Workmen of the Hercules Insurance Co. Ltd. v. Hercules Insurance Co. Ltd. Calcutta (1960 INSC 249)

Court: Supreme Court of India
Decided: 7 December 1960
Bench: P. B. Gajendragadkar, K. N. Wanchoo, K. C. Das Gupta

Headnote

Industrial Dispute-Claim of bonus-General Insurance busi-ness-Validity of reference-Industrial Disputes Act, z947 (r4 of r947), s. IO(I)-Insurance Act, z938 (IV of z938), s. 3rA(I)(c),pro-viso (vii).

In view of the unqualified and absolute prohibition contain~ ed ins. 31A(1)(c) of the Insurance Act, 1938, against payment of bonus to the employees in general insurance business, the exception made by proviso (vii) to that section must be strictly confined to the limits prescribed by the said proviso.·

The policy underlying the proviso clearly is to exclude the intervention of Industrial Tribunals·and leave the question of payment of such bonu!! entirely to the discretion of the Central Government.

Consequently, where the w.orkmen in general insurance business claimed bonus and the Central Government referred the dispute for adjudication to the Industrial Tribunal under s. 10(1) of the Industrial Disputes Act, i947, and the Tribunal, on a preliminary ·objection under s. 31A(1}(c) of the Insurance Act, 1938, read with proviso (vii) thereof, held that· the refe-rence was invalid, _ - >f' t•J [t96•l 2 s.c.R. 978.

Held, the decision of the Tribunal was correct and must be upheld.

Workmen of the The Central Bank of India v. Their Workmen, [r960] r S.C.R.

Hercules 200, relied on.

Insurance Co., Ltd.

v. CIVIL APPELLATE JURISDICTION: Civil Appeal No. Hercules 531 of 1959.

Insurance Co., Ltd., Calcutta Appeal by special leave from the Awa.rd dated

October 21, 1957 of the Central Government Industrial Tribunal, Dhanba.d, iu Reference No. 6 of 1957.

N. Dutt,a Mazurndar, G. N. Bhattacharjee and B. P. Maheshwari, for the appellants.

M. 0. Setalvad, Attorney-Genera}, of India and R. Gopalakrishnan, for the respondent.

1960. December 7. The Judgment of the Court was delivered by Gajlffl4ragaakor J. GAJENDRAGADKAR, J.-The short question of law

which falls to be decided in the present appeal is whether a dispute raised by the employees of a General Insuro.nce Company against their employer for payment of bonus in any particular year can be referred for adjudication by an Industrial Tribunal under s. 10(1) of the Industrial Disputes Act, 1947 (XIV of 1947). This question arises in this way. The workmen of the Hercules Insurance Co. ·Ltd. are the appellants and the Insurance Company is the respon-dent before us. On April 11,-1957, the Central Govern-ment referred the appellants' claim for bonus for the years 1954 and 1955 for adjudication to the Industrial Tribunal, Dhanbad, constituted under s. 7A of the Industrial Disputes. Act, and this reference has been made under s. lO(l)(d) of the Act. Before the Tribu-nal the respondent urged a preliminary objection against the validity of the reference itself. Its case was that the payment of bonus by an Insurance Com-pany is conditioned entirely by the relevant provisions of the Insurance Act, 1938 (IV of 1938), and that the said provisions did not justify the reference of a dispute in that behalf for adjudication by any Indus-trial Tribunal. This preliminary objection was based ,'>- _ on the provisions of s. 31A(l) and proviso (vii) of the Insurance Act. It was also urged by the respondent i96o that having regard to the limitations imposed on the w k th General Insurance Companies by s: 400 of the Insu-0 ~:::1~ ranee Act the claim for bonus made by the appellants Insurance Co., Ltd. could not be sustained. The Tribunal has upheld the v. preliminary objection thus raised by the respondent Herc.ules and held that the reference is invalid. Incidentally it lnsurnnce Co., h as a 1 so cons1 .d ere d th e p 1 ea raise . d un d er s. 400 an d Ltd. · _ Calcutta has observed that the said plea. is also well founded. Gajendragadkar J. In the result the Tribunal refused to entertain the reference and dismissed it accordingly. It is agairist this order of the Tribunal that the appellants have come to this Court by special leave.

It is common ground that the respondent has paid the appellants bonus equivalent to two months' basic wages for each of the two years 1954 and 19fi5. The appellants claim two months' basic wages as additional bonus for each of the two years under reference. It is their case that if the trading profits made by the respondent are ascertained from the respondent's balance sheet and the Full Bench formula is applied, it would appear that the respondent has in its hands a substantial amount of available surplus from which the additional bonus claimed by them can be award-ed. Since the reference has been rejected on the pre-liminary ground the Tribunal has naturally not con-sidered this aspect of the problem.

The preliminary objection raised by the respondent is founded on the relevant provisions of s. 31A of the Insurance Act (hereafter called the Act) and so we must now turn to the said provisions. Section 31A(l)(c) of the Act provides, inter alia., that notwithstanding anything to the contrary contained in the Indian Com-panies Act, 1913, or in the articles of association of the insurer, if a company, or in any contract or agree-ment, no insurer shall after the expiry of one year from the commencement of the Insurance (Amend-ment) Act, 1950, be directed .or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or a.ny pa.rt thereof takes the form of commission or bonus in respect of the

i96o general insurance business of the insurer. Thus look-

ing s. at 31A(l b l )( c) by itself without the proviso the posi-b wo,kmen of the tion is a so utely at clear. The respondent cannot e

Hercules rn.mrance co .• Ltd. directed to employ the appellants in any capacity so

v. as to include in their remuneration a liability to pay Hmules bonus in respect of the general insurance business of lnSHrance Co.. the respondent. Bonus under the Industrial Disputes Ltd., _ Cofoutla A c t is . no t a par t o f wages, b u t t h e rig • h t t o c ] aim •

Headnote as published in the Digital Supreme Court Reports by the Supreme Court of India. Paragraph references point to the judgment below.

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Judgment

Gajendragadkar J. bonus which has been universally recognised by indus-

trial adjudication in cases of employment falling under the said Act has now attained the status of a legal right. Bonus can be claimed as a matter of right provided of course by the application of the :Full Bench formula it is shown that for the relevant year the employer has sufficient available surplus in hand. Therefore a claim for bonus made by the appellants in the present proceedings is a claim in respect of the general insurance business of the respondent, and if allowed it would add to the remuneration payable to them. In other words, bonus claimed by the appel-lants, if awarded, would, for the purpose of s. 31A (l)(c}, be a part of their remuneration, and that is precisely what is prohibited by the said provision. There are, however, certain exceptions to this general prohibition, and it is to one of these excep-tions that we must now turn. Proviso (vii) to s. 31A (l)(c) lays down that nothing in this sub-section shall be deemed to prohibit- "the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration, such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reasonable ha v - ing regard to the circumstances of the case."

This provision which constitutes an exception to the rule prescribed by s. 3IA(I)(c) allows the payment of bonus to the empfoyees of Insurance Companies subject to the condition specified by it. Bonus intend-ed to be paid to such employees must not exceed in amount the equivalent of their salary for a period which the Central Government regards as reasonable. The result of this provision appears to be that the 1960 Central Government has to consider the circumstances of each insurer and then d eci d e w h et h er any b onus Workmen of Iha, Hercules should be paid by the insurer to its employees. If the Insurance Co., Ltd. financial position of the insurer is sufficiently satisfac-v. tory, the Central Government may decide to allow the . Hercules insurer to pay bonus to its employees, and in that f;;ur~n~e ~~·· context the Central Government would prescribe the ·· _"_ 0 " maximum within which the payment should be made. Gajondragadkar J In no case can payment exceed the maximum prescrib-ed by the Central Government, and in all cases the matter has to be considered by the Central Govern-ment and no other authority. Having regard to the scheme of the Act which purports to supervise and regulate the working of Insurance Companies the legis-lature thought that the payment of bonus by the Insu-rance Companies to their employees should normally be prohibited and its payment should be permitted subject to the over-riding control of the Central Govern-ment to prescribe the maximum in that behalf. If the Central Government decides that no bonus should be paid, no bonus ca.n be paid by the insm·er. If the Central Government decides that bonus should be paid but not beyond specified limit the insurer cannot exceed that limit. · That; in our opinion, is the effect of proviso {vii) to s. 31A{l). ·

It is, however, urged that proviso (vii) merely en-ables the Central Government to prescribe the maxi-mum. It does not take away the Central Govern-ment's authority to refer an industrial dispute in respect of bonus for adjudication under s. 10 of the Industrial Disputes Act. In this connection it is urged by Mr. Mazumdar that in some cases the Cen-tral Government may take the view that the financial position of the insurer justified the payment of bonus, but the quantum may be better left to the Industrial Tribunal. In such a case the Central Government should have authority to make the reference. Simi-larly it is urged that the Central Government may decide tha.t within the maximum prescribed by it, bonus should be paid by an insurer, but the insurer

1960 may not comply with the Central Government's deci-Workmen of the sion aGnd in thatt~asedt~e.only ::ayt· to 1?-ake thfe Cehn-

Her•ul" tra 1 overnmen s ec1s10n e11ec ive IS to re er t e Ins111anceCo., ua. matter to adjudication and enable the employees to

v. obtain an award which can be executed. That is why Hmul" the appellants contend that the enabling provision ~':a~,'·;;;.,~~; conta.ined in proviso !vii) should not be construed ~o

_ constitute a bar agamst the Central Government·s Gajendragadkar J. power to act under s. 10(1) of the Industrial Disputes

Act.

We are not impressed by this argument. In our opinion the policy of the relevant clause of the pro-viso is absolutely clear. Payment of bonus by insurers was intended by the legislature to be conditioned by the provisions contained in the said clause, and we feel 110 doubt or difficulty in reaching the conclusion that the intervention of the Industrial Tribunals was intended to be excluded and the matter was intended to be kept within the discretion of the Central Govern-ment so far as the payment of bonus by the insurers is concerned. Then, as to the argument that the Government directive issued under proviso (vii) may not be obeyed by any insurer, we do not think that such an event is likely to happen; but theoretically it is conceivable that an insurer may refuse to comply with the decision of the Government. In that case all we can say is that there is a lacuna left and the legis-lature may consider whether it is necessary to provide adequate remedy for making the Government. deci-sion binding and final. Having regard to the unquali-. fied and absolute prohibition contained in s. 31A(l)(c) it seems to us difficult to hold that the payment of bonus to the employees of Insurance Companies is not absolutely conditioned by proviso (vii). In the ab-sence of the said provision no bonus could have been claimed by Insurance employees, and so the effect of the said provision must be to limit the said right to the conditions prescribed by it. That is why we think that the Tribunal was right in coming to the conclu-sion that the reference made by the Central Govern-ment is invalid. The fact that the Central Govern. ment took the view that it could make such a reference -i is hardly relevant in determining the scope and 1960

effect of the relevant provisions of the, Act. This quest10n . must b e cons1 'd ere d on w h at we regard to b e Workmen of th• Hercules the fair constn10tion of the relevant stat;utory provi-l>isurance co , Ltd. sion, and as we have just indicated the constructfon v. of the relevant provision clearly supports the view Hercule< taken by the Tribunal. Incidentally, it may be point-Inrnrauce Co., ed out that in its 'award the Tribunal ha,s 'referred to Ltd., Calcutta several other decisions of Industrial Tribunals which Gnje"a,:~~dkar 1. have taken the same view though there are one or two decisiqns which have upheld the validity of the reference without duly considering the effect of s. 31A(l).

In this connection we may refer to the decision of this court in The Central Bank of India v. Their Workmen (1), where a similar question has been consi-dered. In that case the Court had to consider the effect of s. 10 of the Banking Companies Act, 1949, prior to its amendment in 1956. The said section, according to that decision, prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in the profits of a banking compimy. In dealing with the character of bonus in relation to remunera-tion specified by s. 10, S. K. Das, J., who spoke for the Court, observed that "bonus in the industrial sense as understood in our country does come out of the available surplus of profits, and when paid it fills the gap, wholly or in part, between the living wage and the actual wage. It is an addition to the wage in that sense, whether it be called contingent or supplemen-tary. None the less, it is labour's share in the profits, and as it is a remuneration which takes the form of a share in profits, it comes within the mischief of s. 10 of the Banking Companies Act", · Section 10 of the Banking Companies Act is comparable to s. 31A of the Insurance Act, and so this decision supports the view that we have taken about the effect of s. 31A(l)(c). We have already held that the payment of bonus would be an additional remuneration to the J_ employees of Insurance Companies and it would be

'960 bonus in respect of the general insurance business of the insurer. In view of our conclusion that the Tribunal Work1nen of the was right in upholding the preliminary objection, we

Hercules r.,,,ran" co .. Lid. do not propose to consider the other argument which

v. had been urged by the respondent before the Tribu-Hercules nal under s. 400 of the Act, and which the Tribunal ~";"'"t; Co.. has incidentally considered and accepted.

1 11• The result is that the appeal fails and is dismissed.

"_':_'"

Gajrndraga(lkar J. There will be no order as to costs.

Appeal dismissed.

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