Supreme Court Upholds Appellant Banks in Bonus Dispute; Section 10 of Banking Companies Act, 1949 Prohibited Profit-Sharing Bonus to Bank Employees Before 1956 Amendment. The 1956 Amendment Was Not Retrospective, So Pre-Amendment Bonus Claims Were Barred as Remuneration Taking the Form of Share in Profits.

Industrial dispute relating to payment of bonus to bank employees, adjudicated under the Industrial Disputes Act, 1947, with appeals before the Supreme Court against the Labour Appellate Tribunal's decision.

Appellant banks sought to set aside the Labour Appellate Tribunal's finding that Section 10 of the Banking Companies Act, 1949 did not prohibit grant of bonus, and to establish that bonus was prohibited as profit-sharing remuneration.

The dispute arose from bank employees' demands for bonus; the Central Government referred the matter to an Industrial Tribunal; the Labour Appellate Tribunal allowed bonus, prompting banks to appeal to the Supreme Court.

The Sen Tribunal award was declared void in toto by the Supreme Court for want of jurisdiction; the Sastry Tribunal held item 5 did not cover quantum of bonus for particular years; the Labour Appellate Tribunal held item 5 embraced claims to bonus and Section 10 did not prohibit bonus.

What is the scope of item 5 of Schedule II of the notification dated January 5, 1952, regarding bonus including qualifications for eligibility and method of payment? Does Section 10 of the Banking Companies Act, 1949, prior to its amendment by Act 95 of 1956, prohibit the grant of bonus to bank employees? Whether an industrial tribunal is entitled in law to compel banks to disclose secret reserves and other necessary provisions for the purpose of adjudication? Whether the Full Bench formula laid down by the Labour Appellate Tribunal in Mill Owners' Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay for payment of bonus to employees in the textile industry is applicable to banks?

Section 10 of the Banking Companies Act, 1949, read with Section 2, explicitly prohibits any employment where remuneration takes the form of a share in profits; industrial bonus is such remuneration and share in profits, thus overriding the Industrial Disputes Act, 1947 for banking companies. The scope of item 5 of the notification does not include determination of quantum of bonus for particular banks and years; it only refers to general bonus principles, qualifications, and method of payment. Industrial tribunals cannot compel banks to disclose secret reserves and internal provisions, as such disclosure is not legally required. The Full Bench formula for textile industry is not applicable to banks. Bonus is not a share in profits and therefore Section 10 does not prohibit it; it is an industrial matter left to tribunals under the Industrial Disputes Act. Item 5 of the notification covers claims to bonus for relevant years and permits adjudication of quantum. Industrial tribunals have power to require disclosure of necessary financial information including secret reserves. The Full Bench formula is applicable to banks for determining bonus.

Bonus awarded by industrial courts is 'remuneration' within the meaning of Section 10 read with Section 2 of the Banking Companies Act, 1949, and it takes the form of a share in profits. Therefore, Section 10 expressly prohibits banking companies from employing persons whose remuneration includes such profit-sharing bonus. The 1956 amendment was not retrospective, so pre-amendment Section 10 continued to bar industrial bonus for bank employees.

No banking company shall employ any person whose remuneration or part of whose remuneration takes the form ... of a share in the profits of the company. bonus in the industrial sense comes out of the available surplus of profits, and when paid, it fills the gap, wholly or in part, between the living wage and the actual wage. It is labour's share in the profits, and as it is a remuneration which takes the form of a share in profits, it comes within the mischief of s. 10 of the Act. The Banking Companies (Amendment) Act, 1956, is not a declaratory Act, and except in the small matter of the expression 'shall continue to employ' in sub-s. (1), it does not purport to explain any former law or declare what the law has always been.

In 1946, bank employees' unions presented demands for higher salaries and allowances; regional awards (Divatia, B.B. Singh, Gupta, Chakravarty, Sen) were made. On April 30, 1949, the Industrial Disputes (Banking and Insurance Companies) Ordinance brought banking companies under Central Government jurisdiction. On June 13, 1949, the Sen Tribunal was constituted; its award published August 12, 1950, was later declared void in toto by the Supreme Court for want of jurisdiction. On June 26, 1951, Industrial Disputes (Amendment and Temporary Provisions) Act, 1951 froze some gains under Sen Award. On January 5, 1952, the Sastry Tribunal (All India Industrial Tribunal (Bank Disputes)) was constituted and dispute referred; its award published April 20, 1953. The Labour Appellate Tribunal, Special Bench, decided appeals on April 28, 1954, holding item 5 embraced bonus claims and Section 10 did not prohibit bonus. Banks obtained special leave from Supreme Court on October 4, 1954; the seven consolidated Civil Appeals Nos. 56-62 of 1957 were filed.

• Banking Companies Act, 1949: Section 10, Section 2
• Banking Companies (Amendment) Act, 1956: Section 10 (amended)
• Industrial Disputes Act, 1947:
• Industrial Disputes (Banking and Insurance Companies) Ordinance, 1949:
• Industrial Disputes (Appellate Tribunal) Act, 1950:
• Industrial Disputes (Amendment and Temporary Provisions) Act, 1951: