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The Hutti Gold Mines Kamgar Sangh Vs. Government of India and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtAndhra Pradesh High Court
Decided On
Judge
Reported in(1973)ILLJ46AP
AppellantThe Hutti Gold Mines Kamgar Sangh
RespondentGovernment of India and ors.
Excerpt:
- all india services act, 1951. sections 32(c) (as amended by section 3 of amendment act, 2005] & 10 & general clauses act, 1897, section 6: [g.s. singhvi, cj, dr.g. yethirajulu, ramesh ranganathan, g.bhavani prasad, c.v. nagarjuna reddy, jj] exemption of building from applicability of provisions of act held, (per majority) section 32(c) of the act provides that the provisions of the act shall not apply to any building the rent of which as on the date of the commencement of the a.p. buildings ( lease, rent and eviction) control (amendment) act 2005 exceeds rs.3,500/- per month in the areas covered by the municipal corporations in the state and rs.2,000/- per month in other areas. there is nothing in the provisions of the amendment act which either expressly or by necessary implication.....lakshmaiah, j.1. the constitutional validity of sub-section (10) of section 32 of the payment of bonus act, 1965 is assailed in this writ petition filed by hutti gold mines kamgar sangh, against their employer, the hutti gold mines company limited, raichur, mysore state, the 2nd respondent herein.2. the petitioner is a registered trade union of employees working in the 2nd respondent's mines. the government of india is impleaded as the 1st respondent. the 2nd respondent is the hutti gold mines co., ltd., engaged in mining of gold. the 3rd respondent is the industrial tribunal, hyderabad, constituted under section 7a of the industrial disputes act, 1947 to adjudicate upon a reference of an industrial dispute regarding payment of bonus between the petitioner and the 2nd respondent.the hutti.....
Judgment:

Lakshmaiah, J.

1. The constitutional validity of Sub-section (10) of Section 32 of the Payment of Bonus Act, 1965 is assailed in this writ petition filed by Hutti Gold Mines Kamgar Sangh, against their employer, the Hutti Gold Mines Company Limited, Raichur, Mysore State, the 2nd respondent herein.

2. The petitioner is a registered trade union of employees working in the 2nd respondent's mines. The Government of India is impleaded as the 1st respondent. The 2nd respondent is the Hutti Gold Mines Co., Ltd., engaged in mining of gold. The 3rd respondent is the Industrial Tribunal, Hyderabad, constituted under Section 7A of the Industrial Disputes Act, 1947 to adjudicate upon a reference of an industrial dispute regarding payment of bonus between the petitioner and the 2nd respondent.

The Hutti Gold Mines Company Limited is a company governed by the provisions contained in the Companies Act, 1956. It became a Government company on account of the Government of Mysore purchasing more than 51% of the share in it. The Payment of Bonus Act, 1965 (referred to hereinafter merely as 'the Act') came into force with effect from the accounting year 1964. As per Sub-section (2) of Section 1 of the Act, the Act was made applicable to every factory and every other establishment in which twenty or more persons ' are employed on any day during the accounting year.

3. The petitioner raised a dispute regarding payment of bonus for the year 1968-69 at the rate of 20% of the total annual wages of every worker under the Act. The management resisted the said claim mainly on the ground that the Act is not applicable to them as they ' are a public sector establishment, and also on the additional ground that there is no allocable surplus. The matter is pending adjudication before the 3rd respondent herein in I.D. No. 41 of 1969.

4. The petitioner contends that the exemption, under Sub-section (10) of Section 32 of the Act, of the employees employed by any establishment in the public sector from the operation of the provisions contained in the Act, save as otherwise provided therein, is a clear case of discrimination violative of the protection afforded under Article 14 of the Constitution of India.

5. The petitioner submits that the 2nd respondent-company became a Government company as defined under Section 617 of the Companies Act, 1956. The business of the 2nd respondent is gold mining. There is another gold mining establishment in India known as Kolar Gold Fields Company, which was nationalised by the Government of India barring these two establishments there are no other establishments doing gold mining in this country. Hence, there is no scope for the 2nd respondent establishment in the private sector so as to come within the scope of Section 20 of Payment of Bonus Act. The employees of th. 2 2nd respondent-company are thus denied the benefit of maximum and minimum bonus under the Act, though it is an establishment employing more than 20 persons. According to the petitioner, no distinction can be drawn between employees of a company in private sector and those in Government companies in public sector as regards payment of bonus. Even in the matter of wages and dearness allowance, the Supreme Court of India disapprove any discrimination between private and public sectors. The 2nd respondent-company or any other Government company is in no way different from other companies so far as its obligation to pay bonus to its employees is concerned. In so far as their business and conduct are concerned, even the Companies Act, 1956 did not make any distinction between the Government company and other companies,

6. The claim of the petitioner was resisted by the respondents. Shri Hansraj Chhabra, Under-Secretary in the Ministry of Labour and Employment, filed a counter, wherein it was stated that the exclusion from the operation of the Act of certain public sector establishments by virtue of Section 32(x) or Section 20 or 1 Section 32(iv) does not amount to discrimination and as such, it is not violative of Article 14 of the Constitution of India. There is a basic difference between the nature of the activities carried out by the establishment run by the Government and the private sector establishments. The object of the former is to serve public interest. The prices of services rendered and articles produced or manufactured are not always determined by usual considerations of profit. The prices charged by such undertakings can include an element of monopoly profit which is in the nature of indirect tax. Sometimes, it involves an element of subsidy too. Any surplus of income over expenditure gets merged with the general revenues and deficit is ultimately met from the general revenues. Further it is stated in the counter that the formula with regard to the payment of bonus embodied in the Act could be applied to establishments run as companies and corporations which record the trading result through a balance-sheet and a profit and loss account. The working of the formula is possible only if certain items like share capital, reserves, taxes payable, subsidies, etc., can be separately identified. The Government system of accounting does not permit this.

7. The Legislature, the counter proceeds further, gives power to the Government under Section 36 of the Act to exempt certain establishments or classes of establishments from all or any of the provisions of the Act on the ground of public interest. The classification of various establishments under Section 32 should also be deemed to have been based on similar considerations. The power to classify persons or establishments on appropriate grounds is well recognised. The Supreme Court did in fact recognise this distinction in Jalan Trading Co, v. Mill Mazdoor Union 1966-11 L.L.J. 546 : : (1966)IILLJ546SC , each class of that employees specified in Section 32 of the Payment of Bonus Act requires special treatment having regard to special circumstances and conditions governing their employment.

8. It is contended, lastly, that the exemption of certain public sector establishments under Section 20 is also based on intelligible classifications. Such establishments are required to pay excretion bonus under executive orders of the Government and the exemptions under Section 32(iv) and (x) are based on reasonable classification, and that there is no violation of Article 14 of the Constitution.

9. The point then that arises for consideration is whether Sub-section (x) of Section 32 of the Payment of Bonus Act, 1965, is hit by Article 14 of the Constitution of India.

10. The formula evolved by the Supreme Court for testing the conformity of law to the requirements of Article 14 of the Constitution is so well-known by now as not to need any citation of an authority in support of the same. What Article 14 forbids is only class legislation but not reasonable classification in making laws. The test of permissible classification is analysable into two cumulative conditions, namely, (i) that the classification under the Act must be founded on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the group and (ii), that differentia has a reasonable relation to the object sought to be achieved by the Act. In other words, there must be a nexus between the basis of classification and the object sought to be achieved by the Act. For the purpose of ascertaining whether or not the test of permissible classification is satisfied in this case, we shall have to ascertain, firstly, what the object of the Act is; secondly, what the basis of the classification is; and, lastly, whether there is a nexus between the basis of the classification and the object sought to be achieved by the Act.

The object of the Act:

11. The object of the Act, as its preamble discloses, is to provide for the payment of bonus to persons employed in certain establishments. The expression bonus is not defined in the Act nor that expression is found defined in any other enactment.

12. One of the terms of reference to Bonus Commission appointed by the Government of India in 1961 was to define the concept of 'bonus'. In the report submitted by them, it is stated thus: 'We think it proper to construe the concept of 'bonus' as sharing by the workers in the prosperity of the concern in which they are employed'. One of the considerations on which, according to the Commission, the employees are entitled to claim bonus as a matter of right is that there is a gap between the present wages and the living wage which bonus is intended to shorten.

13. In Corpus Juris Secundum, Volume II under the caption, 'As compensation for services', the following passage occurs:

The word 'bonus' is commonly used to denote an increase in salary or wages in contracts of employment. The offer of a bonus is the means frequently adopted to secure continuous service from an employee, to enhance his efficiency and to augment his loyalty to his employer and the employee's acceptance of the offer by performing the things called for by the offer binds the employer to pay the bonus so called.

14. The Textile Labour Inquiry Committee defined 'bonus' as follows :

The term 'bonus' is applied to a cash payment made in addition to wages. It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained.

15. So far as the judicial dicta is concerned we find the Supreme Court, speaking through Gajendragadkar, J. (as he then was) in the case of Associated Cement Companies v. Their Workmen : (1959)ILLJ644SC at 985, observing thus:.the formula for awarding bonus to workmen is based on two considerations: first that labour is entitled to claim a share in the trading profits of the industry because it has partially contributed to the same; and second that labour is entitled to claim that the gap between his actual wage and the living wage should within reasonable limits be filled up. The concept of labour's contribution to the profits of the industry has reference to the contribution made by the employer and the workmen taken together as a class; and so it would not be relevant to inquire which section of labour has contributed to what share of the profits. The broad idea underlying this concept is that capital invested by the employer and labour contributed by workmen jointly produce the profits of an industry. This does not necessarily mean that, in the industry in question labour must actually manufacture or produce goods, though, in the case of manufacture and production of goods contribution of labour is patent and obvious.

* * *Thus, in dealing with the claim for bonus made by workmen the two-fold basis of the formula must always be kept in mind.

16. 'The object of the Act', observed Shah, J., in delivering judgment of the Supreme Court in the case of Jalan Trading Co v. Mills Mazdoor Sabha : (1966)IILLJ546SC , at p. 704, 'being to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management and labour, Parliament has provided that bonus in a given year shall not excsed 1/5th and shall not be less than 1/25th of the total earning of each individual employee, and has directed that the excess share shall be carried forward to the next year, and that the amount paid by way of minimum bonus not absorbed by the available profits shall be carried to the next year and be set off against the profits of the succeeding years. This scheme of prescribing maximum and minimum rates of bonus together with the scheme of 'set off' and 'set on' not only secures the right of labour to share in the prosperity of the establishment but also ensures a reasonable degree of uniformity.'

17. Subba Rao, C.J., while delivering judgment of the Supreme Court in the case of Hindustan Antibiotics v. Workmen : (1967)ILLJ114SC , observed thus :

The object of the industrial law is twofold, namely, (i) to improve the service conditions of industrial labour so as to provide for them the ordinary amenities of life, and (ii) by that process, to bring about industrial peace which would in its turn accelerate productive activity of the country resulting in its prosperity. The prosperity of the country, in its turn, helps to improve the conditions of labour. By this process, it is hoped that the standard of life of the labour can be progressively raised from the stage of minimum wage, passing through need-found wage, fair wage, to living wage.

18. After having observed that till the enactment in question was passed there was no statutory obligation on the part of the employer to pay bonus, nor there was correspondingly any statutory right of an employee to receive the same, Shelat, J., observed while rendering the decision of the Supreme Court in Sanghvi Jeevraj Ghewar Chand and Ors. v. Secretary, Madras Chillies, Grains and Kirana Merchants Workers Union and Anr. : (1969)ILLJ719SC , thus:

The right to the payment of bonus and the obligation to pay it arose on principles of equity and fairness in settling such disputes under the machinery provided by the Industrial Acts and not as a statutory right and liability as provided for the first time by the present Act. In providing such statutory liability, Parliament has laid down a statutory formula on which bonus would be calculated irrespective of whether the establishment in question has during a particular accounting year made profit or not.

19. The Text can never be understood without the context and the object of the Act can better be understood in this case in its constitutional context. The principles laid down in Part IV of the Constitution, dealing with the subject-matter of 'directive principles of State policy' are fundamental in the governance of the country and it is the duty of the Parliament to apply those principles in making laws (Article 37). The Parliament shall have to strive to usher in a welfare State by securing and protecting as effectively as it may, a social order in which social justice, among other things, shall have to inform all the institutions of national life (Article 38). In. particular, it has to direct its policy towards securing equal pay for equal work for both men and women (Article 39). It has to make provision for securing just and humane conditions of work (Article 42). Article 43 enjoins on the State including Parliament to endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life.

20. It is only with a view to securing the implementation of the principles embodied in Part IV of the Constitution, the Parliament made laws contained in the Act in question. It is a piece of welfare legislation. Welfare of labour is one of the matters with respect to which the Parliament has been given power to make laws under Articles 245 and 246 read with the relevant entries, particularly, Entry 24 in the concurrent list in the 7th Schedule appended to the Constitution. The law contained in the present Act is one such.

21. The Act, in question, is entitled the Payment of Bonus Act, 1965; it is enacted, as we have already noticed, with a view to providing for the payment of bonus to persons employed in certain establishments. The Act is of all India application, excepting it be with respect to the States of Jammu and Kashmir (Section 1(2)). It applies to every establishment in which 20 or more persons arc employed on any day during an accounting year (Section 1(3)). An establishment to which this Act applies is to be continued to be governed by this Act, notwithstanding the fact that the number of persona employed therein falls below twenty (Section 1(5)). The expression 'employee' is intended to comprehend within its ambit, industrial labour (Section 2(13)). Every employee is entitled to be pail by his employer in an accounting year bonus, in accordance with the provisions of the Act (Section 8). Payment by every employer to every employee of minimum bonus at four per cent of the salary or wage earned by the employee during the accounting year or forty rupees, whichever is higher, whether there are profits in the accounting year or not, is assured (Section 10).

22. The Act envisages a scheme prescribing minimum (Section 10) and maximum (Section 11) rates of bonus together with the scheme of stay of and stay on of allocable surpluses (Section 15). We shall have occasion to comment upon this part of the case at a later stage. We shall now proceed with the consideration of the other question, namely, the basis of classification.

The basis of classification :

23. We shall now read the impugned provision of law, that is, Sub-section (x) of Section 32.

Section 32. Nothing in this Act shall apply to-

(x) Employees employed by any establishment in public sector, save as otherwise provided under this Act.

24. As per Section 20(1), 'if in any accounting year an establishment in public sector sells any goods produced or manufactured by it or renders any services, in competition with an establishment in private sector, and the income from such sale or services or both is not less than twenty per cent of the gross income of the establishment in public sector for that year, then, the provisions of this Act shall apply in relation to such establishment in public sector as they apply in relation to a like establishment in private sector.'

25. Sub-section (2) of the aforesaid section provides for an establishment in public sector to which this Act applies for being continued to be governed by the Act notwithstanding that in any subsequent accounting year its income from the sale of goods produced or manufactured by it or from services rendered or from both, in competition with an establishment in private sector, falls below twenty per cent of its gross income for that accounting year.

26. 'Establishment in private sector' is defined under Sub-section (15) of Section 2 of the Act to mean 'any establishment other than an establishment in public sector', and the expression establishment in public sector is defined under Sub-section (16) of the aforesaid section to mean 'an establishment owned, controlled or managed by-(a) a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956); (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by-(i) the Government; or (ii) the Reserve Bank of India ; or (iii) a corporation owned by the Government or the Reserve Bank of India.'

27. Section 617 of the Companies Act, 1956 (1 of 1956) defines a 'Government company' to mean 'any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government or by a State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and induces a company which is a subsidiary of a Government company as thus defined'.

28. As per Section 618 of the Act, Government companies were prohibited from having managing agents.

29. Sections 224 to 233 of the Companies Act deal with the subject-matter of providing for the appointment and remuneration of auditors, resolutions for appointing or removing auditors, prescribing qualifications and disqualifications of auditors, and defining their powers and duties. As per Section 619 of the Companies Act, in the case of a Government company, the provisions contained (herein were rendered applicable notwithstanding anything contained in Sections 224 to 233. Under that section, the auditor of a Government company shall have to be appointed or re-appointed by the Central Government on the advice of the Comptroller and Auditor General of India. The Comptroller and Auditor General of India was empowered, under Sub-section (3) thereof, to direct the manner in which the company's accounts shall have to be audited by the auditors appointed in pursuance of Sub-section (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such, to conduct a supplementary or test audit of the company's accounts by such person or persons as he may authorise in this behalf. The auditor aforesaid, under Sub-section (4) thereof, shall have to submit a copy of his audit report to the Comptroller and Auditor General of India who shall have the right to comment upon, or supplement the audit report in such retunes as he may think fit. Any such comments upon, or supplement to, the audit report shall have to be placed before the annual general meeting of the company at the same time and in the same manner as the audit report.

30. Section 619-A of the Companies Act deals with the subject-matter of 'Annual Report in Government Companies'. Under Sub-section (3) of the section, where the Central Government which is not a member of a Government company, every State Government which is a member of that company, or where only one State Government is a member of the company, that State Government, shall have to cause an annual report on the working and affairs of the company to be (a) prepared within the time specified in Sub-section (1), and (b) as soon as may be after such preparation laid before the House or both Houses of the State Legislature with a copy of the audit report and comments or supplements referred to in Sub-section (1).

31. Those are the provisions applicable specially to Government companies. It is not out of place to refer to Section 11 of the Act, particularly Sub-section (2) thereof, as per which no company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof, unless it is registered as a company under the Act, or is formed in pursuance of some other Indian law.

32. The Hutti Gold Mines Company Limited, Hutti Gold Mines, the 2nd respondent herein, is a company governed by the provisions contained in the Companies Act of 1956. The Government of Mysore State purchased more than 51% of the shares, and, therefore, it became a Government company subsequently. Excepting it be with respect to audit, there doc's not seem to be maintained any distinction by the Companies Act, 1956 between a company registered under the Companies Act and a company registered under the Act becoming subsequently, thereafter, a Government company, as defined under Section 617 of the Companies Act. Having regard to the features distinguishing a company registered under the Companies Act from a Government company as defined under Section 617 of the Companies Act from the point of the object of the Payment of Bonus Act, there cannot be mantained any distinction, whatsoever, between one and the other, and, as has already been noticed every company consisting of more than 20 persons is prohibited from carrying on its business if the object is acquisition of gain, unless it be registered under the Companies Act. Therefore, we can conclude that there is absolutely no distinction between employees of an establishment in a private sector and an establishment in public sector in the context of the Companies Act, having regard to the object of the Payment of Bonus Act. But the learned Counsel appearing for the respondents submits that there is a basic difference between the nature of activities carried on by the establishment run by the Government and the private sector establishment, and that the object of the former is to serve public interest. The prices of services rendered and articles produced or manufactured are not always determined, according to the learned Counsel, by usual considerations of profit. The prices charged by such undertakings can include an element of monopoly profit which is in the nature of indirect tax. It may equally involve an element of subsidy. Any surplus of income over expenditure gets itself merged with the general revenues and deficit is ultimately met from the general revenues. It is further contended mat the formula embodied in the Act for this payment of bonus could be applied to establishments run as companies and corporations which record in trading result through balance-sheet and a profit and loss account. The working of the formula is possible only if certain items like share capital, reserves, taxes payable, subsidies, etc., can be separately identified and the Government system of accounting obviously does not permit this...It is further submitted that the Legislature has given power to the Government under Section 36 to exempt certain establishments or class of establishments from all or any of the provisions of the Act on the ground of public interest and the classification of various establishments under Section 32 should also be deemed to have been based on similar considerations. Referring to Section 20, it was further contended that the establishments contemplated by that section were required to pay ex gratia bonus under executive orders of the Government, and, therefore, the Government companies in public sector as a class for the purpose of exemption is not hit by Article 14 of the Constitution.

33. As we have already noticed the Payment of Bonus Act applies to every establishment in which twenty or more persons are employed on any day during an accounting year. The 2nd respondent is one such establishment. The spirit of the Act as envisaged under Sub-section (5) of Section 1 is that such an establishment continues to be governed by the Act notwithstanding that the number of persons employed therein falls below twenty. The 2nd respondent-establishment but for the exemption clause must be taken to have been governed by the provisions contained in the Act. It is only on the assumption that the Act is otherwise applicable to an establishment in public sector, the exemption is enacted. Therefore, there is nothing intrinsically inherent in the provisions contained in the Act disabling the employees in an establishment in public sector from claiming the benefits under the Act but for the exemption under Sub-section 10 of Section 32. The contention of the learned Counsel, under those circumstances, to permit the possibility of applying the bonus formula as embodied in the Act to the establishment in question, is of no avail to them. By adopting a particular system of accounting, employees who are otherwise entitled for the benefit of the Act cannot be permitted to be deprived of such benefits. Even so, the counsel continues to contend that it is only in the interest of public that this exemption clause was enacted.

34. While dealing with the subject-matter of the object of the Act, we have noticed that the Act is enacted with a view to providing for the payment of bonus to the persons employed in certain establishments and that what was once considered to be in its origin merely voluntary and gratuitous was transformed into a statutory obligation on the part of the employer to pay bonus to the employee and that while providing for the payment of minimum bonus to the employees, considerations of profit were not at all taken into account by the framers of the Act, and having regard to the way in which the Supreme Court construed the concept of 'bonus', we find, that it is intended with a view to enabling the employees to share in the prosperity of the establishment to which they contribute and employees are employees and there is no distinction between the employees in an establishment in a private sector and one in public sector.

35. Every employee, under Section 8 of the Act, is entitled to be paid by his employer bonus in accordance with the provisions of the Act. While declaring, under Section 10, that every employee is entitled for the payment of minimum bonus the framers of the enactment have taken into account the wage structure of these employees for reckoning the basis of bonus.

36. The point raised before the Supreme Court in the case of Hindustan Antibiotics v. The Workmen : (1967)ILLJ114SC , is whether the wage structure including dearness allowance of a Government undertaking in the public sector should be of a pattern different from that of an undertaking in a private sector. Subba Rao, C.J., speaking for the Court, observing that no distinction can be maintained between Government undertakings in public sector and other undertakings in a private sector, observed at page 955 of the report thus:

Article 39 of the directive principles of State policy says that the State shall direct its policy towards securing equal pay for equal work for both men and women and Article 43 thereof enjoins on the State to endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. This Constitutional directive will certainly be disobeyed if the State attempts to make a distinction between the same class of labourers on the ground that some of them are employed by a company financed by it and the others by companies floated by private enterprise. These articles do not countenance the invidious distinction which is now sought to be made on the basis of the character of the employer. The Legislature in India even before the coming into force of the Constitution passed Acts regulating industries such as the Industrial Disputes Act, 1938, Industrial Employment (Standing Orders) Act, 1946, and Industrial Disputes Act, 1947. In these Acts no distinction is made between industries in public and private sectors vis-a-vis service conditions of the labour.

37. Notwithstanding the fact that the expression 'salary or wage' was defined in Sub-section (21) of Section 2 of the Act in such a way as not to include within its ambit any bonus (including incentive production and attendance bonus), yet, in view of the fact that the wage structure being adopted for reckoning the minimum as well as the maximum bonus under the Act and having regard to the object intended to be achieved by industrial law, we are of the opinion, that the principles came to be propounded by the Supreme Court speaking through Subba Rao, C. J., in the aforesaid case are equally applicable to the facts of the present case in the sense that no distinction could be maintained between the employees of an establishment in a public sector and an establishment in a private sector, so far as the payment of bonus under the Act in question is concerned.

38. From the point of the object of the Act, we find that the employees in these two classes of establishments, both in public sector as well as in private sector, cannot be distinguished or differentiated and the exemption embodied under Sub-section (x) of Section 32 of the Act is not, under those circumstances, based upon any basis much less a reasonable one. It is also pertinent in this connection to note the caution administered in the above case that in cases like this, it is not the character of the employer that is to be allowed to assume importance, but it is from the point of the employees that the problem shall have to be approached.

39. The learned Counsel persisted that the exemption is intended to be justified on the ground that it is enacted or it is conceived in the interest of the public interest as is the case contemplated under Section 36 of the Act. It may be noticed, in this connection, that both the conferral of the privileges on and the withholding of the same from the employees is governed by the provisions contained in the Act. While considering their classification, the provision for exemption also must be shown as to how it is quite conducive to the achievement of the object of the Act. We have got to examine then as to how the provisions for exemption serve the public interest. The concept of bonus was construed as sharing by their workers in the prosperity of the concern wherein they are employed. The object of the industrial law is to improve the service conditions of the industrial labour so as to provide for them the ordinary amenities of life, and, by that process, to bring about industrial peace which would in its turn accelerate productive activity of the country resulting in its prosperity, and the prosperity of the country, in its turn, helps to improve the conditions of labour, and by this process, according to the Supreme Court, it is hoped that the standard of life of the labour can be progressively raised from the stage of minimum wage, passing through need found wage, fair wage, to living wage, and the object of the Act, according to the Supreme Court, is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management as well as by labour. The directive of the Constitution, as per the directive principles, is to see that the industrial labour be guaranteed a living wage, and the bonus formula embodied in the Act is intended to bridge the gulf between the actual wage and the living wage. We fail, under those circumstances, to see how the exemption is intended to achieve the aforesaid object. Far from achieving the same, it is likely, if not certainly, to hinder and hamper the objective from being achieved.

40. We shall then proceed to consider the other aspect of the matter, namely, the nexus between the basis of classification and the object sought to be achieved by the Act.

Nexus between the basis of the classification and the object sought to be achieved by the Act:

41. In view of the fact that we have arrived at the conclusion to the effect that there is, from the point of the objective of the Act, no basis, much less a reasonable one, for the classification between the two classes of employees employed in an establishment in the private sector and the other in an establishment in the public sector, the question of considering the reasonableness of the relationship between the basis of classification and the object of the Act will not arise, as it will be relevant only if we have come to the conclusion that the classification is based on as intelligible differentia.

42. The position may be summed up thus:

(1) The history of the evolution of the concept of bonus in the Indian context, reflects the increasing awareness on the part of the framers of the Constitution of India and the makers as well as the interpreters of laws made there under, a social philosophy, permeating the entire structure of Indian society, wherein, the ideal of social justice as proclaimed in the preamble to the Constitution, is intended to be translated into actual reality by the State being required to strive to promote the welfare of the people by securing and protecting a social order in which social justice is to inform all the institutions of national life, and by further being required to secure by suitable legislation to all industrial workers 'a living wage', conditions of work ensuring a decent standard of life and full enjoyment of leisure and social opportunities, manifested in the form of laws made by Parliament, contained in Acts like the Payment of Bonus Act, 1965.

(2) Conceived in its inception, merely as gratuitous or voluntary in character, the concept of bonus after having passed through various vicissitudes in its revolutionary process, ultimately succeeded in having secured for it a statutory anchorage, by entitling every employee to be paid by his employer bonus (S. 8) and by the employee being assured of minimum bonus irrespective of the employer's making any profits (S. 10) and by securing the continuation of the application of the provisions contained in the Act to an establishment irrespective of its ceasing to be qualified for the Act to be applied, after the same was applied to it. (Ss. 1(5) and 20(2)).

(3) Part XI of the Constitution provides for the conferral and distribution of legislative powers; subject to the provisions of the Constitution, the Parliament has been given power to make laws (sic) welfare of labour is one of the matters with respect to which the Parliament has been given power to make laws under Articles 245 and 246, read with the relevant entries, particularly, entry 24 in the concurrent list in the Seventh Schedule appended to the Constitution, and the law contained in the Payment of Bonus Act is one such.

Part III of the Constitution, dealing with the subject-matter of 'Fundamental Rights', conlains such provisions subject to which alone, the Parliament can make laws.

Part IV of the Constitution, dealing with the subject-matter of 'Directive Principles of State Policy', contained provisions not enforceable by any Court, but the principles therein laid down are nevertheless fundamental, in the governance of the country, and it is the duty of the Parliament to apply these principles in making laws. Some of the principles embodied therein are that the State, including Parliament, shall have to strive to promote the welfare of the people by securing and protecting a social order in which social justice shall inform all the institutions of national life, and it shall have to endeavour to secure by suitable legislation to all industrial workers, living wage, and conditions of work ensuring u decent standard of life.

41. While Part III of the Constitution provides for what the Parliament shall not do, Part IV provides for what the Parliament shall have to do while making laws under Part XI thereof. It is the duty of the Courts while interpreting the provisions contained in any law made by Parliament under Part XI to have regard to the scheme of the Constitution as unfolded in Part IV of the Constitution. Implicit in the making of laws by the Parliament is the application and implementation of the principles embodied in Part IV of the Constitution, which are declared fundamental in the governance of the country. Principles, declared by the framers of the Constitution as fundamental in the governance of the country and principles which the Parliament has a duty to apply in making laws, are certainly principles, which the Court has not only a right, but a duty to refer to for guiding their interpretative processes. Indeed, the Supreme Court of India has, on more then one occasion, taken cognisance of these directive principles embodied in Part IV of the Constitution for determining the reasonableness of the restrictions on fundamental rights under Article 19, and the reasonableness of classification for determining what the concepts like 'Public Purpose' and 'Public Interest' denote or connote. There does not then involve, in a Court's referring to the provisions contained. HI Part IV, in an interpretative process, any element of enforcement by the Court of the provisions contained therein. In a way, the Court is only measuring the conformity of laws made by the Parliament to the requirements of the Constitution as the power of the Parliament to make laws is subject to the provisions of the Constitution.

42. The object of the Payment of Bonus Act is to maintain peace and harmony between labour and capital by allowing the employees, in recognition of their right, to share the prosperity of the establishment, reflected by the contributions made by capital, management and labour. The formula for awarding bonus to workmen is based upon the consideration that the labour is entitled to claim that the gap between actual wage and the living wage should, within reasonable limits, be filled up. This process brings about industrial peace and harmony, which accentuates the productive activity, culminating ultimately in the prosperity of the country. The dignity of the individual, proclaimed by the preamble to the Constitution, is thus sought to be assured, through securing the prosperity of the country.

(5) On the basic structures of recognition of the right of an employee to actual wages is constructed a superstructure by virtue of which the employee is entitled to have the gap between the actual wages, which he earns, and the living wage, which he is assured of constitutionally, filled up. The constitutional directive will certainly be disobeyed if the Parliament makes any attempt, preventing such a gap from being filled up.

(6) The Hutti Gold Mines Company Limited, Hutti Gold Mines, the 2nd respondent herein, is a company governed by the provisions contained in the Companies Act of 1956. The Government of Mysore State purchased more than 51 % of the shares, and, therefore, it became a Government company subsequently. Excepting it be with respect to audit and provisions relating to managing agency, there does not seem to b maintained any distinction by the Companies Act of 1956 between a company registered under the Companies Act and a company registered under the Act becoming subsequently, thereafter, a Government company, as defied under Section 617 of the Companies Act. There is absolutely no distinction between employees of an establishment being a company is a private sector and in public sector, in the context of the Companies Act, having regard to the object of the Payment of Bonus Act.

43. Maintenance of peace and harmony between labour and capital by allowing the employees in recognition of their right to share the prosperity of the establishment is as much needed in an establishment in the private sector as it is needed in an establishment in public sector. Permitting the gap between the actual wages and the living wages and the living wages to be filled up through the device of the payment of bonus is as much needed in one case as it is in the other. The employer, the 2nd respondent herein, is admittedly an establishment in public sector, employing more than 20 persons, attracting thus the application of the provisions contained in the Payment of Bonus Act. The employees therein are entitled to be paid by their employer bonus under Section 8 and they are entitled for the payment of minimum bonus under Section 10. The policy of the Act seems to be more to extend the application of the provisions rather than to restrict their application by not, extending. This is discernible in Sub-section (5) of Sub-section (1) and Sub-section (2) of Section 20 of the Act. The Act, by itself, does not furnish any clue by which to justify the exemption enacted in Sub-section CIO) of Section 32 of the Act by virtue of which the employees employed by any establishment in public sector were deprived of the benefits conferred by the Act. The provisions contained in Section 36 of the Act providing for exemption in public interest, our attention has been drawn to, for justifying the exemption under the impugned provision of law. It is not certainly in the public interest to prevent maintenance of harmony and peace between labour, management and capital. It is not certainly in the public interest to hinder or hamper the prosperity of the country, and we find, as n matter of fact, is the counter in this case, the respondent stating that provision was made through executive orders for the payment of ex gratia bonus in the case of establishments governed by Section 20 of the Act. When the need or the necessity for the payment of ex gratia bonus through executive orders is thus found recognised, we find absolutely no basis for denying the employees their right to claim bonus grounded in the statute itself.

44. For the aforesaid reasons, we are of the opinion, having regard to the object of the Act, the employees employed by an establishment in public sector are similarly situated or circumstanced as the employees employed by an establishment in private sector as not to permit any basis for securing exemption of the former from the benevolent provisions contained in the Act, and as such we are of the view that Sub-section (x) of Section 32 of the Payment of Bonus Act, 196J, is hit by Article 14 of the Constitution of India. We direct, under these circumstances, the issuance of a writ of mandamus as prayed for, declaring that provision of law as unconstitutional, and we further direct that the Industrial Tribunal, Hyderabad, the 3rd respondent herein, to dispose of the Industrial Dispute No. 41 of 1969 on its file according to the provisions of the Payment of Bonus Act, 1956.

45. The writ petition is, therefore, allowed with costs.


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