High Court of Bombay

JUDGEMENT INFORMATION SYSTEM

ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.82 OF 1998 Cipla Employees Union, Room No.102, Plot No.8, Anandshradha, Friends Colony, Bhandup (E), Mumbai-400 042. ... Petitioner. V/s. 1. Cipla Limited, Bellasis Road, Mumbai Central, Mumbai-400 008. 2. Mr.Amar Lulla, Director (Finance & Administration), Cipla Limited, Ballasis Road, Mumbai Central, Mumbai-400 008. 3. Shri P.S.Ghose, Member, Industrial Court, Mumbai. ... Respondents. ...... ! Shri Colin Gonsalves for the Petitioner. ^ Shri S.K.Cooper with Shri Patel i/b.P.M.Palshikar for Respondent Nos.1 and 2. CORAM : DR.D.Y.CHANDRACHUD, J. DATED : 20-07-2001. : ORAL JUDGMENT: 1. The First Respondent, which carries on the business of manufacturing drugs and pharmaceuticals, has establishments at Bombay Central, Vikhroli and Kanjurmarg in the City of Mumbai and at Patalganga, Banglore and Pune. The Petitioner is a recognised Union for the establishment of the First Respondent within the City of Mumbai. The Company employed at the material time 140 workmen at Vikhroli and 105 at Bombay Central. Under the provisions of the Payment of Bonus Act, 1965 ("the Act"), the maximum salary within which employees were entitled to the payment of bonus was Rs.2,500/- during the period 1st April 1989 and 31st March 1994 and Rs.3,500/- thereafter, during 1st April 1994 and 31st March 1995. The salary ceiling for calculating bonus under the Act was Rs.1,600/- between 1st April 1989 and 31st March 1994 and Rs.2,500/- for the period 1st April 1994 to 31st March 1995. The First Respondent was and continues to be under a statutory obligation under the provisions of the Act to pay bonus to employees eligible to receive it. Employees whose salaries exceed the ceiling prescribed by the Act are not entitled to bonus under the Act. The First Respondent at least since 1st April 1989 provided a payment, styled as an ex-gratia. This ex-gratia consisted of two components. The first component was equivalent to bonus computed at the rate of 20%, the rate provided by the Act to those employees who were eligible to the payment of bonus under the Act. A majority of the employees of the First Respondent were in receipt of salaries which exceed the ceiling prescribed by the Act. To all these employees, the First Respondent provided bonus at the same rate of 20% as was applicable to those employees who were eligible to receive bonus under the Act. For the years 1-4-1989 to 31-3-1991, 1-4-1990 to 31-4-1991, 1-4-1991 to 31-3-1992, 1-4-1992 to 31-3-1993 and 1-4-1993 to 31-3-1994 a uniform payment of Rs.3,840/- was provided to all employees at the Mumbai Central, Vikhroli and Kanjurmarg establishments of the First Respondent. This first component, which for the purposes of convenience in description may be referred to as "Ex-gratia-I", was provided by the First Respondent without any industrial settlement having been entered into with the Petitioner. This is common ground between the parties and is accepted by both the Learned Counsel as reflecting the correct factual position. The first component, it would be material to reiterate, was paid at a fixed rate of Rs.3,840/- between 1-4-1989 and 31-3-1994 and there was no variation in this figure based upon the profits which were earned by the First Respondent. The second component of payment which for the sake of convenience may be described as "Ex-gratia-II" was paid under settlements which were entered into by the Petitioner with the First Respondent from year to year. Ex-gratia-II was paid at the rate of Rs.1000/- for 1989-90, Rs.1,660/- for 1990-91, Rs.2,560/- for 1991-92 and Rs.3,160/- each for 1992-93 and 1993-94. The total amount of ex-gratia which was paid to the workmen comprised of the sum total of these two payments, the first being a fixed payment of Rs.3,840/- per year between 1989 and 1994 without any industrial settlement and the second, a variable payment which ranged from Rs.1000 to Rs.3160/- between 1989 and 1994 and which was entirely on the basis of negotiated industrial settlements. 2. In so far as the payment of Ex-gratia-II was concerned, a reference may be made to one of the settlements which was entered into between the Petitioner and the First Respondent for, the subsequent settlements, contained broadly the same provisions. On 1st October 1990, a settlement was entered into between the Petitioner and the First Respondent in which it was recorded that the Union had approached the Company "with a request for payment of an ex-gratia amount towards the continuing co-operation being extended by the workmen in improving productivity, maintaining discipline and in the interest of peaceful and harmonious industrial relations". The terms of the settlement then provided in clause (1) that the company shall pay to the permanent workmen a sum of Rs.1,500/- as ex-gratia and that the amount will be adjusted pro-rata to the attendance during the period 1st April 1989 to 31st March 1990. Clause (4) of the settlement provided as follows : "That the company has agreed to pay this ex-gratia amount as a very special case only in the current year and this payment will not be cited as a precedent or will in no way form a basis for a similar payment in subsequent years." Settlements were entered into for five successive years commencing from 1st April 1989 with the Petitioner which was a recognised Union for the establishments at Mumbai Central, Vikhroli and Kanjurmarg. For the year 1993-94 a settlement was entered into with the Petitioner as a recognised Union for Vikhroli and Kanjurmarg and with certain representatives, allegedly of the employees of the Unit at Mumbai Central. 3. Sometime in July 1995, a lockout came to be declared by the First Respondent as a result of a situation of industrial unrest. According to the First Respondent, the lockout was a result of agitational activities adopted by the workmen at Vikhroli who are organized under the banner of the Petitioner-Union. Accordingly, for the period 1st April 1994 until 31st March 1995, the First Respondent entered into a settlement purportedly with 10 individual workmen of the Company, who are borne on the rolls of the establishment at Mumbai Central. According to the First Respondent, an individual settlement with 10 workmen was necessitated by virtue of the fact that the employees at the Mumbai Central Unit had resigned from the membership of the Petitioner. Be that as it may, clause 4 of the settlement contained the same clause as in the earlier settlements, setting out that the payment of ex-gratia was as "a very special case" and shall not create any precedent for the subsequent years. Clause 5 of the settlement thereafter provided as follows : "That the company has agreed to pay this ex-gratia amount in consideration of the workmen of Bombay Central establishment having extended co-operation in improving productivity and maintaining discipline, especially during the period from April 1995 to date and on their assurance to continue the same hereafter." The dispute between the parties has arisen out of the non-payment of ex-gratia to the employees of the Vikhroli establishment for 1994-95. For this period, the First Respondent effected payments under the Payment of Bonus Act, 1965 only to those employees whose salary ceiling fell within the outer limit prescribed by the Act. Employees at Vikhroli whose salaries fell outside the ceiling prescribed under the Act, were, however, not paid the amounts under the first component of ex-gratia which they had been paid all the previous years since 1st April 1989. Similarly, the second component of ex-gratia which had been paid to all employees at the Vikhroli establishment since 1st April, 1989 regardless of whether or not they were eligible to receive the bonus under the provisions of the Act, was similarly not paid. Both these components of ex gratia have been paid to the workmen at Mumbai Central and Kanjurmarg. 4. On 28th September 1995, the Petitioner made a demand for bonus for the year 1994-95 recording the fact that the Company had achieved a turn over of Rs.300/- crores. A demand for the payment of 20% of the total earnings of each workman as and by way of bonus and a payment of an amount of Rs.10,000/- as ex-gratia was made. In response, the Company stated by its letter dated 13th October 1995 that the statutory payment of bonus under the provisions of the Payment of Bonus Act, 1965 was required to be made on or before 30th November 1995, which would be paid in due course. The First Respondent, however, stated that it did not propose to make any payment of ex-gratia "in view of the current situation". On 29th November 1995, the Petitioner addressed a letter of protest to the First Respondent recording that the Company was discriminating between on the one hand workmen of the Mumbai Central establishment to whom a payment of Rs.7,500/- had been made and to whom cheques had been issued before the Diwali Festival and on the other hand the establishment at Vikhroli where the employees had been deprived of such payments. A similar letter was addressed on 21st December 1995. 5. On 23rd January 1996, a complaint under the provisions of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 was instituted by the Petitioner against the First and Second Respondents. The Petitioner submitted therein that the First Respondent was recording high profits every year and that the practice of the Company was to decide upon the quantum of bonus payments after the finalisation of the annual accounts. The practice was to pay bonus under the Act and an additional amount as and by way of ex-gratia. The quantum was decided after discussion with the Union. The Company, it was claimed, made a net profit of Rs.2482.07 lakhs for the year 1994-95 which was almost double the profit for the previous year. According to the Petitioner, there was a change in leadership of the Union and Dr.Datta Samant was elected as President of the Union in 1995. This according to the Petitioner, was not to the liking of the First Respondent which consequently started adopting a hostile attitude towards the members of the Petitioner and the workmen at Vikhroli. The grievance of the Petitioner was first and foremost that the First Respondent had refused to collectively bargain or hold discussions with the Petitioner though it was the recognised Union, as a reprisal for the change in Union leadership at Vikhroli and that this amounted to an unfair labour practice under Item 5 of Schedule II of the MRTU & PULP Act, 1971. The second grievance was that the grant of bonus payments only to the workmen at Mumbai Central and the denial of these payments to the members of the Petitioner at Vikhroli amounted to a hostile discrimination which had been practiced against the workmen at Vikhroli. The third grievance was that it had been the practice of the Company to pay ex-gratia in addition to the amount of bonus payable in accordance with the provisions of the Act and such payment of ex-gratia had "become a service condition and a customary bonus which was paid from year to year." 6. The First Respondent-employer in its written statement claimed that the workmen in the establishment at Mumbai Central had resigned from the membership of the complainant on 27th October 1994. The First Respondent claimed that it was under a statutory obligation under the Payment of Bonus Act, 1965 to pay bonus at the rate of 20% to the eligible workmen at Vikhroli and that these workmen had, in fact, been paid bonus due under the Statute. According to the First Respondent, ex-gratia could never be a matter of right and that in the past these payments had been made to the workmen in view of their continuing co-operation in improving productivity and maintaining discipline. According to the First Respondent, the indisciplined behaviour of the workmen at Vikhroli had led to a situation where the Company had to declare a lockout. Consequently, the circumstances prevailing in the establishment at Vikhroli were not such as to warrant the payment of ex-gratia to the workmen at Vikhroli. On the other hand, it was stated that the workmen at Mumbai Central who entered into a settlement had agreed to co-operate in improving productivity and maintaining discipline. 7. Evidence was adduced both on behalf of the Petitioner and the First Respondent before the Industrial Court. By its order dated 20th November 1997, the Industrial Court came to the conclusion that the Petitioner being a recognised Union under the MRTU & PULP Act, 1971, the First Respondent was bound to discuss the issue of ex-gratia with the Petitioner. In the circumstances, the Industrial Court came to the conclusion that the failure of the First Respondent to discuss the issue with the Petitioner constituted an unfair labour practice under Item 5 of Schedule II to the Act. The Industrial Court found that there was a customary practice which had not been followed by the Company. Yet, the Court concluded that there were two separate establishments of the First Respondent viz., at Mumbai Central and at Vikhroli and that in the past there were industrial settlements under which ex-gratia had been paid. The Court noted that there was a settlement for every year between 1989-90 and 1993-94 and held that unless there was a settlement, there could be no payment of ex-gratia. The Court also came to the conclusion that the Union was disentitled by its conduct to the benefit of ex-gratia payment for the year 1994-95. 8. The Learned Counsel appearing on behalf of the Petitioner urged the following submissions: (i) The uninterrupted customary practice in the present case was to pay Ex-gratia-I irrespective of the ceiling prescribed under the Act and Ex-gratia-II to all employees. This had crystallized into a condition of service and, therefore, constituted a binding agreement. The breach of the agreement constituted an unfair labour practice under Item 9 of Schedule IV; (ii) The denial of Ex-gratia-I and Ex-gratia-II payments to the workers at the Vikhroli establishment when this was continued to be paid to the workers at Mumbai Central and Kanjurmarg was a discrimination regardless of merits and hence an unfair labour practice under Item 5 of Schedule IV; (iii) The Petitioner is a recognized Union and in the present case, there was refusal to bargain in good faith with the recognised Union which constituted an unfair labour practice under item 5 of Schedule II; (iv) No reason has been shown on the part of the employer for the relevant period for discriminating against the workers at Vikhroli for 1994-95. The conduct of the employer of entering into a settlement with 10 workmen of the establishment at Bombay Central while on the other hand refusing to bargain with the Petitioner which was a recognised Union, clearly shows mala fides on the part of the employer. 9. On the other hand, the Learned Counsel appearing on behalf of the First Respondent urged that: (i) The payment which has been made ex-gratia was what it purported to be, namely an ex-gratia payment. An ex-gratia payment can never become an implied condition of service; (ii) The notice of demand which has been made by the Union showed that the demand was made on the ground that profits were made by the Company. The Union has sought a profit sharing bonus. The averments in the complaint and in the writ petition would reveal that the nature of the claim was on the ground that this was a profit sharing bonus. There was, therefore, no question of the claim made by the Union being in respect of a customary payment of bonus; and (iii) There was no discrimination on the part of the employer in entering into a settlement with the individual workmen of Mumbai Central in respect of ex-gratia for the year 1994-95 and on the other hand, declining to do so in respect of the workmen at Vikhroli. The settlement for ex-gratia which was entered into with the workmen at Mumbai Central expressly provided in clause 5 that this was on account of the co-operation to be extended by the workmen in maintaining productivity and discipline. On the other hand, in May 1995, the workmen at Vikhroli had struck work as a result of which the employer had to issue a notice of lockout. The employer was, therefore, justified in declining to grant an ex-gratia for the year 1994-95 to the workmen at Vikhroli and this was not a discrimination extraneous to merit within the meaning of Item 5. 10. At the outset, before dealing with these submissions, a reference may be made to certain developments which had taken place in the Bangalore establishment of the First Respondent. Reliance was placed thereon by the Learned Counsel appearing on behalf of the contesting parties. As in the case of the establishments at Mumbai, the First Respondent had granted the benefit of ex-gratia payments to the workmen at Bangalore since 1977. These ex-gratia payments continued to be made until the accounting year 1992-93. The Union had thereafter, demanded the payment of ex-gratia to all permanent employees whose salary exceeded the ceiling of Rs.2500/- under the Act and the payment of ex-gratia over and above the payment of 20% in lieu of bonus. The First Respondent, as in the case of the Vikhroli establishment, declined to accede to the demand save and except for the statutory payment of bonus under the Act which was required to be made to the workmen whose salaries were within the ceiling limit prescribed statutorily. A reference was made to adjudication by the Industrial Tribunal. The Industrial Tribunal held that those of the workmen whose salaries were in excess of the ceiling prescribed under the Act, were also entitled to the payment of bonus for 1992-93 but, rejected the second claim for ex-gratia. Writ Petitions were filed before the Karnataka High Court by both the management and the Union and a Learned Single Judge of the High Court sustained the award of the Tribunal in so far as it had directed the payment of bonus at the rate of 20% to those workmen whose salaries were in excess of the statutory ceiling. The finding of the Tribunal in regard to the payment of ex-gratia was, however, reversed and the matter was remanded back to the Tribunal for fresh consideration. The matter was carried in appeal and a Division Bench of the Karnataka High Court, by a judgment and order dated 2nd February 2000 affirmed the decision of the Learned Single Judge. The First Respondent having thereafter moved the Supreme Court in a Special Leave Petition, further proceedings in pursuance of the order of remand were stayed by the Supreme Court on 27th March 2000, while issuing notice to the Union. Thereafter, during the pendency of the Special Leave Petition before the Supreme Court, a settlement dated 14th December 2000 was arrived at between the parties at Bangalore in pursuance of which on 3rd April 2001 the appeal was disposed of by the Supreme Court in terms of the settlement. Under the terms of the settlement, a comprehensive revision came to be granted by the First Respondent in respect of the terms and conditions of service of the workmen. Clause 16 of the settlement is entitled "Lumpsum payment to workmen ineligible for bonus". Under the said clause, it is agreed that the workmen who are not covered under the Payment of Bonus Act, 1965 are neither eligible nor entitled for payment of any bonus and therefore, to that extent the award of the Industrial Tribunal shall stand modified. However, in consideration of the above, the First Respondent agreed that those of the workmen who were in service between 1992-93 and 1999-2000 and continue to be in service as on the date of the settlement, will receive a lumpsum as shown against their names in Column 1 of Annexure II to the settlement. In pursuance of Clause 16 various amounts were paid by the First Respondent to the workmen. The Learned Counsel appearing on behalf of the Petitioner relied upon the judgment of the Division Bench of the Karnataka High Court, and drew the attention of the Court to the evidence which was recorded before the Tribunal, relevant extracts of which appeared in the course of the judgment of the Division Bench. In the evidence it had emerged that between 1977 and 1992, the First Respondent had uniformly paid bonus and ex-gratia to all its Units. The Learned Counsel appearing on behalf of the First Respondent, however, submitted that the judgment of the Division Bench of the Karnataka High Court would now cease to have any relevance to the dispute in the present case having regard to the fact that the matter came to be settled with the Union at Bangalore in pursuance of the settlement which was arrived at during the pendency of the appeal before the Supreme Court. 11. The first aspect of the matter which may now be considered is the question as to the entitlement of the workmen to receive the payment of ex-gratia properly so-called which has been described for convenience in these proceedings as Ex-gratia-II. As noticed earlier, Ex-gratia-II came to be paid in pursuance of industrial settlements which were entered into between the Petitioner and the First Respondent. These industrial settlements consistently provided that the payment of ex-gratia was requested for by the Union towards the continuing co-operation being extended by the workmen for improving productivity, maintaining discipline and in the interests of maintaining peaceful and harmonious industrial relations. The payment of ex-gratia was agreed upon between the parties as a special case confined to the relevant year and was not to be cited as a precedent or form the basis of similar payments in subsequent years. The terms of the settlements which were arrived at under Section 2(p) read with Section 18(1) of the Industrial Disputes Act, 1947 would thus reflect an understanding between the parties that these were payments which were negotiated upon in the course of collective bargaining and were to be treated as ex-gratia payments valid and current only for that year. The Petitioner-union agreed in those settlements that the payment of ex-gratia would not create a precedent for demanding similar payment in future. Ex-gratia-II was thus, a matter of negotiated settlement from year to year. Having regard to the circumstances in which these settlements were entered into and the nature of the payments, I am of the view that the award of the Industrial Court in regard to this area does not call for any interference under Article 226 of the Constitution. A reference may also be made to the judgment of the Supreme Court in B.N.Ellas & Co. Ltd. Employees Union v. B.N.Ellas & Co.Ltd. (1960 II LLJ 219), where the Supreme Court held that though the evidence showed that certain payments were made uninterruptedly from 1942 to 1952, it was made clear every time the payment was made that it was an ex gratia payment. The payment of bonus was accepted in that case as ex-gratia bonus. The Supreme Court in these circumstances, held that it would not be possible to imply a term of service on the basis of an implied agreement when the payment was clearly made ex gratia and had been accepted as such by the workmen. 12. The Industrial Court has noted that the payment of ex-gratia took place under settlements arrived at during the course of collective bargaining. The employer was found to be justified in not granting the benefits of ex-gratia for the year 1994-95 since the Union had proceed on a strike in April 1995 which had led to the declaration of a lockout by the management. The Learned Counsel appearing on behalf of the Petitioner has fairly drawn the attention of the Court to the fact that the Industrial Court, in a related complaint has come to the conclusion that the strike which had been resorted to by the Petitioner was not justified. Though the decision of the Industrial Court is the subject mater of a Writ Petition which is pending in this Court, the Learned Counsel stated that for the purposes of the present proceedings, he is willing to proceed on the basis that the strike which was resorted to by the Union was not justified and that the lockout was in the circumstances lawful and justified. The Learned Counsel has conceded after arguments were completed that the Petitioner does not press the claim for the receipt of ex-gratia-II payment for the year 1994-95 in view of the objection raised by the First Respondent to making the payment on the ground that during the aforesaid year the workmen had proceeded on an illegal and unjustified strike. The Learned Counsel, however, submitted that the workers cannot be penalised for subsequent years also, once they have been required to forsake the payment of ex-gratia for the year 1994-95. In this regard, the Learned Counsel for the parties have informed the Court that complaints have been filed by the Petitioner in the Industrial Court for the denial of ex-gratia payments for the subsequent years. This Court is not called upon to determine the tenability of the claim which has been made in those complaints which are pending before the Industrial Court. The Industrial Court will deal with those complaints on merits and it is needless to add that the rights and contentions of the parties in those complaints are kept open to be urged when those complaints are heard. 13. The next aspect of the matter relates to the payment of Ex-gratia-I. This payment as already noted earlier, was made to those employees whose salary ceiling took them out of the purview of the Payment of Bonus Act, 1965. As already noticed earlier, the payment was made at the rate of 20% of the salary which was the same basis on which payment was made to those employees who were eligible for bonus under the Act. The Tribunal has rejected the demand for the payment of the aforesaid component to those employees who are not within the scope and purview of the Payment of Bonus Act, 1965. A perusal of the order of the Tribunal would show that the Tribunal has treated the aforesaid payment on the same footing as the payment of Ex-gratia-II. The principal reason on the basis of which the claim for Ex-gratia-II was rejected was that these payments had always been negotiated under industrial settlements between the Petitioner and the First Respondent and that in the absence of these settlements, there was no question of payment being effected. In so far as Ex-gratia-I payments are concerned, the attention of the Tribunal does not appear to have been drawn to the fact that this was never the subject matter of industrial settlements. In so far as the Mumbai establishments are concerned, it is common ground that the aforesaid payment was consistently made on and after 1-4-1989 at the same rate of Rs.3,840/- until 1992-93. The payment which was made by the employer was thus not on the basis of any industrial settlement. This aspect of the matter has not been considered by the Tribunal at all. The second important aspect of the matter which was not taken into consideration by the Tribunal is that between 1st April 1989 and 31st March 1994, the payment was made at a fixed rate of Rs.3,840/-. The payment, therefore, has admittedly not varied on the basis of the profit which was earned by the employer during the aforesaid period. The third important aspect of the matter is that in para 3(g) of the complaint, it has been expressly averred that once the quantum was decided after discussion with the Petitioner-Union, the amount was paid by the Company to all the workmen all over the country. The averment in para 3(g) of the Complaint has not been denied in para 8 of the Written Statement which has been filed before the Industrial Court. Though in para 3(c) of the Complaint, there is a reference to the fact that the quantum of bonus was decided after the finalisation of the annual accounts every year and to the fact that the Company is making high profits, in para 3(h), it has also been sought to be contended that the payment of bonus is a service condition and constitutes a customary bonus which is being made from year to year. 14. The Supreme Court held in Mumbai Kamgar Sabha v. Abdulbhai (AIR 1976 S.C. 1455), that the Payment of Bonus Act, 1965 deals with the subject of profit based bonus. The Act, it has been held, cannot, therefore, exclude by implication, other distinct and different kinds of bonus such as customary, traditional; or contractual bonus. This view has been reiterated by the Supreme Court in Hukum Chand Jute Mills Ltd. v. Second Industrial Tribunal, West Bengal (1979 (3) SCR 644. 15. Reliance has been sought to be placed on behalf of the Petitioner on a judgment of the Supreme Court in Workmen of Kettlewell Bullen & Company Ltd. vs. Kettlewell Bullen & Company Ltd. (1994 I CLR. 511). In the course of its judgment, the Supreme Court referred to the position that customary bonus differs from bonus as normally understood which is based on the general principle that labour and capital should share surplus profits available after meeting prior charges. According to the judgment, customary bonus has also to be distinguished from bonus claimed as an implied term of the contract of employment. In the course of its judgment in Kettlewell (supra) the Supreme Court referred to the distinction which was made in Graham Trading Co.(India) Ltd. v.Its Workmen (1960 (1) SCR 107) between bonus which is sought as a matter of custom or tradition and bonus that is payable as an implied term of employment. In determining whether bonus is payable by way of a custom or tradition, the following circumstances are required to be taken into consideration: (i) Whether the payment has been made over an unbroken series of years; (ii) Whether payment has been made for a sufficiently long period, though the length of the period might depend on the circumstances of each case; (iii) Whether the payment depended upon the earning of profits or, whether the consideration of profit has been excluded so that the payment was also made in years in which a loss was sustained; and (iv) whether the payment has been made at a uniform rate throughout to justify an inference that the payment at a particular rate had become customary and traditional in a particular concern. In Graham Trading (supra) the Supreme Court held that in dealing with the payment of bonus as custom, the fact that the payment when made was called as ex-gratia by the employer, would make no difference because a unilateral declaration made by the employer would not be of material significance. 16. In Vegetable Products Ltd. v. Their Workmen, (AIR 1965 SC 1499), the third circumstance which was enunciated by the Supreme Court in Graham Trading was further elaborated upon and explained. Under the third circumstance which is described in Graham Trading, it has to be proved that the payment has been made even in years of loss. In Vegetable Products the Supreme Court held that this only means that where there are years of loss, payment should have been made in those years also. However, that is not to suggest that in a case where a Company has made no loss and was fortunate enough to make a profit that there would be no customary or traditional bonus. Similarly, it was held that the fourth circumstance in the decision in Graham Trading does not require that uniformity in the payment of bonus was to be established from the beginning until the end. These decisions were referred to in the judgment in the Kettlewell case (supra) and the Supreme Court held that there was a payment at a uniform rate of 10.5% of the salary or wages over an unbroken period of 9 years between 1965 and 1973. The Tribunal, it is held, could have reasonably drawn an inference that this payment was customary or traditional bonus on the occasion of the Puja festival. In these circumstances, the Supreme Court restored the award of the Tribunal which had held that the workmen were entitled to payment of customary bonus at the rate of 10.5% of their annual salary and set aside the Judgment of the High Court which had quashed the award of the Tribunal. 17. In so far as bonus as a condition of service is concerned, the test has been reiterated by the Supreme Court in Ispahani Ltd. v. Ispahani Employees Union, reported in 1959 II LLJ 4. Referring to a decision of the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers Union (1952 II LLJ 635), the Supreme Court held that in a case where there is no express agreement between the employer and employees, the circumstances in which an agreement may be implied would include (i) the fact that the payment has been unbroken; (ii) that it has been made for a sufficiently long period; and (iii) the circumstances in which the payment has been made would be such as to exclude a payment made out of bounty. 18. In the present case, as the facts which have been adverted to earlier would show, the question as to whether these workmen at the Vikhroli Unit whose salaries were in excess of the ceiling prescribed under the Payment of Bonus Act, 1965 were also entitled to the payment of bonus at the rate of 20% has also been dealt with by the Industrial Court on the footing that unless a settlement was arrived at with the employer as in the manner of previous years, there was no right in the workmen to receive such payment. This finding is ex-facie erroneous since at no stage was the payment of ex gratia bonus at the rate of 20% of the salary to those employees whose salaries were outside the ceiling prescribed by the Act ever linked to the existence of an industrial settlement. There was no industrial settlement between the employer and the Union on this issue. Payments were made by the employer though there was no such settlement. These aspects of the matter and the tests which have been laid down by the Supreme Court have not been considered by the Industrial Court. The error of the Industrial Court has been to equate the question of ex gratia I with ex gratia II. As noticed earlier, industrial settlements were entered into from year to year for the payment of ex gratia II only. Ex gratia I was not governed by any of these settlements. Ex gratia I was paid independent of the existence of negotiated settlements. The Industrial Court has therefore, been in error in equating the question of ex gratia I with ex gratia II and holding that in the absence of settlement, ex gratia I, too would be inadmissible. In these circumstances, I am of the view that it would be appropriate to set aside that part of the judgment of the Industrial Court and to remand the matter back to the Court for reconsideration of the question as to whether the Complainant-Union has made out a case for payment of Ex-gratia-I on the ground which has been set out in para 3(h) of the Complaint. 19. The Industrial Court, it must also be noted, has arrived at the conclusion that in the present case, there was a refusal on the part of the employer to bargain in good faith with the recognised Union. There is no dispute about the fact that the Petitioner is a recognised Union. Section 20 of the MRTU & PULP Act, 1971 deals with the rights of a recognised Union. A recognised Union is entitled as a matter of right, for the purposes of the prevention or settlement of industrial disputes to meet and discuss with the employer or any person appointed by him in that behalf in relation to the grievances of employees employed in his undertaking (Section20(1)(c)(ii)). Clause (b) of sub-section (2) of Section 20 provides that where there is a recognised union for any undertaking, no employee shall be allowed to appear or act or be allowed to be represented in any proceeding under the Central Act not being a proceeding in which the legality or propriety of an order or dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee is under consideration, except through the recognised union. The Industrial Court has come to the conclusion that the employer has refused to bargain collectively in good faith under Item 5 of Schedule II. There is no infirmity in this finding which has been arrived at by the Industrial Court. 20. In the circumstances, this Writ Petition is disposed of in terms of the following directions: (1) The Learned Counsel appearing on behalf of the Petitioner states that the Petitioner agrees to surrender Ex-gratia-II for the period 1994-95 in view of the lockout which commenced from July 1995; (2) The order passed by the Industrial Court in so far as the claim for the payment of Ex-gratia-II for the year 1994-95 is concerned, is confirmed; (3) No opinion is expressed by the Court on the merits of the pending complaints which have been instituted by the Petitioner in respect of the payment of Ex-gratia-II for subsequent years after 1994-95 or in respect of any of the other reliefs, if any, since these do not fall for consideration; (4) The order of the Industrial Court and the directions which have been issued in respect of the finding that the First Respondent has committed an unfair labour practice under Item 5 of Schedule II is confirmed; (5) The order of the Industrial Court in so far as the question as to whether the payment of Ex-gratia-I has become a matter of customary bonus or in the alternative, a condition of service is quashed and set aside. The matter is remanded back to the Industrial Court for reconsideration on the basis of the evidence which is already on the record of the Industrial Court. The Industrial Court shall hear and dispose of the Complaint confined to the aforesaid question within a period of 3 months from today. 21. The Writ Petition is allowed to the limited extent as aforesaid and is disposed of in terms of these directions. There shall be no order as to costs. Certified copy expedited. ......  Home