For calculation of bonus, the departments and branches, having separate balance sheets, are to be treated independently.

MADRAS HIGH COURT
Hon'ble Mr. K. Mohan Ram, J.
Hon'ble Mr. S. Palanivelu, J.
W.A. No. 1229/2000 C.M.P. No. 10831/2000,
D/–10-11-2010

Management of India Tourism Development Corporation, Madras and Anr.
vs.
General Secretary, All India ITDC Employees' Union

PAYMENT OF BONUS ACT, 1965 – Section 3 – Bonus – Minimum Bonus – Appellants challenged the order of Learned Single Judge allowing writ petition and directing the petitioner to pay bonus to all the workers even in future, on consideration of overall balance sheet prepared on the basis of profit and loss account of the petitioner-Corporation – The Division Bench observed;- (i) The Learned Single Judge has not at all referred to the provisions of Section 3 of the Act; (ii) The Labour Judge had rightly concluded that each and every duty free shop is treated as a separate unit for computation of quantum of bonus under section 3 of the Act. Paras 4, 10 and 15

For Appellant: Mr. S. Jayaraman, Advocate.

For Respondent: No appearance.

IMPORTANT POINT

Under Payment of Bonus Act, the departments and branches having separate balance sheets are to be treated independently for calculation of bonus and, as such, the learned Single Judge has erred in directing the petitioner to pay bonus to all the workers since he has ignored the provisions of section 3 of the Act.

JUDGMENT

PER K. MOHAN RAM, J.—1. The writ appeal is directed against the order dated 30.3.2000 passed in WP. No. 21345 of 1992 by a learned Single Judge of this Court.

2. The brief facts, which are necessary for the disposal of the writ appeal, are set out below:

The first respondent is a registered union under the provisions of the Indian Trade Union Act, 1926. According to the first respondent, the duty free shop is one out of six at all India level started in 1969 with a view to facilitate foreign tourist and earn foreign exchange. The employees, who are numbering about 80 working in the duty free shop under the control of the appellants, were paid 20% bonus for several years. But, for the year 1982-83, the management declared 8.33% bonus to the employees working in the duty free shop at Madras. But at the same time, the appellants declared bonus at 20% to the employees working in the other duty free shops at Madras. After failure of conciliation, the Government of Tamil Nadu referred the dispute for adjudication by the Labour Court to fix the quantum of bonus payable to the workmen employed in the duty free shop at Madras for the year 1982-83 in G.O. Ms. No. 2523 Labour Department dated 29.11.1983.

3. Pursuant to the aforesaid reference, the claim was filed before the Third Additional Labour Court, Madras and a counter-statement was filed by the management. The Labour Court, on a consideration of the materials produced before it, by an award dated 24.9.1990, held that the balance sheet is being prepared and maintained by the management in respect of the individual units and on the basis of the profit and loss account in respect of each unit, the bonus is being paid. The Labour Court, after recording a finding that during 1982-83, the duty free shop at Madras suffered a loss, upheld the grant of 8.33% bonus to the employees of the first respondent union.

4. Being aggrieved by the order of the Labour Court, the first respondent preferred WP. No. 21345 of 2002. The learned Single Judge, by an order dated 30.3.2000, accepting the contention of the first respondent, set aside the order of the Labour Court and issued the following directions:

‘'(i) The first and second respondent management is hereby directed to determine the quantum of bonus that is to be paid not only to the members of the petitioner union but to all the workmen employed in the Madras duty free shop based on a overall balance sheet drawn on the basis of the profit and loss account arrived at by all the units in the country and settle the said bonus to be paid in favour of the workmen of the Madras unit for the year 1982-83; and

(ii) The management is further directed to follow the same method in the years to come.”

Being aggrieved by that, the management has preferred the above writ appeal.

5. Learned counsel for the appellants has made a representation before this Court that the first respondent union has become defunct and there are only two employees belonging to the first respondent union and on that ground, sought permission of this Court to serve notice upon those employees. Accordingly, by an order dated 22.6.2010, permission was granted to the appellants to serve notice upon those two employees and the appellants served notice on the two employees. Further, even after service of notice on the two employees and their names appeared in the cause list, they did not choose to appear either in person or through counsel. Therefore, we are disposing of the writ appeal on merits.

6. Mr. S. Jayaraman, learned counsel for the appellants mainly submitted the learned Judge has exceeded in his jurisdiction in directing the appellants herein to determine the quantum of bonus to be paid to the workmen in the Madras duty free shop based on a overall balance sheet on the basis of the profit and loss account arrived at by all the units in the country and settle the said bonus in favour of the workmen of the Madras unit for the year 1982-83. Learned counsel further submitted that as per Section 3 of the Payment of Bonus Act (hereinafter referred to as the Act), where for any accounting year, a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking, then such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under the Act for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year, treated as part of the establishment for the purpose of computation of bonus.

7. Learned counsel for the appellants submitted that the learned Judge has failed to note that in this case each unit viz . Madras, Trichy, Trivandrum, Delhi, Bombay and Calcutta has been treated as a separate unit and separate balance sheet and profit and loss account was prepared and maintained during the past years also and the said individual balance sheets and profit and loss accounts were taken into consideration for the purpose of arriving at the allocable surplus under the Act for the payment of bonus every year to the respective individual units. Learned counsel further submitted that the learned Judge has failed to appreciate the documents viz. Ex M1 the balance sheet, Ex M2 the statement of allocable surplus of the Madras unit, Ex M5 the balance sheet of the Madras unit, ExM6 and Ex M7 the accounts of the duty free shop at Madras, Ex M10 to Ex M12 the profit and loss accounts of Delhi duty free shop, Ex M13 the consolidated accounts of all the duty free shops and Ex M14 the consolidated profits and loss account of all the duty free shops and Ex M2, Ex M16 and Ex M17 the allocable surplus account and the profit and loss accounts of Madras duty free shop.

8. Learned counsel for the appellants submitted that the learned Judge should have seen that these overwhelming documentary evidence supported by the oral evidence of the Accounts Officer Mr. Jayaraman will clearly establish the contention of the appellants herein to show that each and every duty free shop is treated as a separate unit for the purpose of computation of quantum of bonus under Section 3 of the Act. Learned counsel further submitted that when there is a clear evidence that though the company has a number of undertakings, separate accounts are kept for each separate undertaking and separate balance sheet is prepared for each unit and separate profit and loss account is worked out for each unit and such undertaking should be treated as a separate establishment in accordance with Section 3 of the Act especially when the said separate profit and loss account is worked out for each unit except for the head office.

9. We have carefully considered the aforesaid submissions of the learned counsel for the appellants.

10. To appreciate the aforesaid submissions of the learned counsel for the appellants, it is relevant to refer to Section 3 of the Act as here-under:

“3. Establishments to include departments, undertakings and branches. —Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act:

Provided that where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under this Act for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year, treated as part of the establishment for the purpose of computation of bonus.”

11. A careful reading of the aforesaid provision makes it clear that where for any accounting year, a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under the Act for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year, treated as part of the establishment for the purpose of computation of bonus. However, the learned Single Judge has not at all referred to the provisions contained in Section 3 of the Act.

12. As rightly contended by the learned counsel for the appellants, the Labour Court has extensively considered the evidence of MW1 and Exhibits M1, M2, M5, M6, M7, M10 to M14, M16 and M17 and came to the conclusion that each and every duty free shop is treated as a separate unit for the purpose of computation of quantum of bonus under Section 3 of the Act. Such factual finding has not been set aside by the learned Single Judge and in fact, the said finding has not been challenged by the first respondent. That being so, the learned Single Judge ought to have applied the provisions contained in Section 3 of the Act. However, the said provision has not been applied to the facts of this case. The learned Single Judge, in paragraph 15 of the order, has observed that just for the simple reason that they prepare separate balance sheets based on the profit and loss account that is arrived in each and every unit, the individual units cannot be taken as independent entities having all features of an independent corporation or firm created under the authority of law and it is only a segment having its existence, management and control being centralised and operated by the management, i.e. the India Tourism Development Corporation. Learned Single Judge has further observed that functional integrality should be ascertained in order to arrive at the conclusion that there is independent existence for each and every unit so as to call it a separate ‘industrial establishment'.

13. The contention of the learned counsel for the appellants that the functional integrality test cannot be applied for determining the quantum of bonus to be paid under the Act and that test should be relevant for determining applicability of other social welfare legislations like Employees State Insurance Act, etc. merits acceptance. The payment of bonus to the employees is governed by the provisions by the Act. When specific provisions have been made governing the issue of payment of bonus, such provisions ought to have been taken note of and applied to the facts of the particular case. When the Labour Court has applied the said provisions to the facts of this case and held that for the year 1982-83, the Madras unit has sustained loss and that therefore, the management is right in paying the minimum bonus at 8.33%, the learned Single Judge ought to have adverted to Section 3 of the Act. Had the learned Single Judge considered the applicability of Section 3 of the Act to the facts of this case, he would have upheld the award of the Labour Court.

14. The entire reading of the order dated 30.3.2000 does not show that the learned Single Judge has adverted to the provisions contained in Section 3 of the Act, which has resulted in passing the impugned order. When the provisions contained in Section 3 of the Act permits preparation and maintenance of a separate balance sheet and profit and loss account for any accounting year in respect of a particular unit such as the department or undertaking or branch and such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under the Act for that year and when the appellant management established by overruling the evidence that for the accounting year 1982-83, separate balance sheet and profit and loss account had been prepared and maintained in respect of the Madras unit, that should have been taken into consideration for deciding the issue as to whether the appellant management is right in paying the minimum bonus. But, the learned Single Judge, as stated above, has failed to take into consideration the relevant provisions of the Act. Moreover, as rightly contended by the learned counsel for the appellants, the learned Single Judge has not only directed the determination of quantum of bonus on the basis of the profit and loss account in respect of all the workmen employed in the Madras duty free shop and settle the bonus for the year 1982-83, but also directed the management to follow the same in the years to come. The second part of the direction issued by the learned Single Judge is beyond the scope of the writ petition. For the aforesaid reasons, we are unable to agree with the reasonings of the learned Single Judge in allowing the writ petition.

15. Accordingly, the writ appeal is allowed. The order passed by the learned Single Judge dated 30.3.2000 passed in WP. No. 21345 of 1992 is set aside. Consequently, the above CMP is closed.