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Associated Publishers (Madras) Ltd. Vs. Govt. of Tamilnadu and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtChennai High Court
Decided On
Case NumberW.A. 477 of 1982 etc.
Judge
Reported in(1985)ILLJ63Mad
ActsApprentices Act, 1961 - Sections 36; Payment of Bonus Act - Sections 10 and 36; Industrial Disputes Act, 1947 - Sections 10
AppellantAssociated Publishers (Madras) Ltd.
RespondentGovt. of Tamilnadu and ors.
Cases ReferredMadras v. Government of Tamil Nadu
Excerpt:
.....or all provisions of act by government in exercise of their power under section 36 not revive the company - grant of exemption does not promote public interest - functioning of company eaten away its reserve and eroded to some extent capital assets not valid ground to claim exemption because they would not advance public interest - per chance they may serve interests of shareholders and creditors - appeal and petition dismissed. - - 36 is bad in law. if the government's decision is arrived at on irrelevant but extraneous considerations, the court has a constitutional duty to strike down such orders as being bad in law; if the order is borne out of malice, it is bad. if the order failed to take into consideration all relevant considerations, it differs from legal infirmity. the..........year : ----------------------------------------------------------------------s. no. w.p./w.a. no. year bonus accumulatedending liability loss for yearending----------------------------------------------------------------------rs. rs.1. w.a. 477 of 1982against w.p. 3797of 1978 (admittedand interim stayordered) 31.1.77 83,637 67,66,7212. w.a. 78 of 1982against w.p. 2316of 1979 (admittedand interim stayordered) 31.1.78 73,670 80,95,1083. w.a. 654 of 1982against w.p. 1991of 1980 (admittedand interim stayordered) 31.1.79 77,200 90,39,4604. w.p. 10292 of 1982(directed to beposted withw.as.) 31.1.80 75,399 103,42,6235. w.p. 5477 of 1982(directed to beposted withw.as.) 31.1.81 71,990 118,60,0436. w.p. 3506 if 1983(admitted andinterim stayordered) 31.1.82 64,250.....
Judgment:

Shanmukahm, J.

1. The same point is involved in all these proceedings and also the petitioner and the appellant are the same. Hence, a common order.

2. W.A. No. 477 of 1978 is directed against W.P. No. 3797 of 1978. W.A. No. 78 of 1982 is directed against W.P. 2316 of 1979 and W.A. No. 654 of 1982 is against W.P. No. 1991 of 1980. In W.P. No. 3797 of 1978 the appellant sought to quash the order of the Government, the sole respondent therein, who rejected the appellant's application for grant of exemption from the payment of bonus for the year 1976-'77 (from 1st February, 1976 to 31st January, 1977). In W.P. No. 2316 of 1979, the order of the Government, the sole respondent therein refusing to grant exemption to the appellant from the payment of bonus for the year ending 31st January, 1978 is challenged; so too, in W.P. No. 1991 of 1980, the order of the Government refusing to grant exemption to the appellant from the payment of bonus for the year ending 31st January, 1979 is sought to be quashed. These three writ petitions along with the three other petitions filed by The Wheel and Rim company of India as against the Government went were disposed of by a common order by Mr. Justice Sathiadev. These petitions were dismissed by the learned Judge by his common order dated 21st September, 1981. It may be stated at this stage that the three appeals preferred by The Wheel and Rim Company of India were dismissed already as withdrawn.

3. In W.P. No. 10292 of 1982, the Government's refusal to exempt from the Payment of Bonus Act for the year ended 31st January, 1980 is challenged. Similar orders for the year ended 31st January, 1981 and 31st January, 1982 are assailed in W.P. 5477 of 1982 and W.P. 3506 of 1983 respectively.

4. In W.P. 3767 of 1983 and W.P. 4165 of 1983, the order of the 1st respondent (Presiding Officer, Labour Court, Madras) fixing the quantum of bonus for respondents 2 to 30 and for respondents 2 to 16 respectively is sought to be quashed, while in W.P. No. 6825 of 1982, the order of the 1st respondent (Presiding Officer, First Additional Labour Court, Madras) fixing the quantum of bonus for the 2nd respondent is sought to be quashed.

5. The principal ground urged in support of these writ petitions is that the appellant had applied for exemption to the Government under S. 36 of The Payment of Bonus Act and it is pending. We must immediately point out that this is the only ground that was argued before us, though other grounds were set out in the affidavit filed in support of the three writ petitions.

6. The only question that was argued by Mr. Govindaswaminathan, learned senior counsel for the appellant in all these matters and that falls for consideration is, whether the Government's refusal to grant exemption to the appellant from S. 10 of the Act in exercise of their power under S. 36 is bad in law.

7. This in turn requires reference to the above two provisions. Section 10 is as follows :

'10. Payment of minimum bonus. - Subject to the other provisions of this Act, every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent accounting year a minimum bonus what shall be 8.33% of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year : Provided that where an employee has not completed fifteen years of age at the beginning of the accounting year, the provisions of this section shall have effect in relation to such employee as if for the words 'one hundred rupees' the words 'sixty rupees' were substituted.'

It must immediately be pointed out that the amendment has no impact at all for the period under consideration and indeed, both the learned counsel agreed to the said position. Section 36 runs as follows :

'36. Power of exemption. - If the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of this Act thereto, it may, by notification in the Official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act.'

8. The growth in this branch of law is in embryo stage, because the only decision which had in a way construed the power of the Government under S. 36 is the decision of the Division Bench of the Bombay High Court in appeal No. 214 of 1977 against miscellaneous petition 1566 of 1977. The said judgment was furnished to us and the authenticity is not disputed by all the counsel.

9. The constitutional validity of S. 36 is no more open to challenge - see the decision of a Constitutional Bench of the Supreme Court in Jalan Trading Co. v. Mill Mazdoor Sabha : (1966)IILLJ546SC . Both Ss. 10 and 36 are contemporaneous provisions in the Act. Section 36 enables the Government to exempt any establishment or class of establishments from the purview of all or any of the provisions of the Act. Thus, it is patent that the Government has the competence to exempt any establishment or class of establishments even from S. 10 notwithstanding that S. 10 is mandatory so far as the employer's liability to the workmen and notwithstanding the said provision is an ameliorative one from the point of view of the workmen. Therefore, we are unable to accede to the argument, because bonus is a deferred wage, under no circumstances can the Government in exercise of their power under S. 36 relieve any establishment or class of establishments from the clutches of S. 10.

10. The Learned senior Counsel for the appellant pressed into service the following factual circumstances to support the relief claimed by the appellant. These are all set out in the appellant's petition to the Government dated 24th September, 1977. They are as follows :

'The financial position is such that the company has not only exhausted all the reserves but also its capital. The company has also overdrawn from the bank to the extent of Rs. 43,87,442/- as on date. The accumulated loss as at 31st January, 1977 amounts to Rs. 67,66,718/- and after adjusting the available reserves and surpluses of Rs. 15,00,000/- the carried over loss works out to Rs. 52,66,718/-. The current liabilities and loans as on 31st January, 1977 amounts to Rs. 23,11,496/-. The overdraft facility mentioned above is not adequately covered by the securities provided by the company and therefore the question of obtaining any further finance from the Bank is ruled out. Whilst we pay very high wages to our Journalists and Non-Journalists the company is not in a position to generate money to pay bonus as required in the Act. Further from 1st April, 1977 we have agreed to pay a sum of Rs. 60/- to the non-journalists and Rs. 70/- to the journalists per mensem as interim relief as per Wage Board Recommendations without prejudice to our rights to question the legality or otherwise of the Wage Board Recommendations and pending settlements with the Unions. This payment has added more strain to the finance of the company. We find it extremely difficult to finance even the day-to-day operation of the company such as payment of salaries and wages, purchase of newsprint, etc.'

This is the first application made by the appellant claiming exemption for the period ending 31st January 1977. It is useful to refer to the particulars in relation to every accounting year :

----------------------------------------------------------------------S. No. W.P./W.A. No. Year Bonus Accumulatedending liability loss for yearending----------------------------------------------------------------------Rs. Rs.1. W.A. 477 of 1982against W.P. 3797of 1978 (Admittedand interim stayordered) 31.1.77 83,637 67,66,7212. W.A. 78 of 1982against W.P. 2316of 1979 (Admittedand interim stayordered) 31.1.78 73,670 80,95,1083. W.A. 654 of 1982against W.P. 1991of 1980 (Admittedand interim stayordered) 31.1.79 77,200 90,39,4604. W.P. 10292 of 1982(Directed to beposted withW.As.) 31.1.80 75,399 103,42,6235. W.P. 5477 of 1982(Directed to beposted withW.As.) 31.1.81 71,990 118,60,0436. W.P. 3506 if 1983(Admitted andInterim stayordered) 31.1.82 64,250 140,75,820---------------------------------------------------------------------

Thus, it is seen that the accumulated loss for the company was always on the increase. In all the subsequent five applications made by the appellant to the Government seeking exemption for the succeeding accounting years, the same grounds are urged except that there were changes in the bonus liability and the accumulated loss for the respective accounting year. In other words, the grounds urged are almost in identical terms in all these applications. The learned senior counsel further adopted the reasonings of the Division Bench of the Bombay High Court referred to above as his arguments. He laid emphasis on the following factual aspects, viz, all reserves were eaten away as also the capital is also being eroded.

11. It must be noticed that the Division Bench of the Bombay High Court has settled some principle of law in the application of S. 36 of the Act, because it did not dispose of the application finally, but remitted the matter to the learned single Judge on the Original Side of that High Court to dispose of the application in accordance with law. According to the Division Bench, the Legislature has cast a duty on the appropriate Government to examine the financial position and other circumstances of the establishment concerned and to decide then as to whether grant or rejection of such application is in the public interest or not; this provision thus creates a right in the parties as also a duty on the part of the appropriate Government to consider the application on merits and to dispose of it in accordance with the schemes of the Act. Any order passed by the Government will be subject to judicial review. If the Government's decision is arrived at on irrelevant but extraneous considerations, the Court has a constitutional duty to strike down such orders as being bad in law; mere absence of reasons is no ground to quash the order. If the reasons were found to exist on the records, it is immaterial whether such reasons were not only absent in the order but also in the counter-affidavit filed by the Government. The reason should exist in both the cases when the prayer for exemption is rejected or granted. The factum of loss is not an irrelevant consideration and should be appreciated with reference to its impact on the damage, on the liquidity and also on the stability of the concern. The scheme of payment of compulsory bonus is closely linked to the scheme of set off and set in, vide Jalan Trading Co. v. Mill Mazdoor Sabha (supra). It is untenable to contend that the powers under S. 36 of the Act are merely discretionary, vide Mahalakshmi Textile Mills Ltd., Madras v. Government of Tamil Nadu : (1969)IILLJ133Mad ; the claim and demand of the workmen in the face of the rising cost of living and the effect of exemption on the intensity of their claim and law and order position may not be wholly irrelevant; no question of the workmen sharing prosperity can arise when financial position itself poses a threat to its existence; bonus is intended to enable the workmen to share the profits and the prosperity of the concern and not to accelerate the process of its sinking. The other relevant considerations can be (i) industrial peace (ii) law and order situation (iii) effect on the production of consumer goods and (iv) difficulties in the management and the extent of the relevance will be determined by the object of the Act.

12. At the outset, we have to point out that the power exercised by this Court under Art. 226 of the Constitution of India in interfering with the order passed by the Government under S. 36 of the Act is almost the same as the power of interference by this Court with the order of the Government passed under S. 10 of the Industrial Disputes Act. In other words, if extraneous considerations had weighed with the Government, the order is liable to be struck down. If the order is borne out of malice, it is bad. If the order failed to take into consideration all relevant considerations, it differs from legal infirmity. Besides in a case where the Government exercised its powers under S. 36 of the Act, it is bound to take into consideration whether such exercise will foster the public interest. A careful reading of S. 36 of the Act will show that the appropriate Government is bound to have regard to (a) financial position and (b) other relevant circumstances of any establishment or class of establishments. The other mandate on the Government is that it shall be satisfied that it would not be in public interest to apply all or any of the provisions of the Act to such establishment or class of establishments. Thus not only has the appropriate Government a duty to consider the financial position and other relevant circumstances of an establishment, but also has to be satisfied that it would not be in public interest to apply all or any of the provisions of the Act. The following manner in which S. 36 is couched, 'it will not be in pubic interest to apply all or any of the provisions of this Act thereto', has its own significance. In our view, the Government must be of the opinion that it will not advance public interest to apply all or any of the provisions of the Act and if such opinion is formed, the Government is bound to grant exemption. It follows therefore that in a converse case, the Government is justified in refusing exemption.

13. We therefore find that there are two stages in S. 36. The first stage is that the Government shall consider financial position and other relevant circumstances of an establishment or class of establishments. The second stage is that it should be of the opinion that it would not be in the public interest to apply all or any of the provisions in the Act. To put it differently, the order of the government passed at either stage individually or collectively is open to challenge.

14. We have already pointed out that if the records should disclose that circumstances existed, it is immaterial whether the order itself made any reference or whether in counter-affidavit, it was not disclosed by the Government. So too even assuming that it is the subjective satisfaction of the Government whether it would be in public interest to apply all or any of the provisions of the Act, such executive action of the Government is subject to review by this Court under Art. 226 of the Constitution. From the existing circumstances as disclosed in the records, it is rather difficult to say that the Government had not taken into consideration the financial position and other relevant circumstances of the appellant.

15. We had carefully considered the import of S. 36 of the Act and our approach is as follow : Neither recurring loss by itself nor mere wiping out of reserves is a decisive factor. The expression employed is 'the financial position of the establishment.' Financial position is comprehensive enough to include loss as also various other factors, the totality of which would picture the economic condition of the establishment. It is not possible to exhaust what are the other relevant circumstances. According to the Division Bench of the Bombay High Court, the other relevant circumstances are industrial peace, law and order situation, effect on the production of consumer goods and difficulties in the management. We would like to add few more and they are : (a) the workmen principally being responsible for the financial set back of the company and (b) the extent of bonus liability relatable to the loss for the concerned year. Let us now explain. If the workmen had principally contributed to the financial loss of the company, it might be that in order to preserve industrial harmony, the Government may exercise their power under S. 36 and grant exemption. If the bonus liability of the establishment is very neglegible compared to the loss suffered by the company, it is not advisable that the power should be exercised by the Government. For when the company were to shoulder all other liabilities, there is no justification whether to relieve the company of this statutory liability. In other words notwithstanding the exemption, the company cannot save itself from its financial reverses.

16. We had already pointed out that the Government shall form the opinion that it will not be in public interest to apply all or any of the provisions in the Act. If there is a reasonable prospect of saving the company from becoming extinct by granting exemption under S. 36 it will be a fit case where the Government can exercise their power under the said provision. For, any closure would result in unemployment and that would not be in public interest. Another illustration is where the establishment produces essential commodity for day-to-day life of the society at large. If the circumstances should establish that the grant of exemption under S. 36 would reasonably help the establishment to resurrect and revive itself, this will also be a case where exemption would advance public interest. Yet another illustration is where the establishment is involved in the production of certain components required for defence purposes, the closure will be not only against public interest but also against the interest of the nation as a whole.

17. In the instant case, it is seen from the particulars furnished in the earlier part of our judgment that the bonus liability is most negligible compared to the accumulated lose for every year. For six consecutive years, the appellant had incurred loss. Above all, it is common ground - indeed that is the picture that is exhibited from the balancesheets for all these years produced before us - that the circulation of the English daily 'The Mail' published by the appellant has gone down from year to year. In the memorandum submitted by the appellant to the Government, there is no reference that if the exemption were to be granted, there is every chance of the company saving itself from sinking. As a matter of fact, the establishment was closed with effect from 1st January, 1982. This is a particular trade where unless the circulation is remarkable, the company cannot work profitably or even to sustain itself. From the foregoing circumstances, it is established beyond doubt that any amount of exemption from any or all provisions of the Act by the Government in exercise of their power under Section 36 will not revive the company. If so, the grant of exemption will not promote public interest. The mere fact that the functioning of the company had eaten away its reserves and has also eroded to some extent the capital assets is no valid ground to claim exemption, because they by themselves would not advance public interest; per chance they may serve the interests of the shareholders and the creditors. Again, we have to reiterate that there shall not be a discrimination between the other unsecured creditors of the establishment and the workmen unto whom the establishment is bound statutorily.

18. No doubt, the impugned orders do not in express terms refer to public interest. But, we have taken the view that if the circumstances should exist on the date when the power was exercised, it is immaterial whether the same is disclosed in the order or in the counter-affidavit filed in the proceeding. In this case, there can be no dispute as to the existence of the above facts. Thus, the order of the learned Judge does not call for interference.

19. In the result, all the appeals and writ petitions are dismissed, but we make no order as to costs.


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