TMI Blog1997 (11) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the employees of the Housing Board during the relevant accounting years from 1976-79 onwards. It is contended on behalf of the appellants that the employees of the Board will not be entitled to the statutory bonus under the Act on twin grounds. Firstly, in view of the statutory exclusion of the Housing Board from the applicability of the Act as per Section 32(V)(C) of the Act: and secondly, on the ground that the State of the Tamil Nadu for the relevant years had exercised its power of exempting the Housing Board under Section 36 of the Act from all the provisions of the Act. In the writ petitions filed by employees of the Housing Board the High Court of Madras has taken the view that the Housing Board is not entitled on the facts of the cases to earn statutory exemption under Section 32(V)(C) of the Act and the orders of exemption issued by the State of Tamil Nadu in exercise of its powers under Section 36 of the Act in favour of the Housing Board for the relevant years, were not legally sustainable. The High Court has also taken the view that in any case the State of Tamil Nadu had no authority to retrospectively grant exemption under Section 36 of the Act for the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit'. Section 36 of the Act deals with 'Power of exemption' and reads as under: 36. Power of exemption.-If the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of this Act thereto, it may, be notification in the official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act. In exercise of its powers under Section 36 of the Act the State of Tamil Nadu by Government Ms. No. 2016 dated 31st October 1979 in the Housing and Urban Development Department directed that the Tamil Nadu Housing Board was exempted from all the provisions of the Payment of Bonus Act, 1965 for a period upto accounting year 1977-78. A similar Government Order Ms. No. 1033 on the same Department was issued on 23rd November 1962 exempting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory exemption under Section 32 (v) (c) of the Act as it was a social welfare institution established not for the purposes of profit and consequently its employees could not claim any bonus under the Act. It was ultimately contended that in any view of the matter once power of exemption which in the nature of conditional legislation was exercised by the State of Tamil Nadu under Section 36 of the Act, the orders of exemption for the relevant years as issued by the State of Tamil Nadu could not have been declared to be null and void on the ground that before invoking such power of exemption the State had not given opportunity of hearing to the employees concerned who were likely to be affected by the grant of such exemption. Learned counsel for the respondent employees represented by their unions on the other hand submitted that the impugned orders of the High Court were quite justified on the facts and circumstance of the cases. That the Government Order dated 23rd November 1982 was rightly held by the High Court to be inoperative so far as it tried to retrospectively grant the exemption under Section 56 of the Act for earlier accounting years to the Housing Board as such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of hearing was given to the employees by the State while issuing the impugned orders which had a direct pernicious and adverse effect on their civil rights and amounted to depriving them of their statutory right of bonus under the Act. That implicit in Section 36 is the requirement for the appropriate Government to have a look at the rival contentions which may have to be put forward before the appropriate Government by the claimants of exemption on the one hand and their employes likely to be adversely affected by such exemptions on the other hand, before such drastic power of exemption having pernicious civil consequences and evil effects on the employees on their pay packet could be visited on the employes for whom minimum statutory bonus as granted by the Act of the Parliament was a sort of a deferred wage. Points for Consideration In the light of the aforesaid rival contentions the following points arise for consideration: 1. Whether the exemption order dated 23rd November 1982 is bad inasmuch as it seeks to retrospectively apply to earlier accounting years 1978-79, 1979-80, 1980-81 and 1981-82. 2. Whether the provisions of the Act are not applicable to the Housin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention but for the fact that on the language of the notification dated 23rd November 1982 it is not possible to countenance the contention of learned senior counsel for the appellants that the said notification on its express terminology sought to apply the net of exemption retrospectively for earlier years 1976-79 to 1981-82. On the language of the notification it appears clear that even though the Governor had read the earlier Government Order dated 31st October 1979 as recited in the notification all that the Governor was pleased to order was that all the provisions of the Act will not apply to the Housing Board for a further period upto accounting year 1982-83. The notification is dated 23rd November 1982. Therefore, from that date 23rd November 1982. Therefore, from the date onwards till the end of the accounting year 1982-83 exemption was granted. Nowhere in the said notification it is stated that the author of the notification wanted the said notification to retrospectively cover even earlier accounting years which had already gone by. If such was the intention of the author of the notification the wording of the notification would have clearly mentioned that the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as this contention is concerned the High Court in the impugned judgment has taken the view that by their own act the Housing Board accepted that the Act applies to it and, therefore, it, by passing various resolutions sought for exemption from the Act by invoking the powers of the State of Tamil Nadu under Section 36 of the Act. In this connection it has to be kept in view that before Section 32(v) (c) of the Act can be pressed in service the following factual aspects have to be pleaded and proved by the Housing Board - 1. That it is a social welfare institution; 2. That it is established not for the purposes of profit; and 3. Even otherwise it is an institution which is established from its inception not for the purposes of profit. This would require investigation into facts as to whether the Statute under which the Housing Board is created enjoins upon the Housing Board functions which are likely to generate profit and whether in fact profit gets generated by the exercise of permissible statutory functions by the Housing Board. These questions which are factual questions would be required to be considered if properly pleaded by the Housing Board. Instead of pressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 32(v) (c) of the Act for the relevant accounting years wherein the Housing Board had tried to obtain and actually got orders of exemption under Section 36 of the Act. In this connection it is useful to refer to the Notes of proceedings of 04th May 1979 under Item 277 of the agenda of the Special Board meeting of the Housing Board wherein its Chairman had prepared the Note to the following effect: ...The Tamil Nadu Housing Board was exempted from the provisions of the Payment of Bonus Act under Section 36 of the Act for (sic) the temporary periods upto the end of the 1973-74. This exemption had necessarily to be obtained for the reason that the Tamilnadu Housing Board is governed under the Industrial Disputes Act according to the orders issued in G.O.Ms. No. 9139, H.U. III/2/69-2, dated 14.3.69 (copy appended herewith) when the Housing Board is governed under the Industrial Disputes Act, the applicability of the Bonus Act is not obligatory but it is statutory. As the financial position of the Board in the past was not sound enough, the payment exemption was previously sought for by the Board.... In the said note it has been further mentioned as under: Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Housing Board had rightly taken the stand that the Payment of Bonus Act would apply to it and that is the reason why it sought exemption from the operation of the Act under Section 36 from the Tamil Nadu Government from time to time. We may mention that by the decisions of a Bench of two learned Judges of this Court in the case of Housing Board of Haryana v. Haryana Housing Board Employees' Union and others [(1996) 1 SCC 95] Bonus Act is held applicable to Haryana Housing Board by holding that it is not entitled to statutory exemption from the Act under Section 32 as a local authority. We are informed that accordingly bonus is being paid by the said Board to its employees as per the Bonus Act. In this connection it is, therefore, too late in the day for the Tamil Nadu Housing Board to take a somersault and to try to submit that despite its consistent course of conduct spread over decades accepting the position that it was statutorily liable to pay the minimum bonus as per the Act, but for the exemption sought by it under Section 36 of the Act, in fact the Act itself did not apply to it under Section 32 (v) (c) of the Act and all attempts to get exemption from the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slation. In the case of Jalan Trading co. (Private Ltd.) v. Mill Mazmoor Union [(1967) 1 SCR 15] the majority of the Constitution Bench speaking through J.C. Shah. J. while interpreting Section 36 of the Act has made the following pertinent observations: By s.36 the appropriate Government is invested with power to exempt an establishment or a class of establishments from the operation of the Act, provided the Government is of the opinion that having regard to the financial position and other relevant circumstances of the establishment, it would not be in the public interest to apply all or any of the provisions of the Act. Condition for exercise of that power is that the Government holds the opinion that it is not in the public interest to apply all or any of the provisions of the Act to an establishment or class of establishments, and that opinion is founded on a consideration of the financial position and other relevant circumstances. Parliament has clearly laid down principles and has given adequate guidance to the appropriate Government in the implementing the provisions of s.36. The power so conferred does not amount to delegation of legislative authority. Section 36 amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35; King Emperor v. Benoarilal Sarma (1944) L.R. 72 I.A. 57; Sardar Inder Singh v. State of Rajasthan (1957) SCR 605]. Thus when the delegate is given the power of making rules and regulations in order to fill in the details to carry out and subserve the purposes of the legislation the manner in which the requirements of the statute are to be met and the rights therein created to be enjoyed it is an exercise of delegated legislation. But wen the legislation is complete in itself and the legislature has itself made the law and the only function left to the delegate is to apply the law to an area or to determine the time and manner of carrying it into effect, it is conditional legislation. It is thus obvious that in the case of conditional legislation, the legislation is complete in itself but its operation is made to depend on fulfilment of certain conditions and what is delegated to an outside authority, is the power to determine according to its own judgment whether or not those conditions are fulfilled. In case of delegated legislation proper, some portion of the legislative power of the Legislature is delegated to the outside authority in that, the Legislature, though compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d another v. Cynamide India Ltd. and another [(1987) 2 SCC 720]. In that case the Court was concerned with the question whether price fixation under Paragraph 3 of Drugs (Prices Control) Order, 1979 was an executive function or a legislative function. Treating it to be a legislative function Chinnappa Reddy,J., speaking for the Court observed that the legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case of Parliamentary legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. But, where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity. It was further observed in paragraph 27 of the Report that the price fixation under Paragraph 3 of the said Order being a legislative activity, the principles of natural justice are not attracted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court while dealing with mere extension of the provisions of an Act to other areas, persons etc. has categorically held the same to be `conditional' legislation . On the other hand 'price fixation' etc. was treated in Cynamide (supra) as `delegated' legislation, the reason being that in the case of delegated legislation the Legislature lays down the policy broadly leaving it to the delegate to supply details while in the case of conditional legislation the legislation is complete and the Legislature leaves it to the delegate the exercise discretion as to the time and manner of carrying the legislation into effect as also the determination of the area to which it si to extend. This is clear from the decision of the Constitution Bench in Hamdard Dawakhanna's case (supra). In fact. even in Cynamide case (supra), which is a case of delegated legislation dealing with price fixation, Chinnappa Reddy, J. pointed out that an action of the delegate, while supplying details of the legislation lays down the policy for the future as in price fixation cases and therefore the action of the delegate is legislative in character and precludes application of principles of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure of the legislation is ready but its future applicability to a given area is left to the subjective satisfaction of the delegate who being satisfied about the conditions indicating the ripe time for applying the machinery of the said Act to a given area exercises that power as a delegate of the parent legislative body. Tulsipur Sugar Co. 's case (supra) is an illustration on this point. When the Act itself is complete and is enacted to be uniformly applied in future to all those who are to be covered by the sweep of the Act, the Legislature can be said to have completed its task. All that it leaves to the delegate is to apply the same uniformly to a given area indicated by the parent Legislature itself but at an appropriate time. This would be an act of pure and simple conditional legislation depending upon the subjective satisfaction of the delegate as to when the said Act enacted and completed by the parent Legislature is to be made effective. As the parent Legislature itself has laid down a binding course of conduct to be followed by all and sundry to be covered by the sweep of the legislation and as it has to act as a binding rule of conduct within that weep and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially granted or partially withdrawn from time to time would be binding on the entire class of persons similarly situated and who will be covered by the seep of such exemptions, partial or whole, and whether granted or withdrawn, wholly or partially, and in exercise of such a power there may be no occasion to hear the parties likely to be affected by such an exercise. For example from a settled tariff say if earlier 30% exemption is granted by the delegate and then reduced to 20% all those who are similarly situated and covered by the sweep of such exemption and its modification cannot be permitted to say in the absence of any statutory provision to that effect that they should be given a hearing before the granted exemption is wholly or partially withdrawn. In the aforesaid first two categories of cases delegate who exercises conditional legislation acting on its pure subjective satisfaction regarding existence of conditions precedent for exercise of such power may not be required to hear parties likely to be affected by the exercise of such power. Where the delegate proceeds to fill p the details of the legislation for the future - which is part of the integrated action of pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and for deciding whether the rights or liabilities created by the Act are to be denied or extended to particular areas, persons or groups. This exercise is not left to his objective satisfaction nor it is a mere ministerial exercise. Section 36 of the Act with which we are concerned falls in this third category of conditional legislative functions. A mere look at the said Section shows that before an appropriate Government can form its opinion regarding grant of partial of full exemption to any establishment or class of establishments which are otherwise already covered by the sweep of the Act the following factual conditions must be found to have existed at the relevant time to enable the delegate to exercise its powers under the Act: 1. The financial position of the establishment or class of establishments, as the case may be, must be such that it would not be in public interest to apply all or any of the provisions of the Act to such establishment or establishments. 2. There may be other relevant circumstances pertaining to such establishment or establishments which would require exercise of such power of exemption. 3. Such exercise must be in public interest as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablishment but a situation might arise when in public interest such establishment in order that they may effectively exist and may to be wiped off, may be given a statutory protection by way of exemption from the operation of the relevant provisions of the Act by the appropriate Government under Section 36 of the Act. It is obvious that when such a case is tried to be made out by the establishment concerned invoking powers of the State under Section 36, the State would not act merely as a post office and accept as a gospel truth what the establishment states. It will have to apply its objective mind on the relevant data before it can legitimately exercise its powers of exemption under Section 36 of the Act qua such an establishment or a class of them. While exercising that power the data which would be available from the establishment would obviously be one-sided data in support of its claim for exemption. The employees who are likely to be deprived of their minimum statutory bonus as per the Act would be the rival class of persons who are necessarily likely to be adversely affected if such exemption is granted to the establishment on the basis of the one-sided data in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rebuttal by the aggrieved employees on the other and then the opinion would become comprehensive and objective. In the setting of the Section, therefore, and the way it will work, as discussed earlier, implicit in the Section is the direction to the appropriate Government by the Legislature that it should form its opinion on objective facts furnished not only by the establishment or a class of establishment claiming such exemption but also by the employees who are likely to be affected by the exercise of such power and who should necessarily get an opportunity to submit their material in rebuttal. If this requirement is not read in the Section the exercise of power of exemption qua the establishment or a class of establishments which will have a direct pernicious adverse effect on the employees who would otherwise earn statutory benefit of the provisions of the Act would always remain a truncated, inchoate, half-baked and a still-born exercise of power and only on remand by competent court the exercise would become an informed one. Thus the submission of learned senior counsel for the appellants would make the exercise under Section 36 of the Act one futility. To instill life i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affected by such an exercise by the delegate. Such exercise may also cover existing situations as well as future situations sought to be subjected to the exemption for the period prescribed in the order and may sometimes affect to any permissible extent even past transactions in individual cases. Such type of exercise of power cannot be said to rule out consideration of rival viewpoint on the question of grant of exemption to an establishment or to a class of establishments from the relevant provisions of the Act. In the case before us the legislation has prescribed objective standards and has permitted the delegate to grant exemption and to withdraw the benefit of the statute which is being enjoyed by the persons and in our opinion, in such a situation, principles of fair play or consultation or natural justice cannot be totally excluded. In this connection we may also refer to a decision of this Court in the case of Visakhapatnam Port Trust and another v. Ram Bahadur Thakur Pvt. Ltd and others [(1997) 4 SCC 582] wherein this Court had to consider the question whether the appropriate Government while modifying or cancelling the rates of welfare charges framed by the Visakhapatn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the respondents that in appropriate cases representation of aggrieved parties can be considered by the statutory authorities for arriving at a just and balanced conclusion on relevant facts. On the aforesaid conclusion of ours we cannot find fault with the decision rendered by the High Court that the impugned exemption notification issued from time to time by the State of Tamil Nadu under Section 36 of the Act were not legal and valid and they were issued without giving any opportunity whatsoever to the employees of the Housing Board to have their say when they were necessarily adversely affected by the exercise of such power even though it was an exercise of conditional legislative power. Such an exercise of power did not fall within any of the first two categories of delegated legislations but squarely fell within the third category of such an exercise of power. However still a question as to whether the High Court was justified in taking the view that hearing should be given to the affected employees of the establishment before the appropriate Government can exercise its power to exemption under Section 36 qua a given establishment like the Housing Board. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the relevant years : 1. When such applications are received by the appropriate Government which necessarily have to be supported by relevant data by the claimants, the receipt of such applications has to be brought to the notice of the employees likely to be affected by grant of such applications and for that purpose notices can be suitably got affixed by the appropriate Government on the notice boards of the concerns or factory premises of the establishments where the workmen are working mentioning the dates on which such applications are received and the grounds on which such exemptions are claimed under such applications. 2. Suitable public notice in newspapers having circulation in the area of operation of such establishments can be got published and for that purpose suitable expenses can be required to be reimbursed by the claimants to the appropriate Government. 3. The concerned employees through their representative unions may, under these circumstances, be permitted to file their written representation with relevant data for rebutting the material furnished by the claimants so that the rival version put forward by the employees also will become available to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government can form its opinion, if any, and complete the exercise if it is of the opinion that all the requisite conditions for exercise of the power under Section 36 of the Act have been found to have existed qua the claimant- establishment or class of establishment for an appropriate period for which such exemption is to be granted. The aforesaid procedural steps are illustrative and to exhaustive. But they have to be read in Section 36 of the Act so as to make the Section workable and the exercise of power can be insulated against attack on the ground o irrational exercise of power. We make it clear that only in the third category of cases of conditional legislation in which Section 36 of the Act falls, as discussed by us, the aforesaid procedure is required to be followed. It cannot have any application to the first two categories of cases of exercise of powers of conditional legislation. On the aforesaid conclusion of ours we must hold that the ultimate decision of the High Court on Point No.3 that the impugned exemption notification issued under Section 36 from year to year by the State of Tamil Nadu were null and void, has to be upheld not on the ground that hearing, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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