Case Note & Summary
The appeal arose from a decision of the Central Government Industrial Tribunal, Dhanbad, which dismissed a reference concerning a bonus claim made by workmen of a general insurance company. The workmen of Hercules Insurance Co. Ltd., the appellants, sought additional bonus for the years 1954 and 1955. The Central Government had referred the claim for adjudication under Section 10(1)(d) of the Industrial Disputes Act, 1947 to the Industrial Tribunal, Dhanbad, constituted under Section 7A of that Act. The employer, Hercules Insurance Co. Ltd., Calcutta, raised a preliminary objection to the validity of the reference itself, contending that payment of bonus by an insurance company was governed entirely by the provisions of the Insurance Act, 1938, particularly Section 31A and proviso (vii), and that the reference to an Industrial Tribunal was therefore incompetent. The employer also relied on Section 40C of the Insurance Act, which limits management expenses, to argue that the claim could not be sustained. The Tribunal upheld the preliminary objection, holding that the reference was invalid and dismissed it. It also incidentally observed that the plea under Section 40C was well founded. The workmen appealed to the Supreme Court by special leave. Before the Supreme Court, it was common ground that the respondent had paid the workmen bonus equivalent to two months' basic wages for each of the two years in question. The appellants claimed an additional bonus of two months' basic wages for each year, contending that the respondent's trading profits, as reflected in its balance sheet, yielded a substantial available surplus under the Full Bench formula. The Tribunal did not examine the merits because it disposed of the matter on the preliminary objection. The central legal question before the Supreme Court was whether an industrial dispute concerning bonus payable by a general insurance company could be referred for adjudication under Section 10(1) of the Industrial Disputes Act, 1947, in view of Section 31A(1)(c) of the Insurance Act, 1938. The appellants argued that proviso (vii) merely enabled the Central Government to prescribe a maximum bonus and did not take away the Central Government's power to refer bonus disputes to an Industrial Tribunal. They submitted that the Central Government might consider an insurer's financial position justified bonus but might prefer the quantum to be decided by a tribunal, or the insurer might refuse to comply with a bonus directive, making a reference necessary for enforcement. The Supreme Court rejected these contentions. It examined Section 31A(1)(c), which prohibited an insurer from employing any person whose remuneration or any part thereof took the form of commission or bonus in respect of the general insurance business. The court held that bonus under industrial law, though not a part of wages, had attained the status of a legal right and, if awarded, would constitute remuneration within the meaning of the prohibition. Proviso (vii) allowed payment of bonus in any year on a uniform basis to all salaried employees or any class, not exceeding an amount equivalent to salary for a period which the Central Government considered reasonable. The court held that this proviso was the only exception and had to be strictly confined. Its policy was to exclude the intervention of Industrial Tribunals and leave the question of bonus entirely to the discretion of the Central Government. On the argument that an insurer might disobey a Central Government directive, the court observed that there might be a lacuna which the legislature could address, but that did not alter the construction of the statutory provision. The court also relied on its earlier decision in The Central Bank of India v. Their Workmen, [1960] 1 S.C.R. 200, which interpreted an analogous provision in Section 10 of the Banking Companies Act, 1949, as prohibiting industrial bonus to bank employees. The Supreme Court therefore held that the reference was invalid and dismissed the appeal, affirming the Tribunal's decision.
Headnote
A) Industrial Disputes - Reference Validity - Insurance Act, 1938, Section 31A(1)(c) and Industrial Disputes Act, 1947, Section 10(1) - The court held that an industrial dispute for bonus raised by employees of a general insurance company could not be referred to an Industrial Tribunal because Section 31A(1)(c) contains an unqualified and absolute prohibition against paying bonus as remuneration in general insurance business. The Tribunal's decision that the reference was invalid was upheld. Held that the statutory prohibition overrides the Industrial Disputes Act reference power. (Paras 1-5) B) Insurance Law - Bonus Payment Exception - Insurance Act, 1938, Section 31A(1)(c) proviso (vii) - The exception allowing uniform bonus to salaried employees up to a period considered reasonable by the Central Government must be strictly confined to its limits. The policy behind the proviso is to exclude Industrial Tribunal intervention and leave bonus payment entirely to Central Government discretion. Held that where Central Government referred the dispute, the reference was invalid because the matter was exclusively within Central Government's domain. (Paras 1-5) C) Labour Law - Bonus as Remuneration - Insurance Act, 1938, Section 31A(1)(c); Banking Companies Act, 1949, Section 10 - Bonus claimed under industrial adjudication is a share in profits and forms part of remuneration, thus falling within the prohibition of Section 31A(1)(c). The court relied on The Central Bank of India v. Their Workmen, [1960] 1 S.C.R. 200, where Section 10 of the Banking Companies Act was similarly interpreted to bar industrial bonus. Held that insurance employees could not maintain bonus claim through Industrial Tribunal. (Paras 1-5)
Issue of Consideration
Whether a dispute raised by employees of a General Insurance Company for payment of bonus can be referred for adjudication by an Industrial Tribunal under Section 10(1) of the Industrial Disputes Act, 1947, given the prohibition and exception in Section 31A(1)(c) and proviso (vii) of the Insurance Act, 1938.
Final Decision
Appeal dismissed; Tribunal's decision upheld; reference invalid due to Section 31A(1)(c) of Insurance Act read with proviso (vii); Industrial Tribunals excluded; Central Government discretion only.
Law Points
- Section 31A(1)(c) of Insurance Act
- 1938 absolutely prohibits bonus as remuneration in general insurance business
- proviso (vii) is strict exception requiring Central Government discretion
- Industrial Tribunal intervention excluded
- reference under Section 10(1) Industrial Disputes Act invalid for insurance bonus claims
- bonus is share in profits and part of remuneration
