Case Note & Summary
The appeal arose from a challenge by a cotton textile mill in Bombay to a notification issued by the Government of Bombay under Section 114(2) of the Bombay Industrial Relations Act, 1946, extending a bonus award to the appellant mill despite its not being a party to the underlying agreement. The appellant had been incurring losses from 1950 to 1955. References under Section 73-A of the Act regarding bonus for 1952 and 1953 were pending before the Industrial Court when the Mill-owners' Association and the Rashtriya Mill Mazdoor Sangh, a representative union, entered into an agreement for payment of bonus for 1952 to 1957. The agreement provided for minimum bonus of 4.8 per cent of basic wages even where a mill made actual loss, with adjustment against future surplus. The agreement was registered and made an award against member mills, but the appellant did not sign it. The union requested the State Government to enforce the award against the appellant under Section 114(2), and after hearing, the Government issued notification dated July 31, 1956, directing enforcement of the bonus award for 1952-1953 and 1954-1957 against the appellant. The appellant challenged the notification and the constitutional validity of Section 114(2) in writ proceedings, but the Bombay High Court dismissed the petition and the appeal, granting certificate to appeal to the Supreme Court. The legal issues were whether Section 114(2) violated Articles 14, 19(1)(f) and 19(1)(g) of the Constitution, and whether the notification exceeded the power conferred by that section. The appellant argued that Section 114(2) gave unguided and arbitrary power to discriminate, placed unreasonable restriction on business, and prevented adjudication of industrial disputes. It further contended that the notification was bad because it was made while a reference was pending and ignored a Full Bench decision that no bonus was payable where the employer had no profits. The State defended the validity of the section and the notification. The majority, per Wanchoo J., did not consider the constitutional challenge because the notification was ultra vires. It interpreted Section 114(2) as subject to three limitations: the subject matter of the instrument sought to be extended; conformity with industrial law laid down by the Full Bench under Section 95A and decisions of the Supreme Court; and co-extensiveness with the power of an adjudicator under the Act. Because action under Section 114(2) was a proceeding under the Act and bound by Section 95A, the State could not direct bonus payment contrary to the Full Bench formula requiring available surplus. Since the appellant had incurred losses, the notification directing minimum bonus was beyond power. Dissenting judge Sarkar J. upheld the validity of the section and the notification, reasoning that Section 114(2) did not require compliance with Full Bench decisions and directly permitted variance from Supreme Court rulings. The Supreme Court by majority allowed the appeal and struck down the notification as beyond the powers conferred under Section 114(2).
Headnote
A) Constitutional Law - Fundamental Rights - Articles 14, 19(1)(f), 19(1)(g) Constitution of India, 1950; Section 114(2) Bombay Industrial Relations Act, 1946 - Validity of statutory power - Appellant challenged Section 114(2) as unconstitutional for conferring unguided arbitrary power and unreasonable restriction on business; majority did not decide constitutional issue because notification was found ultra vires; dissenting judge held provision valid as restrictions reasonable in interest of general public and object of industrial peace, and not violating Article 14. (Paras not mentioned) B) Industrial Dispute - Bonus - Extension of Award/Agreement - Scope and Limitations of Section 114(2) Bombay Industrial Relations Act, 1946 - State Government's power to extend registered agreement, settlement, submission or award is limited by subject matter of underlying instrument, must conform to industrial law laid down by Full Bench under Section 95A and decisions of Supreme Court, and is co-terminous with adjudicator's power; action under Section 114(2) is a proceeding under the Act. Held that notification extending bonus award to non-consenting mill despite pending reference and contrary to Full Bench formula was beyond power. (Paras not mentioned) C) Industrial Dispute - Bonus - Full Bench Formula - Available Surplus Principle - Bombay Industrial Relations Act, 1946, Section 95A - Full Bench decision required available surplus for payment of bonus and that no bonus is payable where employer made no profits; agreement providing minimum bonus even on actual loss could not be extended under Section 114(2) to an employer with continuing losses because it would require State to do what adjudicator could not lawfully do. Held notification invalid. (Paras not mentioned) D) Industrial Dispute - Bonus - Validity of Notification - Dissenting View - Bombay Industrial Relations Act, 1946, Sections 95A and 114(2) - Dissenting judge held Section 114(2) not required to comply with Full Bench decision under Section 95A because notification is not a proceeding under that section; section directly permits variance from Supreme Court decision; notification unobjectionable and cannot be set aside. Held Act and notification valid. (Paras not mentioned)
Issue of Consideration
Constitutional validity of Section 114(2) of the Bombay Industrial Relations Act, 1946 under Articles 14, 19(1)(f) and 19(1)(g); whether the notification issued under Section 114(2) extending bonus award to appellant was beyond statutory power, ignoring Full Bench decision and pending reference.
Final Decision
By majority, the Supreme Court held that the notification dated July 31, 1956 was beyond the powers conferred on the State Government under Section 114(2) of the Bombay Industrial Relations Act, 1946 and struck it down. The majority did not decide the constitutional validity of Section 114(2). The power under Section 114(2) is limited by subject matter, must conform to Full Bench decisions under Section 95A and Supreme Court law, and is co-terminous with adjudicator's power. Since the Full Bench formula required available surplus for bonus and the appellant had losses, the notification directing minimum bonus was invalid. Dissenting judge (Sarkar J.) upheld the validity of the section and the notification.
Law Points
- State Government's power under Section 114(2) is limited by subject matter of agreement
- settlement
- submission or award
- must conform to industrial law laid down by Full Bench under Section 95A and decisions of Supreme Court
- co-terminous with adjudicator's power
- action under Section 114(2) is a proceeding under the Act
- award must conform to Full Bench formula requiring available surplus for bonus
- extension cannot direct bonus where no profits.
