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TMI Blog1970 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Payment of Wages Act. 2. The main argument was advanced in Special Civil Application No. 2239 of 1968 and we would first set forth briefly the facts of that Special Civil Application. The petitioner before us is the manager of the India United Mills Ltd., No. 1 Mill, of Bombay, which we shall hereafter refer to for the sake of brevity as the Indu Mills as it is popularly known. On 29th November 1965 the Indu Mills was taken under the management of an authorised controller under Section 18-A of the Industries (Development and Regulation) Act, 1951 by a notification of the Government of India. One M.D. Bhat was appointed as the authorised controller. We shall refer to the detailed provisions of this notification a little later. On 21st December, 1967 the 1st respondent Dhondu Mahadeo Ghadi an employee of the Indu Mills applied before the Authority appointed under the Payment of Wages Act for the area of Greater Bombay for the payment to him of the minimum bonus payable to him under the provisions of Section 10 of the Payment of Bonus Act. He claimed to be entitled to receive ₹ 76.40 and ₹ 101.68 as bonus for the years 1965 and 1966. Though the amount claimed by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonus claimed. Secondly it was urged that the adjudication of the claim of the workers to the payments under the Bonus Act would involve or give rise to difficult and complicated questions of law which the Payment of Wages Authority should not ordinarily undertake to decide or alternatively was not competent to decide and therefore ought to have directed the workers to pursue their ordinary remedy under law. Thirdly that in any case Section 22 of the Bonus Act itself excludes the jurisdiction of the Payment of Wages Authority because it has created a special forum before which claims under the Bonus Act can be tried namely the Industrial Court. Therefore the Payment of Wages Authority will have no jurisdiction. Lastly it was urged that in any event these companies are expressly exempted under the Bonus Act as being establishments engaged in an industry "carried on by or under the authority of any department of the Central Government ......or a local authority" within the meaning of Section 32, Clause (iv) and that therefore the mills are exempt under Act 6. The authorities have turned down these preliminary objections and ordered the amounts claimed by the workmen to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(6) as meaning available surplus as computed under Section 5. By Section 5, it is the gross profit of that year after deducting therefrom the sums referred to in Section 6 and the sums referred to in Section 6 are amounts by way of depreciation, development rebate or development allowance, any direct tax and any other sums specified in the First Schedule. Section 7 shows how any direct tax payable by the employer has to be computed. These sections providing for the computation of bonus have to be read along with the two definitions in Section 2 namely the definition of "available surplus" in Sub-section (6) of Section 2 and of "allocable surplus" in Sub-section (4) of Section 2. Then the subsequent sections of the Act proceed to declare the right of the employees to receive the bonus (Section 8) in what cases an employee is disqualified from receiving bonus (Section 9) and the duty of the employer to pay the minimum bonus (Section 10). Section 10 indicates what is "minimum bonus" and when it is payable and Section 11 deals with the payment of "maximum bonus". 8. The effect of these provisions is that the employer is bound to pay to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) of Section 15 which could be utilised for payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, is to be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule. The purpose of these provisions is clear. Where there are profits or allocable surplus, the allocable surplus must be set apart and utilised towards payment of the bonus under the Act subject to the limitations indicated. The balance has to be carried forward and when there are lean years and there is no available surplus or the allocable surplus falls short of the amount of minimum bonus, then the establishment can draw from the balance of the allocable surplus if any of the previous years. It is clear, however, that whether or not there is allocable surplus or available surplus, the minimum bonus has to be paid in any Case. 10. Various other deductions are permitted where the employer has paid different kinds of bonus or made other payments. Deductions are also allowed for certain reasons such as misconduct (Section 18). Section 21 makes provisions for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson employed in respect of his employment or of work done in such employment, and includes. (c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name); but does not include ..... (1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a court;" What is urged on behalf of the petitioners is that the definition of "wages" in Clause (vi) of Section 2 is confined only to consensual remuneration and not remuneration imposed by any law. In other words the definition only applies to remuneration payable under the terms of a contract of employment between the employer and the employee and that it cannot apply to a payment to be made compulsorily under the provisions of the Payment of Bonus Act. It was urged that payment of remuneration by operation of law would not fall within the definition of "wages" under the Payment of Wages Act. 12. We are unable to accept this contention because, in the first place as the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1957 and the words "terms of employment" were substituted. It seems to us that upon the point which has been argued, this amendment makes a crucial difference. Now the words "the contract of" having been dropped, we do not see how it can still be argued that the definition is limited only to remuneration payable under an agreement or contract. It is clear that the amended definition would apply to all kinds of remuneration whether arising from a contract, an award, a settlement or under a statute. As stated in Balaram Abaji's case, (1960)IILLJ491Bom , the definition as it now stands makes no reference to the origin of the employer's obligation to pay the remuneration. When we consider the legislative history of the definition, the construction which we have put upon it is further reinforced. 14. It was next argued that there is an express exclusion which was not noticed by the Payment of Wages Authority when it held that the payment of the amount under the Bonus Act amounted to "wages". It was urged that Clause (c) includes in the definition of "wages" any additional remuneration payable under the terms of employment, whether called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The reference to Section 13 in Section 10 need not detain us, for it is a provision merely for the proportionate reduction in bonus in certain cases, with which we are not really concerned in the present case. This provision does not affect the existence of the duty to pay laid upon the employer by Section 10. Even in the case of maximum bonus referred to in Section 11, the words used are "........ the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in the accounting year bonus ....... subject to a maximum of ......." Here again, therefore, the duty of the employer to pay the maximum bonus subject to the conditions laid down is clearly defined. Section 19 lays down the time-limit for payment of the bonus and is also couched in a language which shows that it is the mandatory duty of the employer to do so. It begins with the words "all amounts payable to an employee by way of bonus under this Act shall be paid in cash by his employer", within a period of eight months from the close of the accounting year or in the case of a dispute within a month from the date on which the award becomes enforceable or the settlement comes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 22 of the Payment of Bonus Act which creates a special forum for the trial of disputes regarding bonus payable under the Act, the jurisdiction of the Payment of Wages Authority is impliedly ousted and Section 22 in terms relegates the trial of any question, where a dispute has arisen regarding bonus, only to the Authority under the Industrial Disputes Act and no other authority. 19. As regards the first contention, we have already discussed the question whether the payments under the Bonus Act amount to "wages" and in our opinion, they do amount to "wages" and to that extent, therefore, we must hold that so far as this contention is concerned, the Payment of Wages Authority had jurisdiction and the two authorities were right in the decision which they took on this point. 20. The same however cannot be said about the other two contentions on the question of jurisdiction. Section 15, Sub-section (1) confers the jurisdiction upon the Payment of Wages Authority in the following words "the State Government may appoint one or more persons to be the authority or authorities to hear and decide for any specified area all claims arising out of deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person employed." The other question involved was the plea taken by the particular employer who had been proceeded against that he was not the employer under the Act, because he was merely a transferee of the business and the worker was not working under that particular employer. Under the Industrial Disputes Act also a forum was indicated in Section 33-C namely the Labour Court where industrial disputes could be decided as in the present case Section 22 provides. The Supreme Court held that under the circumstances the claim could not be entertained by the Payment of Wages Authority and gave its reasons as follows at p. 596, Column 2:-- "In the first place, the claim made in the instant case is not a simple case of deductions having been unauthorisedly made or payment having been delayed beyond the wage periods and the time of payment fixed under Sections 4 and 5 of the Act. In the second place, in view of the defence taken by the Respondent No. 1, the Authority would inevitably have to enter into questions "arising under the proviso to Section 25-FF, viz. whether there was any interruption in the employment of the workmen, whether the conditions of service un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was being carried on under the authority of a department of the Central Government. That question in itself is as we shall presently show, not a simple question but gives rise to complicated questions of law in that it requires careful consideration not only of the provisions of the Payment of Bonus Act but of the Industries (Development and Regulation) Act, 1951 and of the notification issued under that Act. Other questions that have been raised are as regards the true scope and effect of Section 22 of the Bonus Act, its effect upon Section 15 of the Payment of Wages Act and the important question whether these Mills are exempt under Section 32(iv), These would require consideration of several provisions of the Bonus Act and the question which has been actually argued whether the Bonus Act is a self-contained Code in itself. Surely it was never intended that such questions would under Section 15 fall within the purview of the Payment of Wages Authority. In this view we do not think that the questions arising in these cases were fit for the Authority under the Payment of Wages Act to consider. 23. So far as we have viewed this question as if we were only concerned with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes the operation of the other laws. Section 34(1) says "save as otherwise provided in this section, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any award, agreement, settlement or contract of service made before the 29th May, 1965". It was therefore intended that the Bonus Act should have effect notwithstanding anything contained in any other laws- Therefore even assuming that the Payment of Wages Act had provided for jurisdiction in a matter like this, we have held that it has not--still Section 34 would exclude the operation of the Payment of Wages Act, but we have already said that there is nothing in the Payment of Wages Act to indicate that the operation of any other law is excluded so far as the jurisdiction of the payment of wages authority is concerned. 25. Counsel on behalf of the employees, the respondents before us, urged that the ambit of Section 22 of the Bonus Act is very limited and that it only applies to any dispute between an employer and his employees with respect to the bonus payable under the Act, but in the present case he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case will be a dispute under this Act and not "de hors" the Act. It seems to us therefore that the provisions of Section 22 would squarely apply to the dispute raised in the present case. That it is a dispute there can be no doubt, and indeed that has not been challenged in the present case. If so, it seems to us that for both the reasons which we have stated above that dispute would be beyond the jurisdiction of the Payment of Wages Authority. The first reason is that normally it is not a question which under the Payment of Wages Act itself ought to be decided by the Payment of Wages Authority because it raises a complicated question of law and secondly that in any event Section 22 indicates a forum where such a dispute ought to be tried and therefore by implication ousts the jurisdiction of the Authority under the Payment of Wages Act. 27. The payment of Bonus Act is a special Act dealing with a special subject. It statutorily creates rights in favour of the employee and against the employer which the employee never enjoyed before namely the right to be paid what is called a bonus even though the establishment or undertaking may not be making profits at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof. A perusal of that paragraph will show that it only took into account the provisions of Section 22 of the Bonus Act but had no regard to the law as it prevailed under the Payment of Wages Act till that date and even thereafter. After referring to Section 22 of the Payment of Bonus Act the Authority went on to say "the disputes contemplated in this section which can be referred for adjudication for Industrial Tribunal are of two kinds: (1) regarding quantum of bonus which will be more than 4% but upto 20% of the total earnings, and (2) applicability of the Payment of Bonus Act to certain establishment in the public sector. Regarding the first point of Quantum, there is no and cannot be any dispute about the payment of 4% bonus which is the minimum under the provisions under which the employer is obliged to pay irrespective of profit or loss within 8 months from the close of the accounting year. There is, therefore, hardly any dispute regarding the quantum of bonus. As regards the second point concerning the applicability of the Payment of Bonus Act to the concern of the opposite party, since the concern of the opposite party does not fall under the definition of "e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act to an establishment in the public sector. Indeed counsel said that that was never urged on behalf of the employers. Therefore, the whole of the reasoning of the learned Authority in paragraph 8 of its order was futile. What the Authority failed to take into account or consider was whether the dispute of the nature raised by the employers was a dispute with respect to the bonus payable under the Act falling under the first clause. It went wrong in its decision because it limited the first clause only to the quantum of the bonus. 30. Surprising as it may seem, though the decision in Special Civil Application No. 1909 of 1968 was given by a different Authority, the reasoning on both the heads is reiterated in that order also in paragraphs 16 and 17 of the judgment, though the manner of consideration of the two points is different. In this case the Authority said "Section 22 refers to the application of the Act only in connection with establishments in public sector. Only then a dispute as to application of the Act would be deemed to be an industrial dispute under Section 22. Admittedly the Pratap Company is not an establishment in the public sector as defined by Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims. Therefore the points which have been raised on behalf of the employers and which we have dealt with above could have been dealt with by the Payment of Wages Authority in the present case. 33. It seems to us that the amendment was brought in only for the purpose of clarifying what was already the law namely that the jurisdiction of the authority is confined to deciding all claims arising from deductions from wages or delay in the payment of wages and that would necessarily include, matters connected with the two questions and that is why it is referred to in the amendment as "all matters incidental to such claims". The amendment refers only to matters incidental--incidental to the claims arising out of deductions from wages or delay in the payment of wages and we do not think that when the amendment speaks of "matters incidental" it meant to include within the ambit of the jurisdiction of the payment of wages authority substantial questions as to the applicability of the Act or as to the applicability of exemptions created under the Act and similar other questions especially where complicated questions of law or fact arise. Despite the amendment we think th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether having regard to the facts and circumstances here the establishments of these employers were on the date on which the applications were presented being carried on "under the authority of any department of the Central Government" and for this purpose it will be necessary to see firstly the two notifications which were issued taking these two establishments under the management of the authorised controllers and then to see what is the effect of those notifications having regard to the provisions of the Industries (Development and Regulation) Act under which the notifications were issued. 35. In the Indu Mills case the notification dated 29th November 1965 recites in the preamble that the Central Government was of the opinion that the Indu Mills an industrial undertaking was "being managed in a manner highly detrimental to public interest" and therefore action was being taken. The nature of the action is important. It was ordered as follows: "now therefore in exercise of the powers conferred by Section 18-A of the said Act the Central Government hereby authorises Shri M.D. Bhat (hereinafter referred to as the authorised controller) to take over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 18-A the authorised controller was authorised to take over the management of the whole of the undertaking of the petitioners. The fullest possible control was also imposed because the authorised controller was directed to comply with all the directions issued from tune to time by the central Government. The consequence of such a notification is mentioned in Section 18-B, and the major consequences with which we are concerned are those indicated in Clauses (a), (b) and (e) of Sub-section (1) of Section 18-B. By Clause (a) all persons in charge of the management, including persons holding office as managers or directors of the industrial undertaking immediately before the issue of the notified order are deemed to have vacated their offices as such. This clause creates a fiction by which persons already occupying offices as managers or directors are deemed no longer to be managers or directors. They are deemed to have vacated their offices. The consequence is drastic in the extreme. From the moment the notification is issued its effect is automatic and those in charge of the management particularly the directors cease to be directors altogether. Similarly un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This is one of the crucial errors which we find made in the judgments of the authorities in the two cases. 39. While Clause (e) of Section 18-B talks of "the persons, if any, authorised under Section 18-A" who become the directors of the industrial undertaking, where only one person is appointed as in the instant cases, it is clear that all the powers of the directors vest in that one person who becomes the sole person in management and control and is substituted for the directors. Sub-section (4) further makes the position abundantly clear. It says that "The person or body of persons authorised under Section 18-A shall, notwithstanding anything contained in the memorandum or articles of association of the industrial undertaking, exercise his or their functions in accordance with such directions as may be given by the Central Government so, however that he or they, shall not have any power to give any other person any directions under this section inconsistent with the provisions of any Act or instrument determining the functions for the authority carrying on the undertaking except in so far as may be specifically provided by the notified order". It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution passed at any meeting of the shareholders of such undertaking shall be given effect to unless approved by the Central Government, and (c) that no proceeding for the winding up of such undertaking or for the appointment of a receiver in respect thereof shall lie in any court except with the consent of the Central Government." We have already seen that Section 18-B provides that consequent upon the issue of a notification under Section 18-A the powers of the directors automatically cease and their offices are deemed to be vacated and also that any contract between them and the company is deemed to have been terminated and the authorised controller steps in as the sole director of the company. Section 18-E prohibits the shareholders from nominating or appointing any person to be a director, so that even if the share-holders pass such a resolution it will be illegal. Secondly Clause (b) drastically controls the powers of the share-holders to pass resolutions because it says that no resolution passed at any meeting of the share-holders can be given effect to unless approved by the Central Government. This in itself shows to what extent the control of the Central Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under its rules of business and therefore the expression "any department of the Central Government" has been used in Section 32(iv). So long as therefore the control of the Central Government is clearly shown, it is the control of a department of the Central Government. In this case the Department is the Ministry of Commerce and Industry as indicated in the heading of the two notifications concerned. 45. Considerable stress was laid on behalf of the workers upon Sub-section (2) of Section 18-E which is so to say a saving clause saving the powers of the undertaking which happens to be a company. Sub-section (2) merely says "subject to the provisions contained in Sub-section (1), and to the other provisions contained in this Act and subject to such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the official Gazette, specify in this behalf, the Indian Companies Act, 1913, shall continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under Section 18-A." No doubt the Companies Act continues to apply but the conditions and limitations with whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y department of the Central Government. It was contended that when the Act says "carried on under the authority of any department of the Central Government" it meant directly under the authority of a department of the Central Government but that in the instant cases it was not directly run by any department of the Central Government but through the authorised controller. We have already referred to the two notifications and to the provisions of the law contained in Sections 18-A, 18-B and 18-E of the Industries (Development and Regulation) Act, 1951 and the authorised controller is in no sense appointed as an agent or representative of the Government. He is a controller authorised by the Central Government and has to comply with all directions issued from time to time by the Central Government. The management and control therefore, is directly under the department of the Central Government concerned and not under a person who has any independent authority of his own. In every matter and in every respect in which the authorised controller can act in the management of the company it is the Central Government who is the authority to issue directions or to control his actions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 7 of that case that "the question as to whether a particular industry is carried on by or under the authority of the Central Government is essentially a question of fact depending on the circumstances of each case." In our opinion, that observation in that case was hardly necessary and was casual observation, but we wish to make it clear that we are unable to accept that observation. In our opinion, the question whether a particular industry is carried on by or under the authority of the Central Government is a mixed question of law and fact. 48. In a decision of the Supreme Court in Heavy Engineering Mazdoor Union v. State of Bihar (1969)IILLJ549SC , a similar question arose with reference to a public limited company, the Heavy Engineering Corporation Ltd., Ranchi of which the entire share capital belonged to the Central Government and all its shares were registered in the name of the President of India. An industrial dispute having arisen between the company and the union representing its workers, the dispute was referred to the Industrial Tribunal by the Government of the State of Bihar and the reference was challenged on the ground that the appropriate Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, or so as to produce the same effect as if the person granting the authority had for himself done the act ....... There clearly arises in such a case the relationship of a principal and an agent. The words "under the authority of" mean pursuant to the authority, such as where an agent or a servant acts under or pursuant to the authority of his principal or master. Can the respondent-company, therefore, be said to be carrying on its business pursuant to the authority of the Central Government? That obviously cannot be said of a company incorporated under the Companies Act whose constitution, powers and functions are provided for and regulated by its memorandum of association and the articles of association." The passage serves to highlight the sharp difference between the position as it existed in that case and the position as it exists in the present case under the notifications and the provisions of law to which we have referred above. In the present case we have shown that not only the powers of the directors are taken away and the powers of the shareholders severely curbed, but the authorised controller is substituted as a director and is In the real manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests of the members, present and future, to which they are entitled to have regard, the interests of the employees, the consumers of the company's products or the nation as a whole are legally irrelevant". The same principle is to be found laid down in the decisions in Parke v. Daily News Ltd. (1962) 1 Ch 927 and in Hogg v. Cramphorn Ltd. (1967) 1 Ch 254. That being the position of a normal company functioning under the Companies Act, it is clear that the Industries (Development and Regulation) Act, 1951 and the drastic provisions which it has made in Chapter III-A effect a radical departure. The Industries (Development and Regulation) Act makes a categorical declaration as to the expediency of control by the Union of certain industries and Section 2 thereof says that "it is hereby declared that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule." The very purpose of the enactment therefore is a public purpose and not the purpose of the company or its shareholders. Since we have shown that the company is managed and controlled for the benefit of the share-holders it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that the words "by an establishment engaged in" would become redundant. We cannot give that construction for we cannot hold that any words used in a statute are redundant unless necessity compels us to do so. In the present case we think that those words have a meaning. The Legislature has used a composite expression, though a somewhat cumbersome expression "an establishment engaged in any industry" to indicate the subject of the clause "carried on by or under the authority of any department of the Central Government." In our opinion, "an establishment engaged in any industry" is a composite expression to which the clause "carried on by or under the authority of any department of the Central Government" is a qualification. Instead of using a more "compendious expression establishment," the draftsman has in the interests of extra clarity used the expression "establishment engaged in any industry". This construction is reinforced on a consideration of other provisions of the Act particularly the preamble to the Act, Sub-section (3) of Section 1 and Section 3, Section 4(b) read with Sch. 2 and Sections 5 and 6 re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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