Customary bonus can arise from long, uniform pre-festival payments independent of profits, despite references to the Bonus Act.

Customary bonus may be established where an employer has paid bonus over an unbroken and sufficiently long period at a substantially uniform rate, independent of profits and with a consistent pre-festival practice. Payments made from 1965 to 1973 at 10.5 per cent were treated as the decisive period for uniformity, while earlier payments were not material. The Payment of Bonus Act, 1965 governs profit bonus but does not exclude customary bonus, and a settlement reference to Section 34(3) does not change the character of payments found to be unrelated to profits. The statutory scheme also recognises customary bonus through adjustment under Section 17.

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Issues: Whether the workmen were entitled to customary bonus at the rate of 10.5 per cent of the annual salary or wages for the accounting years 1974 to 1977.

Analysis: Bonus had been paid by the employer from 1959 onwards, not with reference to profits, and generally before the Puja festival. The earlier payments from 1959 to 1964 could be ignored for assessing uniformity, because the decisive period was 1965 to 1973, during which bonus was paid at a uniform rate of 10.5 per cent for an unbroken span of nine years. The Payment of Bonus Act, 1965 deals with profit bonus and does not exclude customary bonus. A reference in the settlements to Section 34(3) of the Payment of Bonus Act, 1965 did not alter the character of the payments, especially when the payments were found to be unrelated to profits. The statutory scheme also recognises customary bonus by permitting adjustment under Section 17.

Conclusion: The workmen established a customary bonus payable at 10.5 per cent of salary or wages, and the High Court was wrong in disturbing the Tribunal's award.

Ratio Decidendi: A customary bonus is established where bonus is paid over an unbroken and sufficiently long series of years at a substantially uniform rate, independent of profits and with the mutual understanding arising from consistent pre-festival payments; such a payment is not converted into statutory profit bonus merely because the settlement refers to the Payment of Bonus Act, 1965.

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