1981 (2) TMI 200 - SC - Indian Laws

Supreme Court: Delhi Development Authority qualifies as 'local authority' exempting employees from Payment of Bonus Act

Union of India & Ors. Versus RC. Jain & Ors.

The Supreme Court determined that the Delhi Development Authority (DDA) qualifies as a 'local authority' under Section 3(31) of the General Clauses Act, ... Whether the Delhi Development Authority is a 'local Authority' whose employees are taken out of the purview of the Payment of Bonus Act 1965, by Sec. 32(iv) of that Act, which provides that nothing in the Act shall apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any Department of the Central Government or State Government or a Local Authority? Held that:- Appeal allowed. Delhi Development Auhority is a Local Authority and therefore, the provision of the Payment of Bonus Act are not attracted. Issues Involved:1. Whether the Delhi Development Authority (DDA) is a 'local authority' under Section 32(iv) of the Payment of Bonus Act, 1965.2. Interpretation of the term 'local authority' as per Section 3(31) of the General Clauses Act.3. Examination of the provisions of the Delhi Development Act, 1957.4. Autonomy and powers of the DDA.5. The power of taxation and fund management by the DDA.6. The distinction between 'local authority' and the DDA in various statutory provisions.7. The impact of the dissolution clause on the status of the DDA.8. The appropriateness of the DDA's decision to stop paying bonuses to its employees.Detailed Analysis:1. Whether the Delhi Development Authority (DDA) is a 'local authority' under Section 32(iv) of the Payment of Bonus Act, 1965:The primary issue in the appeal was to determine if the DDA qualifies as a 'local authority,' thereby exempting its employees from the Payment of Bonus Act, 1965. The Supreme Court concluded that the DDA is indeed a 'local authority,' and thus, the provisions of the Payment of Bonus Act do not apply to its employees.2. Interpretation of the term 'local authority' as per Section 3(31) of the General Clauses Act:The term 'local authority' is not defined in the Payment of Bonus Act, necessitating reference to Section 3(31) of the General Clauses Act. According to this section, a 'local authority' must be a Municipal Committee, District Board, Body of Port Commissioners, or other authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund. The court emphasized that the definition in one Act should not be imported into another unless explicitly stated.3. Examination of the provisions of the Delhi Development Act, 1957:The court examined the Delhi Development Act, 1957, which established the DDA. The Act empowers the DDA to plan and develop Delhi, a function traditionally performed by municipal bodies. The DDA is a body corporate with perpetual succession and a common seal, and it includes representatives elected from the Municipal Corporation of Delhi and the Metropolitan Council for the Union Territory of Delhi.4. Autonomy and powers of the DDA:The DDA enjoys a considerable degree of autonomy despite being subject to the supervisory powers of the Central Government. The Master Plan and Zonal Plans prepared by the DDA require Central Government approval, and the DDA must forward its budget and annual returns to the Central Government. However, within these bounds, the DDA has the freedom to decide on policy matters affecting the area it administers.5. The power of taxation and fund management by the DDA:The DDA has the power to levy fees and charges under Sections 12 and 37 of the Delhi Development Act, which are considered compulsory exactions of money. The court clarified that the distinction between tax and fee has withered away in this context. The DDA's fund, maintained under Section 23, is used for meeting expenses incurred in administering the Act, further reinforcing its status as a 'local authority.'6. The distinction between 'local authority' and the DDA in various statutory provisions:The court noted that the Delhi Development Act refers to other local authorities performing various civic functions, distinguishing them from the DDA. However, this distinction does not negate the DDA's status as a 'local authority' under Section 3(31) of the General Clauses Act. The DDA performs specific functions ordinarily entrusted to municipal bodies, justifying its classification as a 'local authority.'7. The impact of the dissolution clause on the status of the DDA:The court rejected the argument that the DDA's dissolution without reconstitution implies it is not a 'local authority.' The nature of the DDA's work is such that its existence is transient, and its dissolution upon achieving its objectives does not affect its status during its operational period.8. The appropriateness of the DDA's decision to stop paying bonuses to its employees:The court observed that the DDA had paid bonuses to its employees for over ten years and questioned the rationale behind stopping this benefit based on legal advice. The court suggested that the DDA reconsider its decision in the interest of sound management-labour relations, emphasizing that the focus should be on maintaining good relations rather than merely adhering to legal obligations.Conclusion:The Supreme Court held that the Delhi Development Authority is a 'local authority' as defined under Section 3(31) of the General Clauses Act, thereby exempting its employees from the Payment of Bonus Act, 1965. The appeal was allowed, and the writ petition filed in the High Court was dismissed. The court also urged the DDA to reconsider its decision to stop paying bonuses to its employees. There was no order as to costs.