Case Note & Summary
The appeal arose from an industrial dispute between the Management of Fertilizer Corporation of India, a Central Government undertaking, and its workmen at the Nangal unit. The dispute pertained to the quantum of bonus for the years 1964-65 and 1965-66, the deduction of an advance bonus paid, amendments to a production bonus scheme, and wages for a strike period. The President of India referred four issues for adjudication under Section 10(1)(d) of the Industrial Disputes Act, 1947, to the Industrial Tribunal, Punjab. The Tribunal held that the workmen were entitled to ex-gratia bonus as in previous years, based on a Cabinet decision communicated by the Government of India, and that the strike was justified, entitling them to wages for the strike period. The facts showed that for the first two years of production, the management had paid ad hoc bonus or made ex-gratia payments in addition to statutory bonus. For the year 1964-65, the management announced bonus strictly under the Payment of Bonus Ordinance, 1965, and later the Act, while also introducing a production bonus scheme, stating that with its introduction all ex-gratia payments stood eliminated. The workmen demanded bonus at the same rates as in the past, relying on a statement by the Minister of Labour and Employment in Lok Sabha and a subsequent communication from the Government of India that the Cabinet had decided to allow ex-gratia payments in public sector undertakings. The management gave the workmen the option to accept either the Cabinet decision or the production bonus scheme; the workmen chose the Cabinet decision. When the management did not accede, the workmen went on strike from 17th October to 31st October, 1966, during ongoing conciliation proceedings. The Supreme Court, by special leave, considered two main legal issues: whether the Cabinet decision created an enforceable agreement under Section 34(3) of the Payment of Bonus Act, 1965, entitling the workmen to ex-gratia bonus, and whether the strike was justified. On the first issue, the Court held that the communication of the Cabinet decision to the workmen with an option to accept it or the production bonus scheme, and the workmen’s demand for its implementation, constituted an agreement within the meaning of Section 34(3). The Court rejected the management’s contention that the production bonus scheme had replaced ex-gratia payment with government approval. The striking down of Section 34(2) of the Act did not affect the agreement, as it was valid under Section 34(3). On the second issue, the Court found that the strike was unjustified because the demand was not urgent or serious, the management had been participating in conciliation proceedings and had made proposals, and the workmen had deliberately avoided a scheduled conciliation meeting and refused to postpone the strike despite a request from their own representative. The Court therefore ruled that the workmen were not entitled to wages for the strike period. The appeal was partly allowed, upholding the award on bonus but reversing the decision on wages for the strike period.
Headnote
A) Labour and Industrial Law – Bonus – Section 34(3) Payment of Bonus Act, 1965 – Ex-Gratia Bonus Agreement – The workmen demanded bonus at the same rate as in previous years based on a Cabinet decision communicated by the Government of India. The management gave them an option to accept either the Cabinet decision or a production bonus scheme, and the workmen chose the Cabinet decision. Held, that this constituted an agreement under Section 34(3) of the Payment of Bonus Act, 1965, which permitted payment of bonus in excess of the statutory minimum, and the workmen were entitled to ex-gratia payment as in previous years. (Paras 1-15) B) Labour and Industrial Law – Bonus – Section 34(2) Payment of Bonus Act, 1965 – Effect of Striking Down – The Court held that the striking down of Section 34(2) by the Supreme Court had no bearing on the claim because the agreement in this case fell under Section 34(3) which remained valid and enforceable. (Paras 1-15) C) Labour and Industrial Law – Strike – Industrial Disputes Act, 1947 – Justification and Wages – The workmen went on strike during conciliation proceedings, ignoring a request to postpone the strike and a scheduled conciliation meeting. The demand was not of an urgent and serious nature, and the willful absence from the conciliation meeting showed lack of good faith. Held, that the strike was unjustified, and the workmen were not entitled to any wages for the strike period. (Paras 16-25)
Issue of Consideration
Whether the workmen were entitled to ex-gratia bonus for the years 1964-65 and 1965-66 based on the Cabinet decision communicated by the Government of India, and whether the strike from 17th October to 31st October, 1966 was justified, entitling them to wages for that period.
Final Decision
The Supreme Court partly allowed the appeal. It upheld the Industrial Tribunal’s award on the bonus issue, confirming that the workmen were entitled to ex-gratia bonus at the rates prevailing in previous years, based on the Cabinet decision which constituted an agreement under Section 34(3) of the Payment of Bonus Act, 1965. However, the Court set aside the Tribunal’s finding that the strike was justified, and held that the strike was unjustified; consequently, the workmen were not entitled to any wages for the strike period.
Law Points
- Legal points not extracted
- Communication of Cabinet decision with option to accept constitutes an agreement under Section 34(3) of Payment of Bonus Act
- 1965
- entitling workmen to bonus in excess of statutory minimum
- any dispute regarding such agreement must be based on valid agreement formed by offer
- acceptance
- and communication
- striking down of Section 34(2) does not affect validity of agreement under Section 34(3)
- strike during conciliation proceedings
- absent urgent and serious nature of demand and willful avoidance of conciliation meetings
- is unjustified
- no wages payable for period of illegal or unjustified strike.
