme the employer undertakes to pay bonus under the said scheme whether the company makes profit or not. The terms quoted above do not indicate that the payment of dispatch bonus is made dependent on the company making profits. It must, however, be conceded that inasmuch as the dispatch bonus depends upon the quantity dispatched it had relation to productivity. Dr. Kulkarni for the complainant submits that what is paid under the scheme is really in the nature of incentive wages. In support of his contention, reliance is placed on clause 6(b) of the scheme as modified by the settlement dated 20-9-1971. Clause 6(b) provides that gratuity shall be paid at the last rate of salaries/wages excluding all allowances, but including dearness allowance and the 50% of the dispatch bonus drawn, i.e., as eve of workmen's death, disability, retirement, termination of service or resignation. Reliance is placed on the fact that clause 6(b) includes 50% of the dispatch bonus as a part of the wages on which gratuity is to be calculated.

5. The material question for consideration is what is the nature of payment made under the scheme, is it wages or bonus On behalf of the company, reliance is placed on S. 31A of the Amended Bonus Act, Section 31A reads thus :

Notwithstanding anything contained in this Act :

'(i) Where an agreement or a settlement has been entered into by the employees with their employer before the commencement of the Payment of Bonus (Amendment) Act, 1976, or

(ii) Where the employees enter into any agreement or settlement with their employer after such commencement.

For payment of an annual bonus linked with production or productivity in lieu of bonus based on profits payable under this Act, then, such employees shall be entitled to receive bonus due to them under such agreement or settlement, as the case may be.

Provided that such employees shall not be entitled to be paid such bonus in excess of twenty per cent of the salary or wage earned by them during the relevant accounting year'.

It would be necessary to refer to amended Section 34 also which reads thus :

'Subject to the provisions of S. 31A, the provisions of this Act shall have effect notwithstanding anything inconsistant therewith contained in any other law for the time being in force or in the terms of any award, agreement, settlement or contract of service.'

Section 31A of the amended Bonus Act substitutes S. 34(3) of the unamended Bonus Act. The amended S. 31A covers both agreements or settlements arrived at prior to the commencement of the amended Bonus Act, and also those subsequent to the amended Bonus Act. Amended S. 31A provides that the bonus may be paid as per agreement or settlement arrived at between the parties if annual bonus is linked with production or productivity in lieu of bonus based on profits payable under amended Bonus Act. The effect of amended S. 31A is that an agreement or settlement relating to payment of bonus will be given effect to, if the payment of annual bonus is linked to production or productivity instead of bonus based on profits payable under the amended Bonus Act. Proviso to S. 31A of the amended Bonus Act lays that no employee shall be entitled to be paid bonus under such settlement or agreement in excess of 20% of the salary/wages earned by him during the relevant year.

6. It is important to note that S. 31A of the amended Bonus Act lays down that agreements or settlements relating to bonus linked with production or productivity in lieu of bonus based on profits can be given effect to the extent indicated by the proviso to that section. The company relies on the proviso to contend that in no case bonus more than that 20% can be paid. On the wording of S. 31A of the amended Bonus Act, it is quite clear that the limit of 20% is placed on bonus which is based on profits. It is urged that S. 31A deals with bonus linked with production or productivity also irrespective of the question whether there is profit or not, if so, what is paid under the scheme in this case relates to production or productivity, hence payment under the scheme and bonus based on profits both considered together, cannot exceed 20% of the salary/wages earned by the employees during the relevant year. If the payment under the scheme can properly be said to be bonus the company's contention mentioned above can be said to be correct. The question for consideration, therefore, is what is the nature of the payment made under the scheme. On behalf of the company, reliance is placed on the fact that the payment is styled as bonus, it depends on the extent of the production, hence according to the company it is covered by S. 31A of the amended Bonus Act. As against these contentions of the company. Dr. Kulkarni for the complainant submits that on admitted facts it is clear that the payment under the scheme is merely incentive wage and not bonus. It is true that the scheme itself is styled as 'Dispatch of Material Bonus Scheme.' The use of the expression 'bonus' is relied upon by the company. In my view the more use of the expression 'bonus' will not render it bonus if it is otherwise clear that what is paid is not bonus, but incentive wage. Reliance is placed on the fact by the complainant that the payment under the scheme is made quarterly, and not annually. Bonus is usually paid annually and this circumstances dues indicate that what is paid under the scheme is incentive wages, and not bonus although it is styled as bonus. There is one more indication, viz., while calculating the amount of gratuity, 50% of the dispatch bonus is included in the amount of wages on which gratuity is to be calculated. This is a strong indication that what is paid under the scheme as dispatch bonus is really incentive wages.

7. One more important circumstance is that the payment under the scheme is made ever since introduction of the scheme in addition to the bonus payable under the Bonus Act. The company has been paying bonus based on profits at 20% and has in addition not in lieu of paid what is contemplated by the scheme.

8. As stated above, S. 31A of the amended Bonus Act replaces S. 34(3) of the unamended Bonus Act, agreements relating to bonus under a formula different from that under the Bonus Act were permitted and given effect to without the limitation that the maximum bonus can be only 20% by S. 31A of the amended Bonus Act. Only those agreements and settlements that are based on production or productivity in lieu of bonus based on profits can be given effect to, and that too to the extent of 20%. That is the change brought about by the amendment.

9. In the present case I am unable to hold that the payment made under the scheme is bonus contemplated by S. 31A of the Bonus Act, in my view it is incentive wage, and not bonus. The main grounds on which this conclusion is based are :

(1) Payment is made every quarter, and not annually. The fact that while making payment every quarter, average of the dispatches of the four quarters of the year is taken into account would not change the nature of payment, which is admittedly made quarterly.

(2) The payment under the scheme is made in addition to and not in lieu of the bonus based on profits. During the year prior to the amendment to the Bonus Act the payment under the scheme was in addition to 20% bonus paid under the Bonus Act. The payment under the scheme has been in addition to, and not in lieu of, bonus payable under the unamended Bonus Act.

(3) Part of the payment made under the scheme is treated as part of the wages while calculating gratuity.

(4) The various clauses of the scheme indicate that payment under the scheme will have to be made even though bonus based on profits may not be payable if the company incurs loss.

On these grounds, I hold that the payment made under the scheme is incentive wage, and not bonus contemplated by S. 31A of the amended Bonus Act.

10. In view of the above conclusion, the respondent-company is hereby restrained from giving effect to the notice, dated November 6, 1975. If any payments under the abovementioned scheme are due, they shall be paid on or before 30th April, 1976. No order as to costs.


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