Case Note & Summary
The dispute arose between the Management of Bombay Co. Ltd. and its workmen at the Cochin branch regarding payment of bonus for the financial years 1957-58 and 1958-59. The matter was referred to the Industrial Tribunal, Ernakulam as Industrial Dispute No. 38 of 1960. The workmen claimed bonus on two grounds: first, profit bonus based on surplus under the Full Bench formula, and second, festival bonus of 1 1/2 months' wages as an implied condition of service. The appellant had already paid two months' basic salary as bonus for 1957-58 and one month's basic pay for 1958-59. The tribunal found no available surplus and rejected the profit bonus claim. Relying on the Supreme Court decision in Messrs. Ispahani Ltd. v. Ispahani Employees' Union, the tribunal held that payment of bonus at the rate of 1 1/2 months' salary had become an implied condition of service and ordered the appellant to pay that amount after adjusting the one month already paid. The appellant obtained special leave to appeal to the Supreme Court. The appellant argued that the tribunal erred in holding that an implied condition of service need not be connected with any festival, and that on the undisputed facts no case for payment of any bonus as an implied term was made out, and in any event the rate could not be 1 1/2 months' salary. The workmen supported the tribunal's findings, emphasizing that payment of some bonus at Christmas had become an established condition of service. The Supreme Court held that the tribunal was wrong in law to infer an implied condition of service for bonus without connecting the payment to a festival, especially when the rate varied from year to year. However, on evidence, the Court found that payments from 1951-52 onwards were consistently made around Christmas time, and earlier payments were probably connected with Christmas as well. Although the December payment was often designated as an advance, at least one month's salary out of the so-called advance was never recovered and was treated as a festival bonus. The Court concluded that since the minimum amount always retained with the workmen was one month's salary, the implied condition of service was to pay at least one month's salary as Christmas bonus each year. Consequently, the Supreme Court modified the tribunal's award from 1 1/2 months' salary to one month's salary for each of the two years in dispute, after adjusting the amounts already paid by the appellant.
Headnote
A) Labour Law - Festival Bonus - Implied Condition of Service - Connection with Festival Required for Non-Uniform Payments - Industrial Disputes Act, 1947 - The tribunal erred in holding that an implied condition of service for payment of bonus need not be connected with a festival. The Supreme Court held that where payment has not been uniform over the years, an implied term of service to pay bonus can be inferred only if the payment is connected with some festival; otherwise, it is impossible to infer an implied condition. (Paras 2-3) B) Labour Law - Festival Bonus - Implied Condition of Service - Evidence Established Connection with Christmas - Industrial Disputes Act, 1947 - Payments from 1951-52 onwards were made about Christmas time, and earlier payments were likely connected with Christmas. The so-called advance paid in December left at least one month's salary with the workmen and was treated as festival bonus. Held that an implied condition of service existed to pay something every year about Christmas as festival bonus. (Paras 4-5) C) Labour Law - Festival Bonus - Minimum Rate - One Month's Salary - Industrial Disputes Act, 1947 - Since payment had not been uniform but the minimum amount always retained with the workmen was one month's salary, the implied term required payment of at least one month's salary as Christmas bonus each year. The tribunal's order of 1 1/2 months' salary was modified to one month's salary after adjusting amounts already paid. (Paras 5-6)
Issue of Consideration
Whether payment of bonus at the rate of 1 1/2 months' salary had become an implied condition of service between the appellant and its workmen; specifically, whether an implied condition of service for bonus can be inferred without connection to a festival when past rates were not uniform, and what minimum amount of festival bonus was payable.
Final Decision
The Supreme Court held that the tribunal erred in law by inferring an implied condition of service for bonus without requiring connection to a festival when the payment rate was not uniform. However, on the evidence, the Court found that payments from 1951-52 onwards were connected with Christmas festival, and at least one month's salary out of the so-called December advance was always retained with the workmen and treated as festival bonus. Therefore, an implied condition of service existed to pay at least one month's salary as Christmas bonus each year. The tribunal's award of 1 1/2 months' salary was modified to one month's salary for each of the two disputed years, after adjusting the amounts already paid by the appellant.
Law Points
- Implied condition of service for festival bonus requires connection with festival when rates not uniform
- uniform rate not necessary if connected with festival
- payment called advance but minimum retained as festival bonus establishes implied term
- minimum consistently paid amount is the implied rate
