Madras Metropolitan Water Supply and Sewerage Board Official and Employees Union v. The State of Tamil Nadu & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 31.10.2008CORAMTHE HONOURABLE MR. JUSTICE D.MURUGESAN andTHE HONOURABLE MR. JUSTICE V.PERIYA KARUPPIAHWrit Appeal No.2888 of 2003Madras Metropolitan Water Supply and Sewerage Board Official and Employees Union,represented by itsGeneral Secretary.. Appellant/PetitionerVs.1.The State of Tamil Nadu, rep. by its Secretary to Rural Development and Local Administration Department, Madras-600 009.2.Madras Metropolitan Water Supply and Sewerage Board, rep. by its Managing Director, Madras 600 002..... Respondents/Respondents Writ Appeals under Clause 15 of Letters Patent, praying toset aside the Order dated 29.08.1998 made in W.P.No. 13760 of 1989.Petition filed under Article 226 of Constitution of India, to issue aWrit of Mandamus, directing the 2nd respondent to pay Bonous as per theprovisions of the payment of Bonous Act 1965.For Appellant: Mr.K.ShanmugakaniFor Respondent No.1: Mr.R.Thirugnanam Spl. Govt. PleaderFor Respondent No.2: Mrs.G.DeviJUDGMENTD.MURUGESAN,J.The Writ Appeal raised the following question forconsideration:-Whether the employees of Madras https://hcservices.ecourts.gov.in/hcservices/ Metropolitan Water Supply and Sewerage Board areentitled for payment of bonus under The Payment ofBonus Act, 1965?2. The facts that give rise to the above issue in brief areas follows:-Madras Metropolitan Water Supply and Sewerage Board Employees'Union had made a demand for bonus which was ultimately referred to theIndustrial Tribunal, Chennai for adjudication. The Industrial Tribunalin turn adjudicated the dispute in I.D.No.13 of 2005 and dismissedthe same on 27.07.2006 on the ground that in spite of several notices,the petitioner was not served. The very same Union filed W.P.No.13760of 1989 seeking for a direction for payment of bonus. Among otherthings, the union claimed the benefit of the order of the DivisionBench of this Court in W.P.No.1205 to 1210 of 1984 and 250 of 1985dated 13.04.1989 which was subsequently reported in 1991 (II) L.L.J.494 (Tamil Nadu Water Supply and Drainage Board Engineers Association,etc. v. State Government of T.N. And Tamil Nadu Water Supply andDrainage Board). In the said judgement, the Division Bench consideredthe question as to whether the Tamil Nadu Water Supply and DrainageBoard, is an institution established for the purpose of profit and itis excluded as per Section 32 (v) (c) of The Payment of Bonus Act,1965 (hereinafter referred to as "The Bonus Act"). After referring tovarious provisions of the said Act, the Division Bench ultimately heldthat the Tamil Nadu Metro Water Supply and Drainage Board is aninstitution established for the purpose of profit and consequentlydirected the provisions of the Payment of Bonus Act, 1965, to beapplied to the employees of The Tamil Nadu Water Supply and DrainageBoard.3. However, the writ petition was dismissed by the impugnedorder dated 29.08.1998 on the ground that there exist a dispute as towhether The Madras Metro Water Supply and Sewerage Board (now known asThe Chennai Metropolitan Water Supply and Sewerage Act, 1978) is aprofitable organisation or not and therefore the issue has to beadjudicated under The Industrial Dispute Act, consequently with adirection to the Government to refer the matter.4. The said order is now put in issue in this Writ Appeal.5. Mr.K.Shanmugakani, learned counsel appearing for theAppellant would submit that both the provisions of The Tamil NaduWater Supply and Drainage Board, 1970 and The Chennai MetropolitanWater Supply and Sewerage Act, 1978 are identical in all respectsincluding the object for the enactment of the Board, its powers andfunctions, finance, accounts and audit, etc. Under similar provisions,the Division Bench had found that The Tamil Nadu Water Supply andDrainage Board cannot claim exemption under Section 32(v)(c) of ThePayment of Bonus Act, on the ground that it is not an institutionestablished for the purpose of profit, the judgement of the DivisionBench were taken to the Supreme Court by the Board and those CivilAppeals Nos. 3506-12/91 were dismissed on 24.03.1998. Hence, the https://hcservices.ecourts.gov.in/hcservices/ common judgement of the Division Bench which was confirmed by theSupreme Court squarely applies to the case on hand and consequently,the member of the Writ Petition Union are entitled to the benefit ofThe Payment of Bonus Act, 1965.6. Mrs.G.Devi, learned counsel appearing for the 2nd respondentBoard would on the other hand submit that in view of Section 4 of theAct in question – relating to the constitution of the Board; Section 4(A) – appointment of Chairman of the Board in special circumstances;Section 5 – relating to the functions of the Board; and Section 6 –relating tot he power of Board to call for information, the Boardcannot be considered as an institution established for the purpose ofprofit.7. On the above back-drop of the rival contentions, the issuewhich we have referred to earlier has to be considered.8. Before we delve upon the judgement of this Court reportedin 1991 (II) LLJ 394 rendered in Tamil Nadu Water Supply andDrainage Board Engineers Association, etc. v. State Government of T.N.And Tamil Nadu Water Supply and Drainage Board, we are inclined torefer to the provisions of The Chennai Metro Water Supply andSewerage Board, 1978. The Act is intended for the constitution ofthe Board for exclusively attending the growing needs and for planneda development and appropriate regulation of water supply and sewerageservices in the Chennai Metropolitan Area.9. The said Board is established in terms of Section 3 of theAct 28 of 1978 by a Notification issued by the Tamil Nadu Governmentand in terms of Section 4 of the Act, the Board consist of, theMinister in charge of the Department who shall be the Chairman of theBoard; Secretary to Government in charge of the Department; Secretaryto Government in charge of the Finance Department; Member Secretary,of the Chennai Metropolitan Development Authority, CommissionerMunicipal Corporation of Chennai, Managing Director, Tamil Nadu WaterSupply and Drainage Board, and others.10. Section 5 relates to the functions of the Board; Section 6relates to the power of the Board; while Chapter V, relating to theFinance, Accounts and Audit.11. Section 31 of The Chennai Metropolitan Water Supply andSewerage Act, 1978 reads as under:-Board's Fund: 31. (1) The Board shall have its own fund and allreceipts of the Board shall be credited thereto and allpayments by the Board shall be made there from. (2) All moneys belong to that fund may bedeposited or invested- (i) in any scheduled bank within the meaning ofthe Reserve Bank of India Act, 1934 (Central Act II of1934) : or https://hcservices.ecourts.gov.in/hcservices/ (ii) in any corresponding new bank as defined inthe Banking Companies (Acquisition and Transfer ofundertakings) Act, 1970 (Central Act 5 of 1970): or (iii) in the State Bank of India as defined inthe State Bank of India Act, 1955 (Central Act 23 of1955)or its subsidiary banks as defined in the StateBank of India (Subsidiary Banks) Act, 1959 (Central ActXXXVIII of 1959) ; or (iv) in such securities as may be approved bythe Government. (3) The Government may, from time to time, makegrants, subventions, or advances or loans to the Boardfor the purposes of this Act on such terms andconditions as the Government may determine. (4) The Board may accept grants, subventions,donations and gifts from the Central or State Governmentor local authority, or any individual or body, whetherincorporated or not, for all or any of the purposes ofthis Act. (5) The Board may constitute a sinking fund,depreciation reserve fund and other funds in such mannerand in such form as may be prescribed. Such funds shallbe vested in such manner as may be determined by theBoard with the approval of the Government.12. Section 32 of The Chennai Metropolitan Water Supply andSewerage Act, 1978 reads as under:-Power of the Board to borrow and lend:32. (1) Subject to the provisions of this Act andthe regulations made thereunder and subject to suchconditions as may be specified by the Government by ageneral or a special order issued in this behalf by themand with their previous approval, the Board may, fromtime to time, borrow money required for the purposes ofthis Act by any one or more of the members specifiedbelow:-(a) raising loans from any bank or otherfinancing institutions or the Life Insurance corporationof India established under Section 3 of the LifeInsurance Corporation Act, 1956 (Central Act 31 of 1956);or(b) raising loans from any corporation ownedor controlled by the Central or the State Government; or(c) raising loans from the public by issue ofbonds, or debentures or stocks or otherwise in the formand manner approved by the Government:Provided that the loans or amounts borrowed underthis sub-section shall be utilized only for the purposeor purposes for which such loans or borrowings wereraised or made.(2) Subject to the provisions of this Act and to https://hcservices.ecourts.gov.in/hcservices/ such conditions and limitations as may be specified, theBoard may out of its funds grant loans and advances, onsuch terms and conditions as it may determine to anylocal authority for any development scheme.(3) the Government may guarantee in such manneras they think fit, the repayment of the principal andinterest of any loan proposed to be raised by the Boardunder Sub Section (1):Provided that the government shall, so long asany such guarantees are in force, lay before both Housesof the Legislature in every year during the Budgetsession, a statement of the guarantees, if any, givenduring the current year and an up-to-date account of thetotal sums, if any, which have been paid out of theConsolidated Fund of the State by reason of any suchguarantees or paid into the said Fund towards re-paymentof any money so paid out. 13. The question is, as to whether, on the basis of theprovisions of Section 32(v)(c) of the Bonus Act, Chennai MetropolitanWater Supply and Sewerage Board is an institution established not forprofit and consequently exempted from the provisions of payment ofthe Bonus Act. The bone of contentions of the Employees Union is thatin as much as the very same dispute was earlier raised, argued anddecided in respect of The Tamil Nadu Water Supply and Drainage Boardand the Division Bench held that The Tamil Nadu Water Supply andDrainage Board cannot claim exemption under Section 32(v)(c) of theBonus Act and on the very same parameteria provisions, the employeesof The Chennai Metropolitan Water Supply and Sewerage Board are alsoentitled to payment of bonus. 14. There is no controversy that claim of the Union isresisted by the Board solely on the ground that the Board is exemptedunder Section 32(v) (c) of The Payment of Bonus Act and not on anyother grounds. Keeping the above contention in mind, let us refer tothe judgement rendered by this Court in 1991 (II) L.L.J. 494 (TamilNadu Water Supply and Drainage Board Engineers Association, etc. v.State Government of T.N. and Tamil Nadu Water Supply and DrainageBoard). Prior to the establishment of The Chennai Metropolitan WaterSupply and Sewerage Act, 1978, the Government of Tamil Naduestablished The Tamil Nadu Water Supply and Drainage Board, by Act IVof 1971 viz., The Tamil Nadu Water Supply and Drainage Board Act, 1970to provide for the establishment of Water Supply and Drainage Boardand the regulation and development of drinking water and drainage inthe State of Tamil Nadu. As it was felt by the Government that asimilar Board should be set up exclusively to attend the growing needsand planned development and appropriate regulation of water supply andsewerage services in the Chennai Metropolitan Area, the ChennaiMetropolitan Water Supply and Sewerage Act, 1978 was enacted. Theobject behind both the Acts are one and the same.15. Section 32 of The Payment of Bonus Act, 1965, reads as https://hcservices.ecourts.gov.in/hcservices/ under:-"32. Act not apply to certain classes ofemployees – Nothing in this Act shall apply to- ..... (v) employees employed by- .... (c)institutions (including hospitals, chambersof commerce and social welfare institutions)established not for the purpose of profit;16. The Division Bench on an earlier occasion, whileconsidering the issue as to whether the employees of The Tamil NaduWater Supply and Drainage Board are entitled to payment of bonusfollowing the issue raised by the Board that the Tamil Nadu WaterSupply and Drainage Board is not an institution which could claimexemption under Section 32 (v) (c) of the Payment of Bonus Act heldin the affirmative. The Division Bench considered the variousprovisions of The Tamil Nadu Water Supply and Drainage Board Act, 1970and ultimately, rejected the claim of exemption under Section 32 (v)(c) of The Payment of Bonus Act, 1965. The Division Bench consideredSection 34 of The Payment of Bonus Act, 1965, relating to The BonusForumula. It also considered the provisions of Section 34 and 35 ofThe Tamil Nadu Water Supply and Drainage Board Act, 1970, relatingto sanction of loans and grants to the Board by the State Governmentfor the purpose of the Act and Section 36 relating to the Power ofthe Board to borrow and lend subject to the provisions of the Act andthe rules made thereunder. Applying the above said provisions, theDivision Bench rejected the contention that the Board is exemptedunder the provisions of Section 32 (v)(c) of The Payment of Bonus Actby holding that that Board is an institution established not for thepurpose of profit.17. Coming to The Chennai Metropolitan Water Supply andSewerage Act, 1978, the provisions under Chapter-V, relate toFinance, Accounts and Audit. Section 31(1) of the Act in question isparimeteria to Section 34(1) of The Tamil Nadu Water Supply andDrainage Board Act; likewise Section 34(3) of the Act in question isparameteria to the provisions of Section 34(2) The Tamil Nadu WaterSupply and Drainage Board Act; and Section 31(4) of the Act inquestion is parameteria to Section 35 of the The Tamil Nadu WaterSupply and Drainage Board Act; and Section 32 of the Act in questionis parameteria to Section 36 of The Tamil Nadu Water Supply andDrainage Board Act. 18. On consideration of the provisions of The Tamil NaduWater Supply and Drainage Board Act, the Divsion Bench held thus:-"We have no manner of doubt that therespondent-Board has been established to serve thepublic interest by ensuring better amenities of lifeand raising the standard of living of the community asa whole. Learned single Judge has referred to thefunctions of the Board and its powers and rightly held https://hcservices.ecourts.gov.in/hcservices/ that the purpose behind the functions of the Board isto provide protected drinking water supply anddrainage facilities, but this also cannot be disputedthat the Board has got its own assets and liabilities,that it has got its method of recovery of the cost ofthe scheme, making investment and constituting itsfunds by "all moneys received by or on behalf of theBoard...., all proceeds of land or any other kind ofproperty sold by the Board, all charges, all interest, profits and other moneys accruing to the Board andall moneys and receipts", deposited into the publicaccounts of the Government under such detailed headof accounts as may be prescribed or in the ReserveBank of India, State Bank of India or anycorresponding new bank as defined in the BankingCompanies (Acquisition and Transfer of Undertakings)Act, 1970. It has thus a scheme of profit and loss.It shall earn profit in some year and lose in anotheryear. Thus, in its commercial activities of sort, ithas got a capital structure of profit, liabilities andlabour force to care for. We see reason to hold inaccordance with the rule indicated by the SupremeCourt in the case of Workmen, T.T. Devasthanams Vs.Management (1980 LIC 389) that the Board is aninstitution designed for profit in the limited sensethat when the Government's Department found itdifficult to run such projects departmentally, theydecided to create a Board and transferred the projectsto ensure that there was proper service to thecommunity at large on the one hand and on the other,there was no pressure on the meagre revenue and otherresources of the State.Applying the test as above, we have nohesitation in holding that the learned Single Judgehas fallen in error in holding that the respondent-Board is an institution established not for purposesof profit. Employees of the Board qualifying for bonusunder the Act, in our opinion are entitled to minimumamount of bonus and/or such amount computed inaccordance with law upon the surplus in the accountingyear."19. The Division Bench has also referred to the Judgement ofthe Supreme Court in Housing Board of Haryana v. Haryana HousingBoard Employees' Union and other 1996 (1) SCC 95 and others wherein ithas been held that the Haryana Housing Board is not entitled to thestatutory exemption from the Act under Section 32 of The Payment ofBonus Act, 1965 on the ground that it was a local authority. 20. Questioning the above findings rendered by the DivisionBench, The Tamil Nadu Water Supply and Drainage Board, went on appeal https://hcservices.ecourts.gov.in/hcservices/ before the Supreme Court in Civil Appeal(s) Nos.3506-12/91 and thesame were dismissed on 24.03.1998 by the following orders:-"It is not in dispute that the appellant has beenpaying though not in the name of bonus every yeareither in the name of ex-gratia payment or under someother name. No doubt Mr.Krishnamurthy, learnedcounsel appearing for the appellant-Board, argued atlength to persuade us to hold that the appellant-Board will come under the exempted category underSection 32(v)(c) of the Act. However, we are unableto persuade ourselves to take a different view fromthe one taken by the High Court on the facts as foundby it. We are satisfied that the judgement of theHigh Court does not call for any interference. Theappeals fail and are accordingly dismissed with noorder as to costs."21. The issue raised in this Writ Appeal is whether TheChennai Metropolitan Water Supply and Sewerage Act, 1978 could beexempted from payment of the Bonus in terms of Section 32 of ThePayment of Bonus Act, 1965. The similar question had already beendecided against the Board in the case of Tamil Nadu Water Supply andDrainage Board. Therefore, in our considered opinion the ratio laiddown in the judgement rendered in that case would be squarelyapplicable to the present case on hand. Accordingly, the point isanswered against the Board and in favour of the Writ Petitioner Union.It is held that The Chennai Metropolitan Water Supply and SewerageBoard cannot claim exemption under Section 32(v) (c) of The Payment ofBonus Act. In view of our findings, the employees of The ChennaiMetropolitan Water Supply and Sewerage Board are entitled to the Bonusin accordance with law. The writ Appeal succeeds accordingly. 22. In fine,the Writ Appeal is allowed and the orderdated29.08.1998 made in W.P.No. 13760 of 1989 is set aside. No costs.Sd/- Asst. Registrar/true copy/ Sub Asst. RegistrarkmkTo.1.The Secretary to Government of TamilNadu, Rural Devlopment and Local Administration Department, Fort, St.George, Chennai-9. https://hcservices.ecourts.gov.in/hcservices/

2.The Managing Director, Madras Metropolitan Water Supply and Sewerage Board, Madras -2. 1 cc to Government Pleader SR.No.60745Writ Appeal No.2888 0f 2003rsm(co)em/10.11.08