Case Note & Summary
The Western India Match Company Limited, through its Bareilly Branch, was engaged in the manufacture and sale of matches at four locations in India, including Clutterbuckganj, Bareilly. It operated factories and corresponding sales offices. In 1945, the company introduced a Production Bonus Scheme as an incentive for higher production, initially applicable to about 1500 factory workmen engaged in making matches and 100 factory office staff. In 1947, the scheme was withdrawn for the factory office staff though it continued for other factory workmen. The sales office staff also received payments purporting to be production bonus for a short period in 1946 but were thereafter denied the benefit. The factory office staff raised a dispute in 1957, and an adjudicator's decision dated March 13, 1958 held them entitled to the production bonus; the Supreme Court confirmed that decision on March 17, 1961. The sales office workers, who had become members of the union around 1957, wrote to the sales manager on March 13, 1961, reiterating their claim to production bonus and pointing out that discrimination between employees of the same company would lead to heartburning. The manager replied on May 22, 1961, rejecting the demand as unreasonable. On August 18, 1961, the Government of Uttar Pradesh referred the dispute to the Third Industrial Tribunal, Allahabad. The Tribunal, by award dated October 23, 1961, held that the sales office and factory formed one single unit of industry and directed the employers to pay production bonus to the workmen employed in the sales office. The company appealed by special leave to the Supreme Court. The company argued that the sales office was entirely independent of the factory, citing separate recruitment, control and discipline practices, separate documents like letters of appointment and muster rolls, and the fact that the sales office paid rent to the factory by book adjustments. It also contended that inspectors, salesmen and retail salesmen were not workmen within the meaning of the U.P. Industrial Disputes Act, 1947, and that industrial adjudication should not impose an incentive bonus scheme. The workmen, on the other hand, established that the sales office could not exist without the factory, that the factory could not conveniently function without a sales organization, that factory production volume was arranged according to programmes prepared by the sales manager, that the sales office and factory had the same banking account though separate cheque books were maintained, and that financial forecasts for the Bareilly branch made no distinction between disbursements in the sales office and factory. They also showed that 75% of the time of the workmen in the sales office was devoted to writing work. The Court applied the principles laid down in Titaghur Paper Mills Company Ltd. v. Their Workmen and Burn & Co. v. Their Workmen, namely that while industrial adjudication should not interfere with pure management functions by imposing an incentive bonus for the first time, it may extend an existing incentive bonus scheme to the remainder of the workmen when it is already in force for the majority. On the facts, the Court found functional integrality and inter-dependence or community of financial control and management between the sales office and the factory. It held that the two must be considered part of one and the same unit of industrial production, and therefore there was no reason to discriminate against the sales office staff on the question of production bonus. The Court further held that inspectors, salesmen and retail salesmen were workmen as defined in the U.P. Industrial Disputes Act, 1947, considering the nature of their duties including the significant proportion of writing work. Accordingly, the appeals were dismissed and the Industrial Tribunal's award directing payment of production bonus to the sales office workmen was upheld.
Headnote
A) Industrial Dispute - Production Bonus Scheme - Extension of Existing Incentive Scheme - U.P. Industrial Disputes Act, 1947 - Industrial adjudication should not impose an incentive bonus scheme for the first time, but where a scheme is already in force for the majority of workmen, a Tribunal may extend it to the remaining workmen. The company had a Production Bonus Scheme since 1945 applicable to factory workmen and factory office staff, and the sales office staff were denied the benefit after 1947. Held that the Tribunal was justified in extending the scheme to the sales office staff subject to functional integrality of the units (Paras 1-8). B) Industrial Dispute - Functional Integrality of Units - Single Industrial Unit - U.P. Industrial Disputes Act, 1947 - Sales office and factory showed interdependence in that sales office could not exist without factory, factory production was planned by sales manager, there was common banking account, and financial forecasts did not distinguish disbursements, though recruitment, control and discipline were separate. Held that there was functional integrality and inter-dependence or community of financial control and management, and the two must be considered part of one and the same unit of industrial production; therefore sales office workmen were entitled to production bonus on same terms as factory workmen (Paras 1-8). C) Labour Law - Definition of Workman - Salesmen, Retail Salesmen and Inspectors - U.P. Industrial Disputes Act, 1947 - Management contended that inspectors, salesmen and retail salesmen were not workmen and thus outside the terms of reference; workmen claimed they were. Evidence showed 75% of the time of workmen in the sales office was devoted to writing work. Held that inspectors, salesmen and retail salesmen were workmen as defined in the U.P. Industrial Disputes Act, 1947, and hence within the terms of reference (Paras 1-8).
Issue of Consideration
Whether the sales office and factory were independent units or formed one industrial unit for purposes of production bonus; whether inspectors, salesmen and retail salesmen employed in the sales office were workmen within the meaning of the U.P. Industrial Disputes Act, 1947; whether the Industrial Tribunal could direct extension of the production bonus scheme to the sales office workmen
Final Decision
The Supreme Court dismissed the appeals and upheld the Industrial Tribunal's award. It held that the sales office and factory of the appellant company at Bareilly were functionally integrated and interdependent with community of financial control and management, and therefore constituted one and the same unit of industrial production. Consequently, the production bonus scheme applicable to factory workmen was extended to the workmen employed in the sales office. It further held that inspectors, salesmen and retail salesmen were workmen within the meaning of the U.P. Industrial Disputes Act, 1947.
Law Points
- Industrial adjudication should not impose incentive bonus for first time
- where incentive bonus scheme already in force for majority of workmen
- Tribunal can extend same to remaining workmen
- functional integrality test determines single industrial unit
- interdependence of manufacturing and sales activities
- community of financial control and management
- salesmen
- retail salesmen and inspectors are workmen under U.P. Industrial Disputes Act
- 1947
- denial of production bonus to sales office staff constituted unjust discrimination
