Management of Churakulam Tea Estate (p) Ltd. v. the Workmen & Anr.

Vaidialingam, J. In this appeal. by special leave. Mr. H. R. Gokhale, learned counsel for the management-appellant, chal­ lenges the award, dated September 21, 1964, of the Industrial Tribunal. Allcppey. in l.D. No. 10 of 1962. .- We may briefly refer to the circumstances, leading up to the passing of the award in question. The appellant owns the Churakulam Tea Estate, in Kottayam, Kerala State. From 1946 onwards, the Planters' Association of Kerala (South India) used to enter into agreements. with the representatives of the workmen, from time to time, for the payment of bonus. The first agree­ ment. in 1946. related to the payment of bonus for the years 1947, 1948 and 1949; and. by Exhibit W-5. the said agreement was extended for the years 1950 and 1951. A fresh agreement. Exhibit W-15. was entered into in 1955, for payment of bonus for the years 1952, 1953 and 1954 ar.d there appear to have been subsequent agreements also. There is no controversy that the appellant paid bonus for nine years, i.e., from 194 7 to 1951 an~ 1953 to 1956. There is also no controversy that the payment of bonus, for these years, was not at a uniform rate. For instances. r CHURAKULAM TEA ESTATE V. WORKMEN (Vaidialingam, J.)933 • from 1946 to 1949 bonus was paid at 4% of the total earnings whereas, for the year 1950, it was increased to 8t% of the total earnings. From that year onwards an initial payment of 4% was fixed, leaving the balance to be determined by industcy-wise agreements. Again, in 1955 and 1956, the initial payment was raised to 6~ % of the total earnings. So far as the year 19 5 2 was concerned, the appellant's case was that it had not paid any bonus, as such, but, on the other hand, it had made an ex-gratia payment of Rs. 3 to each worker; but the Tribunal has not accepted this plea and it has held that the said payment must be treated as one having been made towards bonus. According to the appellant, it paid bonus for the years, mentioned above, be­ cause it was earning pr6fits. For the years 1960 and 1961 also, the appellant paid bonus to its workers in accordance with the industry-wise agreements. In respect of the years 1957, 1958 and 1959, there was a memo­ randum of settlement, Exhibit M-4, dated January 25, 1960, between the managements of the various plantations and their workers, relating to payment of bonus. So far as tea estates are concerned, the agreement provides for payment of bonus, at a particular percentage of the annual total earnings of a worker, for the three years in question, depending upon the total extent of the estates concerned. There is no controversy that, under cl. 7 of this agreement, it was provided that the agreement will not apply to the appellant's estate. Therefore, so far as the pay­ ment of bonus for these three years is concerned, the appellant was not a party to any agreement. The appellant, on the ground that it had not earned any profit during these years and, on the further ground that it was not bound by the agreemenf, Exhibit M-4, declined to pay any bonus for these three years. The workmen started an agitation claim­ ing bonus at the rates mentioned in Exhibit M-4, and conciliation proceeding~ in that regard failed. Twenty-seven workers, in the factory of the appellant, struck work on the afternoon of Novem­ ber 30, 1961. The management declined to pay wages, for that day, to these factory workers. The management also laid off, without compensation, all the workmen of the estate, from Decem- ber 1, 1961 to December 8, 1961. · The State Government, by its order dated May 24, 1962, referred three questions, for adjudication, to the Industrial Tribu­ nal, Alleppey : "l. Bonus for the years 1957, 1958 and 1959. 2. Wages for days of lay off from 1-12-1961. 3. Wages for 30-11-1961 for factory workers." • Before the Tribunal, both the management and the workmen were agreed that the bonus, which was the subject of adjudica­ !Sup. CI/69-13 ' ' SUPREME COURT REPORTS ll969} I S.C.R. tion was not to be on the ba,is of available surplus and the said aspect need not be considered by the Tribunal. The respandents also accepted that the bonus claim, made by them, was not for profit bonus, production bonus or bonus connected with any festi­ val or celebration. On the other hand, the specific claim, for payment of bonus, by the workmen, was on the basis that the said payment had become traditional and customary; or, at any rate, it had become an implied condition of service. So far as the strike, on November 30, 1961, was concerned, according to the workmen the strike was legal and justified and that the factory workers were entitled to wages, for that day. It was the further case of the workmen that the lay-off, from December I, 1961 to December 8, 1961, was illegal and it disclosed a vindictive atti­ tude. on the part of the manag.~ment, and that the workmen were entitled to wages for that period also. The management resisted the claim of the workmen, in res­ pect of ,i11 the three matters. Regarding the claim for honus, it pleaded that it was not a party to the agreement, Exhibit M-4. The management contended that the payment of bonu; had not become either traditionai, or customary, in the plantation indus­ try, nor was it an implied condition of service. It also urged that inasmuch as the claim for bonus, in this case, was not connected with any festival and, as previous payments had not also been at a uniform rate, the gue;tion of payment of bonus having become either a· customary payment, or payment by virtue of an implied condition of service. was not sustainable in law. According to the management. the strike, on November 30, 1961, was both illegal and unjustified and hence the factory workers, who went on strike, were not entitled to wages. The management alsc pleaded that the lay-off, from December I to December 8. 1961. was perfectly justified, in view of the conduct of the workmen of the estate. After referring to the fact of payment of bonus, by the plan­ tation industry, from 1946 and onw~rJs, though not at a uniform rate the Industrial Tribunal held that payment of bonus could bl" con<idcrcd to have become an implied condition of service. The Tnounal, inasmuch as it was admitted that the claim tor bonus had nothing to do v.ith any festival, held that the question of its being a customary or traditional bonus. in the strict sense of the word, did not arise for consideration. In consequence. the Tribunal only considered the alternative basis of the claim, i·i~ .. that the payment of bonus had become an implied condition of service. Jn this connection, the Tribunal referred to the dzcision, o• this Court, in lspahani Ltd., Calcutta v. lspahani Employees' CHURAKULAM TEA ESTATE V. WORKMEN (Vaidialingam, !.) 935 Union(') and held that a term for paying bonus may b~ im­ plied, even though the payment may not have be~n. at a umform rate throughout; and, under such circumstances, 1t 1s open to the Tribunal itself to consider what should be the quantum of pay­ ment in a particular year. The Tribunal held. that the tests laid down in lspahani's case(') about payment bemg unbroken .and having been made for a sufficiently long period, under circum­ stances excluding the payment being made out of bounty or as ex gratia, were all satisfied, in the instant case. Having c?me. to the conclusion that the payment of bonus had become an m1phed condition of service, for the purpose of fixing the quautum tllat should be awarded, the Tribunal referred to the agreement, Exhibit M-4. While conscious of the fact that tlle appellant was specifically excluded from the operation of this agreement, the Tribunal was of the view that the percentage of bonus, fixed under Exhibit M-4 for tea industry, could be safely adopted. On this basis, the Tribunal awarded to the workmen, bonus at six-and­ two-thirds per cent of the total earnings of the workmen, for each of the three years 1957, 1958 and 1959. The Tribunal was also of the view that the strike of the fac­ tory workers, on November 30, 1961, was both legal and justi­ fied and hence directed the appellant to pay wages for that day. The Tribunal further held that the lay-off, of the workmen, by the management, for eight days from December 1, 1961, was without just cause and it was done as a retaliatory measure. It made the management liable for payment of wages to the work-· men for this period. We shall first take up the question about the legality of the award of bonus. Mr. Gokhale urged that the claim of the work­ men was on the basis that payment of bonus had become an implied term of the conditions of service. Admittedly, the claim for bonus is not related to or connected with any festival. Even according to the workmen, and as found by the Tribunal, the payment over the years had not been at a uniform rate. There can be no claim for payment of bonus, under such circumstances, as an implied condition of service, unconnected with anv festival; and the claim cannot also be recognised, either on the , basis of customary or traditional payment, in view of the fact that one of the essential ingredients, for sustaining such a claim, viz., pay­ ment at a uniform rate, is absent in this case. Counsel also urged that the Tribunal, when it held that in order to recognize a claim for bonus as an implied condition of service, the payment need not have been at a uniform rate, has misunderstood the observations of this Court, in .fshphani's Case('). which was a case of a claim for bonus relaiing to a festival. Mr. Puri, the '!earned counsel for the respondent, in view of the decisions of (!) (1960] 1S.C.R.24. ' ' • 9 36 SCPRDIE COL'R r REPORTS . [1969] I SC.R. this Court, to which we will presently refer, quite naturally found great difficulty in supporting the Tribunal regarding its award of bonus. In lspa/ia11i's case\') this Court had to cllnsider a claim for Puja bonus, in Bengal, and the essential ingredients, for sustain­ ing Such a claim when it i> based on an implied agreement. After stating that the claim. for Puja Bonus, can be based, either as a matter of implied agreement between the employers and em­ ployees, creating a tenn of employment for payment of Puja bonus, or that even where no implied agreement can be inferred, it may be payable as a customary bonus, this Court, in the said decision, specifically dealt with a claim, for payment of bonus, as an implied condition of service. This Court further accepted. as correct. the tests. laid down by the Appellate Tribunal, in Maha­ /axmi Cot1011 Mills l.td .. Calc1111a v. Malialaxmi Cotton Mills Wori.t'rs' U11in11(') for in.fcrring that there is an implied agree­ ment. for grant of such bonus. The three circumstances, laid down by the Appellate Tribunal, were : ( 1 ! that the payment must be unbroken; (2) that it must be for a sufficiently long period: and ( 3) that the circumstances, in which payment wa< made. should be such as to exclude that it was paid out of bounty. The Appellate Tribunal had also held that even if payment was not at a uniform rate throughout the period, an implied agree­ ment to pay smnething could be inferred, and it would be for the Tribunal to decide what was the reasonable amount to be paid as Puja bonus. All these principles were approved, by this Court in Jspa/iani's case( 1 ). Pausing here, it must be noted that lhc payment, al a uni­ form rate. wa.s not found necessary for establishing a claim for payment of bonus, as an implied condition of service, as tha1 claim was held to relate to a festival. This aspect has been missed by the Tribunal in the award under consideration. and it lrns proceeded on the basis that this Court has laid down that, notwithstanding that a payment is not at a uniform rate. ;1ever­ theless, a claim based on an implied condition of service, can be recognised, provided the other tests are satisfied. This Court, again had to consider the essential ingredients. to be established. whe~ payment of bonus, as customary or tradi­ tional, is claim!.!d-again related to a festival-in The Graham Trading Co. (lndia) Ltd. v. It" Workmen(") and dealt with the question, as follows : "In dealing with puja bonus based on an implied term of employment, it was .pointed out by us in Messrs. lspalwni I.td. v. fspalzani Employees' Union(') (ll [196011 S.C.R. 24. m < 19521 LAC. J70. ()) [1960) 1 S.C.R. !07, 111. u CHURAKULAM TEA ESTATE V. WORKMEN (Vaidialingam, !.) 937 • that a term may be implied, even though the payment may not have been at a uniform rate throughout. and the Industrial Tribunal would be justified in deciding what should be the quantum of payment in a particu­ lar year taking into account the varying payments made in previous years. But when the question of customary and traditional bonus arises for adjudication, the con­ siderations may be somewhat different. In such a case, the Tiibunal will have to consider; (i) whether the pay­ ment has been over an unbroken series of years; (ii) whether it has been for a sufficiently long period, though the length of the period might depend on the circumstances of each case; even so the period may nor­ mally have to be longer to justify an inference of tradi­ tional and customary puja bonus than may be the case with puja bonus based on an implied term of employ­ ment; (iii) the circumstance that the payment depended upon the earning of profits would have to be excluded and therefore it must be shown that payment was made in years of loss. In dealing with the question of cus­ tom, th.e fact that the payment was called ex gratia by the employer when it was inade, would, however, make no difference in this regard because the proof of custom depends upon the effect of the relevant factors enume­ rated by us; and it would not be materially affected by unilateral declarations of one party when the said dec­ larations are inconsistent with the course of conduct adopted by it; and (iv) the payment must have been at a uniform rate throughout to justify . an inference that the payment at such and such rate had become custom­ ary and traditional in the particular concern. It will be seen that these tests are in substance more stringent than the tests applied for proof of puja bonus as an im­ plied term of employment." It will be seen from the above extract that an additional circum­ stance has also been insisted upon, in the case of customary or traditional bonus, .that the payment must have been at a unifonn rate throughout to justify an inference that the payment at such and such a rate had become customary and tradi_tional in the particular concern. Therefore, even if the claim, in the case be­ fore us. is considered as a customary or tradition&! bonus, this test will have to be satisfied and, as mentioned earlier, it is lack­ ing in this case. I These two decisions were again adverted to by this Court in Mana1<ement of Bombay Co. ltd v. Workmen(') This Indus­ "trial Tribunal, whose award was under consideration, by this ---· (1) [1964] 7 S.C.R. 477. ' ' • 938 SGPREME COURT REPORTS [ 1969] I S.C.R. Court, in the said decision, had held that payment of bonus, as A an implied condition of service, need not be attached to any festi- val. This Court did not accept that proposition as correct. After referring to the decision in /spahani's case( 1 ) this Court ob­ served, at p, 479 : ";\ow where the payment is connected with a festi­ val it is possible to infer that there is an implied condi­ tion to pay something at the time of the festival, even though the evidence discloses that in previous years payment has not been made al a uniform rate. But it is diflicult to sec how the principle which applies to a case of payment at the time of a festival can be extended to infer an implied term of payment where the payment has been made entirely unconnected with any festival and at rates which have varied from year to year. We arc therefore of opinion that when this Court laid down that there was an implied condition of service to pay something about the time of puja festival in lspalzani's case( 1 ) it was clear that such implied condi­ tion of service could be inferred where the rate of pay­ ment was not unifom1 only when such payment was, obviously connected with some festival. Jn the pre- sent case also, the payment has not been uniform over the years and therefore before an implied term of ser- vice to pay bonus can be inferred it must b~ shown that the payment was connected with some festival. It would in our opinion be impossible to infer an implied condition of service where payment has not been uni- form in the past, unless such payment can be connect- ed with some festival. We are therefore of opinion that the tribunal was wrong in holding that an infe- rence could be drawn for payment of bonus as an im­ plied condition of service in the circumstances of the present case when the payment was not uniform in the past even though it was not connected with any festival." The above observations clearly establish that when payment of honus has not heen uniform, over the years, as in the case be­ fore us, it is impossible to infer its payment as an implied condi­ tion of service, unless such payment is connected with some festival: and, in this case, we have also rcforred to the fact that the respondents have not made any claim for bonus, in relatioio to a festival. All these decisions have again heen reviewed. by this Court, in Bombay Company (Private) Ltd. v. Their Employees('). In this decision. this Court rejected the approach made, by the (\) [l'YiO] I S.C.R. 24. (2) Civil Appeal N0. 659of1966. decided 0n 22-9-1967 ... - .. F CHURAKULAM TEA ESTATE v. WORKMEN (Vaidialingam, !.) 939 • Tribunal, for accepting a claim for bonus, as an implied condi­ tion of service; but proceeded to consider the question as to whether the claim can be rested as a customary or festival bonus. This Court negatived even such a claim, on the ground that pay­ ment had not been made at a uniform rate. It further adverted to an earlier decision, in Jardine Henderson Ltd. v. The Workmen & Anr. (1) wherein it has been held that customary bonus must always be connected with some festival. From the decisions, cited above, it follows that the Tribunal, in the instant case, was wrong in holding that an inference could be drawn for payment of bonus, as an implied condition of ser­ vice, in the circumstances of the present case, when the payment, admittedly, was not uniform and was not connected with any festival. In our view, it is impossible to infer an implied condi­ tion of service, where payment has not been uniform in the past, unless such payment can be connected with some festival. In this case, admittedly, the payments have neither been uniform, nor were they connected with any festival. The claim cannot also be sustained, even as a customary or traditional bonus, because, apart from the fact that it is not con­ nected with any festival, one of the essential ingredients, viz., that the payment should have been at a uniform rate throughout, is also admittedly lacking in this case. Therefore, the Tribunal was in enor in awarding bonus for the three years in question. The second question, that arose for consideration by the Tri­ bunal, related to the claim for wages, of the twenty-seven factory workers, who went on strike on November 30, 1961. There is no controversy that the factory workers alone went on strike, for half a day, on November 30, 1961. . The Tribunal has awarded wages for this period. Mr. Gokhale, learned counsel, contended that the strike was both illegal and unjustified. The events lead­ ing up to the strike, on that date, may be briefly noted. The con­ ciliation proceedings relating to the claim for bonus having failed, the question of refening for adjudication to the Tribunal was under consideration of the Government. The Labour Minister had called for a conference of the representatives of the manage­ ment and the workmen and the conference had been fixed on November 23, 1961. The representatives of the workmen attend­ ed the conference, but the management boycotted the same. It is the case of the workmen that to protest against the recalcitrant attitude of the management is not attending the conference, the twenty-seven factory workers alone went on strike, from 1 p.m., on November 30, 1961. In support of his contention that the strike was illegal, Mr. • Gokhale relied on s. 23(a) of the Industrial Disputes Act, 1947 (I) [1962] Supp, 3 S.C.R. 582. • 940 SUPREME COURT REPORTS [1969] I S.CR (Act XIV of 1947) (hc:rcinaftcr called the Act). The said pro· A vision is as follows : "23. J\o workman who is employed in any indus­ trial establishment shall go on strike in breach of con­ tract and no employer of any such workman shall dec­ lare a lock-out- ( a) during the pcndency of conciliation proceed­ ings before a Board and seven days after the conclusion of such proceedings; ,. The expression 'Board' is defined in s. 2( c) as a Board of Con­ ciliation, constituted under the Act. Admittedly there were n<> conciliation proceedings pending befor.I! such a Board on Novcm· ber 30, 1961, the day on which the factory workers went or strike and hence the strike docs not come under s. 23(a). Ne doubt if the strike. in this case, is hit by s. 23 (a), it will be illegal under s. 24( I )(i) of the Act; but we have already held that i1 does not come under s. 23(a) of the Act. It follows that th~ strike, in this case, cannot be considered to be illegal. Alternatively, Mr. Gokhale contended that in any event the strike on ~ovcmbcr 30, 1961. was thoroughly unjustified. Coun· sci urged that the management had participated in the concilia· :ion proceedings, rclatin1~ to the claim for bonus and, when th(}SC proceedings failed, the question of referring the dispute, ior ad·· judication, was pending before the Government. The workmen could have made a request to the Government to refer the dispute for adjudication and, thi!refore, the factory workers' going on strike cannot be justified. 1n this connection Mr. Gokhale refer­ red us to the observations. made by this Court, in M anai?ement of Chandramalai E1·tate, Ernaku/am v. Its Workmen('). In the said decision, this Court deprecated the conduct of workmen go· ing on a strike, without waiting for a reasonable time to know the result of the report of conciliation proceedings. In our opinion. this decision docs not at all support the appellant. Thcr.~ is a fundamental follacv. in this contention of th,· appellant, when it proceeds on the basis that the strike by the factorv workers, on November 30, 1961, was directly in co11ncc­ tion with the demand for bonus for the years 1957 to 1959. On the other hand the evidence, which has been pbced before us by \fr. Puri learned counsel for the respondent, clearly establishes that the strike was as a protest against the unreasonable attitude of the management in boycottin.g the conference held on Novem­ ber 23, 1961 by the Labour Minister of the State. The evidence. JI ·C -- .jjil __ , - --'~~-- ................ ~~ CHURAKULAM TEA ESTATE V. WORKMEN (Vaidialingam, /.)941 of W-1, the Secretary of the Union, is to the effect that to protest against the attitude of the management in boycotting the confo­ rence held on November 23, 1961, the factory workers went on a token strike for half a day, on November 30, l 961. There is no cross-examination of this witness, on this aspect. There is also nothing in the evidence, adduced by the management to show that the strike on November ·30, 1961 was not for the reason spoken to by the Union Secretary. Therefore, the strike must h~ held to be neither illegal nor unjustified and in consequence it must be further held that the factory workers are entitled to wages for that day. The finding of the Tribunal, in this regard, is accepted. The last question, that arises for consideration, relates to the claim for wages of the workmen, for the period of lay-off, viz., December 1, 1961 to December 8, 1961. On the very day that the factory workers went on strike i.e., November 30, 1961. the management put up a notice, Exhibit M-15, to the effe"t that since all the factory workers had gone on strike at 1 p.m., with­ out previous intimation, the management was forced to lay-off without compensation all the workmen in the entire establish­ ment, as from December 1, 1961, under s. 25E(iii) of the Act which lays down that no compensation shall be paid to a. work­ man who has been laid-off, if such laying-off is due to a strike or slowing-down of production on the part of workmen in another part of the establishment. The correspondence shows that due to the intervention of the Deputy Labour Officer, the Manage­ ment was assured, on December 7, 1961, that the workmen would not resort to any strike and, accordingly, the lay-off was with­ drawn from December 8, 1961 but the management stated that no compensation would be paid for the period of the Jay-off. Here, again, the plea of the workers is that all of them report­ ed for duty on December 1, 1961, but they were not given any work by_ the management on the ground that there was a lay-off. This plea has been found to be true, by the Tribunal, but, according to the management, the Jay-off, in this case, during this period, is justified, under the provisions of s. 25E( iii) and hence the workmen are not entitled to compensation. According to the management, inasmuch as there was a strike in the factory section, work in the other sections could not be carried on; and. as the management were not sure whether the workmen would turn up for work, lay-off, in the circumstances, was justified. We are not inclined to accept this contention advanced on behalf of the management. We have already referred to the finding of the Tribunal that twenty-seven factory workmen alone went on strike on November 30, 1961, and the entire body of workmen pre­ sented themselves for work on December 1, 1961, but they were "declined work by the management on the ground of lay-off. The plea of the management that they suffered loss, on account of the ~ • 942 SUPREME COURT REPORTS [1969] I S.C.R. half a day's strike on November 30, 1961, justifying the lay-off, A has not been accepted by the Tribunal. In fact the Tribuna! has <Iccepted the plea of the workmen that the effect of the three hnurs' token strike on r\ovcmber 30, I 961, would not have re­ rnltcd in any loss to the management, if they had allowed · the workmen to do work on December 1, 1961. TI1e Tribunal has also held that th.~ lay-off, by the management, was as a retaliatory B or vindictive measure against the factory workers, who went on 'trike on November 30, 1961. We arc in 'agreement with the findings, recorded by the Tribunal in this behalf and the award t-v the Tribunal of wages to the workmen for this period is justi- !icd. In the result, the award of the Industrial Tribunal, dated Sep- C tember 21, 1964, in l.D. No. IO of 1962, in so far as it granted bonus to the workmen for the years 1957 to 1959, is set aside, and the appeal is allowed to that extent; in other respects, the appeal stands dismissed. Parties will bear their own costs of this appeal. Y.P. Appeal partly allowed.