1968 (7) TMI 80 - SC - Indian Laws

Supreme Court Clarifies Payment of Bonus Act Scope and Exclusions

SANGHVI JEEVRAJ GHEWAR CHAND Versus SECY. M.C.G. & K. MERCHANTS WORKERS UNIONNA MERCHANTS WORKER

SANGHVI JEEVRAJ GHEWAR CHAND Versus SECY. M.C.G. & K. MERCHANTS WORKERS UNIONNA MERCHANTS WORKER - 1969 AIR 530, 1969 (1) SCR 366 Issues Involved1. Applicability of the Payment of Bonus Act, 1965.2. Entitlement to claim bonus dehors the Act.3. Interpretation of the Act's provisions.4. Legislative intent and historical context of the Act.5. Exemptions under the Act.6. Relationship with the Industrial Disputes Act, 1947.Issue-wise Detailed Analysis1. Applicability of the Payment of Bonus Act, 1965The primary issue was whether the Payment of Bonus Act, 1965 (the Act) applies to establishments not being factories and employing less than 20 persons, and to public sector establishments exempted under sec. 32(x). The Supreme Court noted that the Act's applicability is determined by sec. 1(3), which states that the Act applies to every factory and every other establishment employing 20 or more persons. The Court emphasized that the Act was intended to be comprehensive in dealing with the subject of bonus, and the exclusion of establishments with less than 20 employees was a deliberate legislative choice.2. Entitlement to Claim Bonus Dehors the ActThe Court examined whether employees in establishments excluded or exempted by the Act could still claim bonus under other laws. The respondents argued that the Act did not categorically deprive such employees of their right to claim bonus under other laws. However, the Court concluded that the Act was intended to be exhaustive and that no bonus could be claimed outside its provisions. The Court reasoned that if Parliament intended to retain the right to claim bonus under other laws, it would have made an express provision for such retention, as seen in sec. 35 which saves the provisions of the Coal Mines, Provident Fund and Bonus Schemes Act, 1948.3. Interpretation of the Act's ProvisionsThe Court analyzed various provisions of the Act, including sec. 22 and sec. 39, to determine the legislative intent. Sec. 22 deems certain disputes as industrial disputes under the Industrial Disputes Act, 1947, while sec. 39 states that the provisions of the Act are in addition to and not in derogation of the Industrial Disputes Act. The Court clarified that sec. 22 creates a legal fiction to bring certain disputes within the purview of the Industrial Disputes Act, whereas sec. 39 ensures that the machinery for dispute resolution under the Industrial Disputes Act is available for disputes arising under the Act.4. Legislative Intent and Historical Context of the ActThe Court referred to the historical context and the legislative intent behind the Act. It noted that bonus was initially a gratuitous payment and later became a right enforceable through industrial adjudication. The Act was enacted to provide a statutory obligation for bonus payment, replacing the formula evolved through industrial adjudication. The Court emphasized that the Act was a comprehensive legislation intended to cover the entire subject of bonus, and the legislative history indicated a deliberate exclusion of certain establishments and employees from its scope.5. Exemptions Under the ActThe Court examined the exemptions provided under sec. 32 of the Act, which excludes certain establishments and employees from its application. The Court noted that the exemptions were based on specific policy considerations, such as the absence of profit motive in public sector establishments and the peculiar nature of employment in certain industries. The Court rejected the argument that exempted establishments could still be liable for bonus under other laws, stating that such an interpretation would frustrate the purpose of the exemptions.6. Relationship with the Industrial Disputes Act, 1947The Court addressed the relationship between the Act and the Industrial Disputes Act, 1947. It clarified that the Industrial Disputes Act did not confer a statutory right to bonus but provided a mechanism for resolving disputes, including those related to bonus. The Court concluded that the Act was intended to replace the adjudication-based bonus system with a statutory formula and that the machinery of the Industrial Disputes Act was made available for disputes arising under the Act through sec. 39.ConclusionThe Supreme Court held that the Payment of Bonus Act, 1965, was a comprehensive legislation intended to cover the entire subject of bonus. The Act excluded certain establishments and employees from its scope as a matter of legislative policy, and no bonus could be claimed outside its provisions. The Court set aside the orders of the Tribunals and allowed the appeals, concluding that the Tribunals' interpretation of the Act was incorrect. There was no order as to costs.