1. This is s petition under Article 226 of the Constitution of India for a writ in the nature of mandamus directing the 1st respondent, who is the State Government, to consider all the facts and circumstances of the case and exercise its powers under Section 36 of the Payment of Bonus Act, 1965, (hereinafter referred to as ' the Bonus Act,'), in accordance with law and to grant the exemption prayed for, after, setting aside the order passed by it on 10th October, 1974.
2. The facts necessary for the purpose of disposing of this writ petition are quite simple. The petitioner is a firm, which has six partners, and was doing dry cleaning work on a big scale at various places in the twin cities of Hyderabad and Secunderabad. Till June, 1972, the relationship between the management arid the workers was good, but trouble started thereafter and some time after November, 1972, the relationship between the management and the workers deteriorated rapidly, resulting in strikes, gherao and other agitations as well as violence on the part of the workers which even called for Police intervention and the petitioner-firm ultimately closed down its business in November, 1973,
3. It appears from the figures placed Effort us in the course of hearing of this petition, that the petitioner-firm made a net profit of about Rs. 1,79,000 in the year 1963-69, a net profit of Rs. 2,10,165 in the year 1969-70; and a net profit of Rs. 1,32,000 in the year 1970-71, its accounting year being from Divali to Divali. For the year 1971-72 however, it made a loss of Rs. 69,000 after payment of bonus amounting to Rs. 20.000 for that year. The minimum bonus that the, petitioner firm was required to pay for the said year 1971-72 at the rate of 8.33 per cent as provided in Section 10(2) of the Bonus Act was about Rs. 48,000. It is pertinent to note that for the very next year, that is, 1972-73, the petitioner-firm incurred a huge loss of Rs. 5,52,000.
4. The petitioner-fire, by its letter, dated 10th July, 1973 applied to the State Government under Section 36 of the Bonus Act for exemption from the payment of the balance of the bonus amounting to about Rs. 23,000 in respect of the year 1971-72 The Government, however, by the order communicated by its letter, dated 10th October, 1974, rejected that application, and it is that order that is sought to be impugned by the present petition on the ground that the name has been passed by the Government mechanically, without applying its mind to the financial position and other relevant circumstances of the petitioner-firm.
5. As the counter affidavit filed in answer to she present petition is concerned. I am constrained to observe that beyond reproducing mechanically the language of the section, it does not disclose whether there was any material before the Government on the basis of which it has rejected the petitioner's application. Such an affidavit is of no assistance for the purpose of disposing of a writ petition, and I deprecate the practice which seems to prevail which public authorities regarding counter-affidavits in reply to writ petitions as a mere formality. The affidavit should state facts and not reproduce the language of the sections of the enactment in question, as has been done in paragraph 9 of the counter-affidavit in the present case. Even though the Court is not entitled to consider the adequacy of the material before the public authority, facts must be stated in the counter-affidavit in order to show that there was some material before the authority concerned on which a reasonable man could possibly arrive at the conclusion at which it has arrived. We were, therefore, compelled to call for the file and took into the record for ourselves, as we have the power to do. Such a course has been adopted in several reported cases by various Courts and we have, therefore, resorted to the same.
6. A perusal of that file shows, no doubt, that there had been a personal interview between the representatives of the petitioner-firm and the Commissioner of Labour, on 11th March, 1974, following which the petitioner-firm by its letter; dated 20th March, 1974, addressed to the Commissioner of Labour set out several facts, which had resulted in the loss caused to the firm as well as in its dissolution and closing down of the business. The only statement of account to be found in the file was one containing the bonus estimate for the year ending with 77th October; 1971 which shows a net profit of Rs. 1,32,710-81 Ps. for that period. A perusal of the documents contained in the said file further shows that, in rejecting the petitioner-turn's application for exemption under Section 36 of the Bonus Act the Government has proceeded solely on the fact that the management had been 'getting profits continuously and the exemption seems to have been sought only because of dissolution of the partnership and loss in the year 1971-72. It is from that fact alone that the Government came to the conclusion that the request for the grant of exemption was not genuine and refused the same. Moreover it must be pointed out that in refusing the exemption by the order communicated with its letter 10th October, 1974 the Government has not given any reason whatsoever for its order, but has merely stated as follows:
I am directed to state that the Government have rejected your request for grant of exemption from the payment of the prescribed minimum bonus for the year 1971-72 to the employees.
7. As already stated above, the counter-affidavit filed in reply to the writ petition, does not carry the matter any further.
8. Section 36 of the Bonus Act requires the Government to have 'regard to the financial position and other relevant circumstances' of the establishment in question for the purpose of exercising the power of exemption contained therein. It has been laid down by the Supreme Court in the case of Falan Trading Co. v. Mill Mazdoor Union 1966 II L.L.J. 546 at 556; that bonus has now acquired the character of 'a right to share in the surplus profits; and the liability to pay the same has become a statutory obligation imposed by the Payment of Bonus Act. With regard to Section 36 of that Act, the Supreme Court observed (at page 560). that the said section amounts to conditional legislation and that whether in a given case, power has been properly exercised by the Government would have to be considered when that occasion arises. In the case of Mahalakshmi Textile Mills v. Government of Madras : (1966)IILLJ546SC . it has been laid down by a single Judge of the Madras High Court (at pages 148 and 149) that in exercising its powers under Section 36 of the Bonus Act. it is the duty of the Government to consider the financial position and other relevant circumstances of the establishment and come to its conclusion after giving reasons for the same. In the case of A.K. Ghatak v. State of Assam (1971) 4 L.I.C 189, it has been held by a majority of a Bench of the Assam and Nagaland High Court (paragraphs 25 to 27), that the powers Under Section 36 is a quasi-judicial power which has to be exercised by the Government justly and fairly by means of a speaking order. A single Judge of the Calcutta High Court has in the case of Srinathpur Tea Co. Ltd. v. State of West Bengal (1971) L.I.C. 1011, also taken the view (para 16) that in exercising that power the State must make a bona fide assessment in the light of the provisions of the statute and pass a speaking order, so that it be known to the parties affected by the order that it is based on relevant consideration. The orders impugned in the said ease were set aside by the learned Judge on the ground that they were not speaking orders and that they betrayed exercise of powers mechanically. It may be pointed out that, for the purpose of deciding the writ petitions, the learned Judge called for and looked into the original records of the State Government.
9. I am in agreement with the view taken in the decisions cited in the preceding paragraph that Section 36 of the Bonus Act contemplates the exercise of a discretion which is guided and limited by the provision itself; that in exercising that power the Government must have regard to the financial position and other relevant circumstances relating to the establishment in question; and that since the order is bound to affect the civil rights of the parties the Government must pass a speaking order giving its reasons for the same.
10. Turning to the facts of the present case in the light of that legal position it is quite apparent that the order in the present case is not a speaking order. Not only did the impugned order fail to give any specific reason for rejecting the application of the petitioner-firm for exemption but it did not give the slightest indication in regard to the material on the basis of which the Government had refused to grant the exemption applied for so that an inference could be drawn as to what in fact was the reason for passing of that order. On that ground alone, the impugned, order, in my opinion, is liable to be set aside.
11. The matter, however, does not rest there. As laid down by the Supreme Court in Falan Trading cat's case, 1966 II L.L.J. 246 : A.I.R. 1967 S.C. 691, cited above, the Court hag the jurisdiction to consider whether the powers under Section 36 has been properly exercised by the Government, and I will now proceed to consider that question in regard to the present case. The original record produced before us which we have perused and to which I have already referred earlier in this judgment, shown that, apart from the solitary statement relating to the bonus estimate for the year ending with 17th October, 1971, there was no other material before the Government, on the basis of which it could have arrived at the conclusion that the management had been getting profits continuously and that the application for exemption was, there-fore, not genuine. First and foremost, in my opinion, the fact that the management might have made some profits in the past, if not a relevant consideration in the matter of the exercise of its powers by the Government under Section 36 of the Bonus Act. There is a specific provision contained in Section 15(1) of the Bonus Act laying down in what case and to what extent the employer is bound to make provision from the profits of a previous year for payment of bonus in succeeding years. The employer has to utilise the profits or at any rate a part thereof, for the purpose of his own sustenance. The fact that the management has been getting some profits in the past, without considering the actual figures of the profits for the last several years, would be no ground at all on which the Government could refuse the application for exemption like the one which was made in the present case. Moreover, apart from the provision contained in Section 15(1) of the Bonus Act, referred to above, there is no statutory obligation on an employer to set apart any part of the profits of the previous years, for payment of bonus in subsequent years. The sole ground on which the Government has acted in the present case in refusing the petitioner firm's application for exemption, viz., that 'the management has been getting pro. fits continuously' is, therefore, not a ground of which any reasonable person could possibly arrive at the conclusion that the exemption sought should be refused. It is true that it is not for the Court in exercise of writ jurisdiction to assess whether the ground on which the Government has passed a particular order is adequate, but the Court is certainly empowered to consider whether the authority concerned has acted perversely, or whether the ground on which it is purported to act h one on which a reasonable person could possibly come to the conclusion at which it had arrived. Consideration of the profits for one previous year cannot amount to consideration of 'the financial position' of an establishment within the terms of Section 36 of the Bonus Act, Moreover, if the profits of some previous years are to be taken into consideration for the purpose of assessing the overall 'financial position' of the firm, there is no reason why the huge loss of About Rs. 5,52,000 which the petitioner firm had already incurred in the very next year, viz., 1972-73 by the time the impugned order came to be passed by the Government would have been ignored by it. There is also no material whatsoever shown from the file produced before us to the effect that the Government had considered any other relevant circumstance 'as it is required to do under Section 36 of the Bonus Act.
12. I have, therefore, come to the conclusions that the order which is impugned in the present case was not passed in conformity with the power conferred on the Government under Section 36 of the Bonus Act. Apart from the fact that the said order is not a speaking order, I would, therefore, quash the impugned order on this ground also.
Jayachandra Reddy, J.
13. I agree.
14. (By the Bench)-We quash the order of the Government communicated by its letter No. 2754/Lab. I/73-5 dated 10th October, 1974 and direct the respondents to dispose of the petitioner-firm's application for exemption in accordance with Section 36 of the Bonus Act and in the light of the judgment. The respondents must pay the petitioner's costs of this petition. Advocate's fee, Rs. 100