UCO Bank Employees Association Tamil Nadu v. The Union of India

JUDGMENTS.J.MUKHOPADHAYA, J.The appellant, UCO Bank Employees Association (hereinafterreferred to as 'Association'), challenged the validity of ceilingimposed under Section 2 (13) of the Payment of Bonus Act, 1965(hereinafter referred to as the 'Bonus Act'). Dismissal of writpetition by learned single Judge had given rise to the filing ofthe present writ appeal.2. The main plea taken by the appellant is that the exclusionof a class of employees for the purpose of Section 2 (13) of theBonus Act, 1965, on the basis of a prescribed ceiling of wages isarbitrary, violative of Article 14, unreasonable, without any basisand has no nexus with the object to achieve. He also referred toSection 12 of the Bonus Act to submit that the said provision takescare of all employees even if they draw wages above the prescribedceiling and, thereby, the ceiling prescribed u/s 2 (13) is uncalledfor and imposed without application of mind.Stand of Appellant :-3. Learned counsel for the appellant submitted that as aresult of ceiling limit for the purpose of coverage of the Act,Rs.3,500/= in the year 1995 and Rs.10,000/= per month now is takeninto account, many employees, who had earlier been receiving bonuswhen their salary was less than Rs.10,000/=, will now be deprivedof bonus. Referring to amendment relating to coverage under thePayment of Gratuity Act, learned counsel for the appellantsubmitted that all the employees, irrespective of their status,such as supervisors, managers, workmen, etc., are covered by thePayment of Gratuity Act with effect from 22nd June, 1995. There isonly a limit of the amount of gratuity, which an employee can get.According to him, similar provision should be made and allemployees, irrespective of ceiling limit, should be allowed toreceive bonus. For the purpose of calculation, though ceilingmentioned u/s 12 of Bonus Act could be noticed, but all theemployees cannot be excluded by giving a limited unreasonabledefinition of "employees". It was submitted that exclusion ofemployees from Bonus Act for payment of bonus by keeping a ceilinglimit of Rs.10,000/= per month is arbitrary and violative ofArticle 14 of the Constitution of India.According to the counsel for the appellant, a Bill for paymentof bonus for employees was introduced in the year 1965 as perpreamble to the Act. The said Act was enacted to provide forpayment of bonus to persons employed in certain establishments onthe basis of profits or on the basis of production/productivity.When the purpose of the Act is for payment of bonus on the basis ofproductivity or production, then the question of exclusion of any https://hcservices.ecourts.gov.in/hcservices/ employee from getting the benefit of bonus based on his salary isarbitrary. It was submitted that there should not be any ceilingfor coverage, particularly when there is a ceiling for calculationof bonus u/s 12 of the Bonus Act, which will take care of thesituation.Learned counsel placed reliance on Bonus Commission reportsubmitted before the law was enacted. The said Bonus Commissionhad taken note of the fact that the concern which pays bonus to theemployees would ordinarily have to pay bonus also to the officersand supervisory staff, who have contributed to the profit of theconcern no less than the workmen. Therefore, according to theappellant, u/s 2 (13), supervisory staff and officers have beenincluded, prescription of ceiling limit for getting such benefit isunjust and uncalled for.Learned counsel for the appellant summarised his argumentwhile challenging the exclusion of certain employees from thedefinition of employees, which reads as follows :-"a) The exclusion is arbitrary and is inviolation of Art. 14 of the Constitution of India.b) The Supreme Court in Kasturi Lal's casereported in AIR 1980 SC 1992 at para 12 has heldthat the constitutional validity of a provision hasgot to be tested in the light of Art. 14 and thedirective principles of state policy.c) In the case of workers, the Bonus Act has gotto be tested in the light of Art. 39 of theConstitution of India. Art. 39 (a) states that thecitizens, men and women equally have the right toan adequate means to livelihood.. Art. 39 (b)states that the material resources of the communityare so distributed as best to subserve the commongood. Art. 43 which promises a living wage statesthat a stage by suitable legislation or economicorganisation or in any other way secure to allworkers, agriculture, industrial or otherwiseliving wage ensuring a decent standard of life. Itis nobody's case that the workers are getting aliving wage which is an ideal wage.d) Tested in the light of Art. 39 and Art. 43 ofthe Constitution of India and the preamble to theBonus Act, which provides for payment of bonusbased on profit or on production or productivity,there is no justification for excluding employeesdrawing over a particular salary from the coverageof the Act itself. There is some meaning in saying https://hcservices.ecourts.gov.in/hcservices/ that if an employee draws over a particular salaryhe will get bonus, but for the purpose of thecalculation only certain portion of salary will betaken into account and that is taken care by Sec.12 of the Act.e) One has to see the adverse consequences on theemployees on account of a ceiling on coverage underSec. 2 (13) based on salary. We have given astatement to show that a bank employee with 5 yearsof service and who is getting Rs.8000/= as salarywill get bonus whereas the same employee say after10 years of service will not get any bonus becausehis salary has gone beyond Rs.10,000/= because ofannual increments. Even though as an experiencedemployee he has contributed to the same extent ifnot more towards the profits he will not get bonus.One can understand an employee not being entitledto bonus if he does not work in that year andthereby not contributed to the profits. But to saythat even if he has worked for more number of daysin the year, even then he will not be entitled tobonus because his salary is more than Rs.10,000/=is not justified."It was submitted that injustice and irrationality in suchexclusion earlier came to the notice of the Union of India, whichintroduced a Bill in the year 2002 in Parliament, as enclosed inthe paper book to remove the ceiling for the purpose of coverage ofthe Act, but for reasons best known to the respondents, it was notgiven effect.Reliance was placed on Supreme court decision in Rattan Arya &Ors. – Vs – State of Tamil Nadu & Anr. reported in 1986 (3) SCC385. In the said case Supreme Court held that if the purpose ofthe Rent Control Act was to give protection to the tenants, and iftenants of non-residential building, irrespective of ceiling limiton rental value are covered by the Act, then there is nojustification to restrict the protection in the case of those, whooccupy residential accommodation only to Rs.400/= per month. TheSupreme Court struck down the ceiling of Rs.400/= per month in thecase of residential premises on the ground that it was arbitrary. Though the aforesaid judgment has been referred, but it is notclear as to how the said judgment is applicable in the present casetill it is shown that the exclusion of certain employees from thedefinition of "employee" is unjust, arbitrary, ultra vires andillegal. https://hcservices.ecourts.gov.in/hcservices/ Reliance was also placed on Supreme Court decision in MapleVishwanath Acharya & Ors. - Vs – State of Maharashtra & Anr.reported in 1998 (2) SCC 1 , wherein following observation wasmade:-"30. When enacting socially progressivelegislation the need is greater to approach theproblem from a holistic perspective and not to havea narrow or short-sighted parochial approach.Giving a greater than due emphasis to a vocalsection of society results not merely in themiscarriage of justice but in the abdication ofresponsibility of the legislative authority. Sociallegislation is treated with deference by the courtsnot merely because the legislature represents thepeople but also because in representing them theentire spectrum of views is expected to be takeninto account. The legislature is not shackled bythe same constraints as the courts of law. But itspower is coupled with a responsibility. It isalso the responsibility of the courts to look atlegislation from the altar of Article 14 of theConstitution. This article is intended, as isobvious from its words, to check this tendency;giving undue preference to some over others."Certain other case laws were also referred to, but being notdirectly applicable in the present case, they have not beenreferred to.Stand of Union of India :-4. Learned Asst. Solicitor General appearing on behalf ofUnion of India, while placed historical background of bonus,submitted that bonus used to be paid voluntarily by the employersout of its profit to keep the workmen contended. It is only afterthe enactment of Bonus Act it acquired character of a right toshare in surplus profits and liability to pay bonus has becomestatutory obligation imposed upon employer covered by the Act. Thepayment of bonus is a social legislation, which was enacted byParliament pursuant to powers conferred under List III, Entry 23and 24 of Schedule VII of Constitution of India. While Entry 23enables to legislate on social security and social insurance,employment and unemployment, Entry 24 enables to legislate onwelfare of labour, including condition of work, provident fund,employers liability, workmen's compensation, old age pension andmaternity leave. Therefore, Parliament itself has powers tolegislate and, therefore, it enacted the Payment of Bonus Act,1965. The provision is well within the legislative competence ofthe Parliament. Section 2 (13) brings in definition of "employee"only for the purpose of classifying the employees, who are entitled https://hcservices.ecourts.gov.in/hcservices/ to receive bonus and if classification is not made, as made byinserting ceiling limit on wages, it would have a wider meaning byincluding those drawing higher salary/wages. Therefore, accordingto him, the definition of "employee" without ceiling on wages willbe wide and exhaustive and may run counter to the principle toprovide benefit to those drawing lesser reward. The legislationbeing on social security of working class, particularly theemployees at the grass-root level drawing lesser salary, theCentral Government, from time to time, taking into considerationdifferent factors, such as prevailing economic situation, capacityto pay price rise, living index and upward revision of pay scales,raised the ceiling limit. The purpose of segregation by way ofceiling is to see that those section of employees drawing lesserwages, by applying ceiling limit, is given the benefit of entirebonus so as to have an equal standard of living compared to otherclass of employees, who draw considerable amount of salary and whodo not fall within the ceiling limit. If bonus is equally dividedamongst all employees, the employees at the grass-root level willget meagre amount than the amount, which they could receive if itis limited to such employees getting lower wages. According tohim, as ceiling do not discriminate amongst employees on the basisof their status, such as supervisors, managerial andadministrative, technical or clerical work, it is not arbitrary.The classification being based on salary/wages drawn by anemployee, it is just and proper. In order to maintain equalstandard of living, it is always open to the Union of India to makereasonable classification, which is not violative of Article 14.Stand of the 3rd Respondent :5. Learned counsel appearing on behalf of the 3rd respondent,UCO Bank, also highlighted the historical background of bonus andthe recommendation of the Bonus Commission. It was submitted thatthe validity of Section 2 (13) of Bonus Act cannot be decided inisolation without reference to aforesaid provisions of the BonusAct, besides Section 12 of the Act. The nexus between theprovisions and the object sought to be achieved, namely, economicviability of the industrial concern all over the country establishthat the provision of Section 2 (13) is not unreasonable, but it isreasonable. The lesser paid workmen and lower state of supervisorystaff form a distinct class, who alone are entitled to benefit inthe profit sharing bonus under the Act and there is nodiscrimination as erroneously contended by the appellant. Hence,according to the learned counsel for the 3rd respondent, theprovisions are not arbitrary nor violative of Article 14 of theConstitution of India. It was further submitted that theappellant-association purports to represent the employees of anationalised bank, fully owned by the Government of India andfunctioning under the Ministry of Finance and Economic Affairs.The bonus formula for payment of bonus to the employees in thebanking industry depends upon the economic policy of the Central https://hcservices.ecourts.gov.in/hcservices/ Government and the formula is different from the formula prescribedfor other industrial establishments. That being so, the claim ofthe appellant is not apposite to the well being of the country.6. We have heard the learned counsel appearing for theparties, noticed the rival contentions, the report of the BonusCommission as on record and decisions of the Supreme Court asreferred by the parties.7. Section 2 (13) defines "employee", as quoted hereunder :-"2. (13) "employee" means any person (other thanan apprentice) employed on a salary or wage notexceeding [three thousand and five hundred rupees]per mensem in any industry to do any skilled orunskilled, manual, supervisory, managerial,administrative, technical or clerical work for hireor reward, whether the terms of employment beexpress or implied."Eligibility for bonus has been prescribed under Section 8, asevident from the provision and quoted hereunder :-"8. Eligibility for bonus. - Every employee shallbe entitled to be paid by his employer in anaccounting year, bonus, in accordance with theprovisions of this Act, provided he has worked inthe establishment for not less than thirty workingdays in that year."Section 10, while mandates payment of minimum bonus of 8.33%of the salary or wages earned by the employee during the accountingyear, u/s 12, while calculating bonus, a ceiling has beenprescribed, as evident and quoted hereunder :-"Calculation of bonus with respect to certainemployees. - Where the salary or wage of anemployee exceeds [two thousand and five hundredrupees] per mensem, the bonus payable to suchemployee under section 10 or, as the case may be,under section 11, shall be calculated as if hissalary or wage were [two thousand and five hundredrupees] per mensem."Historical Background :8. It appears that the industrial employees made claim forbonus since the commencement of the first world war. It was foundthat as a result of inflationary trends there were disparitybetween living wage and contractual remuneration earned by theworkmen in the textile industry. The employers paid to the workmencertain wages by describing it as war bonus. Later on, it was https://hcservices.ecourts.gov.in/hcservices/ called as special allowance. A committee was constituted by theGovernment of Bombay in 1922 to consider the "nature and basis" ofbonus payment, which reported that the workmen has a just claimagainst the employers to receive bonus, but the claim was notcustomary legal or equitable. During the second world war theemployees in textile industry were granted cash bonus equivalent toa fraction of actual wages, excluding Dearness Allowance, but eventhat was a voluntary payment made with a view to keep the labourcontended. The dispute for payment of bonus for the year 1948-1949crept up in textile industries at Bombay. The Industrial Courtexpressed its view that since labourer as well as the capitalemployed in the industry contribute to the profits of the industry,both are entitled to claim a legitimate return out of the profitsof an establishment and evolved a formula for charging certainprior liabilities on the gross profits of the accounting year andawarding a percentage of balance as bonus to the workmen. Inadjudicating upon the claim for bonus, the industrial courtexcluded such establishment, which have suffered severe losses inthe year (s) in consideration from the liability to pay bonus. Onappeal against the award relating to the year 1949, the LabourAppellate Tribunal broadly approved the method for computing bonusas a fraction of surplus profit. According to the formula,commonly known as "Full Bench Formula", surplus available fordistribution had to be determined by adopting the following priorcharges against gross profit :-a) Provision for depreciation;b) Reserve for rehabilitation;c) Return of 6% on the paid-up capital; andd) Return on the working capital at a lower rate than thereturn on paid up capital and from the balance equally availablesurplus, the workmen were to be awarded a reasonable share by wayof bonus for the year.The aforesaid Full Bench Formula was considered by the SupremeCourt in Muir Mills Co. Ltd. - Vs – Suti Mills Mazdoor Union,Kanpur (AIR 1955 SC 170), Baroda Borough Municipality – Vs – ItsWorkman & Ors. (AIR 1957 SC 110), Sree Meenakshi Mills Ltd. - Vs –Their Workmen (AIR 1958 SC 153) and State of Mysore – Vs – TheWorkers of Gold Mines (AIR 1958 SC 923). However, the SupremeCourt did not accept the formula in its entirety, but held thatbonus is not gratuitous payment made by the employer to its workmennor a deferred wage, and that where wages fall short of livingstandard and the industry makes a profit, part of which is due tothe contribution of the labour, the claim of bonus may belegitimately made by the workmen.It further appears that in the year 1961, Government of India,from its Ministry of Labour and Employment, by its resolution dated6th Dec., 1961, set up a commission to defend the concept of bonus,to consider the question of bonus based on profits and to recommendthe principle of computation of such bonus and method of payment, https://hcservices.ecourts.gov.in/hcservices/ to determine what the prior charges should be in differentcircumstances and how they should be calculated. It was toconsider whether there should be a lower limit irrespective of lossin a particular establishment and upper limit for distribution inone year, and if so, the manner of carrying forward profits andlosses over a prescribed period and to suggest proper machinery andmethod for settlement of bonus dispute. Accordingly, theCommission submitted its report, which was accepted by the Union ofIndia, subject to few modifications. Thereafter, Payment of BonusOrdinance was issued on 29th May, 1965, which was later on enactedas the Payment of Bonus Act, 1965 (21 of 1965). The originaldefinition of "employee" under the Payment of Bonus Act, 1965,provides for payment of bonus to all employees drawing salary notexceeding Rs.1,600/=. All the trade unions accepted the ceiling.With the passage of time, cost of living increased manifoldnecessitating increase in the wages payable to almost allcategories of employees, including those who are covered by thedefinition of workmen u/s 2 (s) of the Industrial Disputes Act,1947. As a result of this, according to Union of India, theeligibility criteria enshrined u/s 2 (13) read with Section 12 ofthe Act became redundant and large number of employees becameineligible to receive bonus. Therefore, the trade unions andindividual employees represented the Central Government to revisethe eligibility criteria by increasing the quantum of wagesspecified under the definition of the term "employee" u/s 2 (13).Section 2 (13) prescribes limit of Rs.1,600/= which underwentgradual amendments in the year 1985, 1995 followed by recentamendment in the year 2007. In the amendment carried in the year1985, (vide Act 65 of 1985), w.e.f. 7th Nov., 1985, the ceilinglimit was revised to Rs.2,500/= per month from Rs.1,600/=.Likewise, in the year 1995 (vide Act 34 of 1995), ceiling limit onsalary was revised to Rs.3,500/= per month from Rs.2,500/= w.e.f.1st April, 1993. Recently, vide Ordinance No.8/07, ceiling onsalary has been revised to Rs.10,000/= per month.Gist of the report of the Bonus Commission :9. Government of India, Ministry of Labour and employment, byits resolution dated 6th Dec., 1961, set up a Commission consistingof Shri M.R.Meher (Chairman), two independent members, two membersrepresenting the workers and two members representing theemployers. The terms of reference were as follows :-"1) To define the concept of bonus to consider inrelation to industrial employments, the question ofpayment of bonus based on profits and recommendprinciples for computation of such bonus andmethods of payment. https://hcservices.ecourts.gov.in/hcservices/ Note :- The term "industrial employments" willinclude employment in the private sector and inestablishments in the public sector notdepartmentally run and which compete withestablishments in the private sector.2) To determine the extent to which the quantumof bonus should be incluenced by the prevailinglevel of remuneration.3) a) To determine what the prior charges shouldbe in different circumstances and how they shouldbe calculated.b) To determine conditions under which bonuspayments should be made unitwise, industry-wise andindustry-cum-region wise.4) To consider whether the bonus due to workers,beyond a specified amount, should be paid in theform of National Savings Certificates or in anyother form.5) To consider whether there should be lowerlimits irrespective of losses in particularestablishments and upper limits for distribution inone year and if so, the manner of carrying forwardprofits and losses over a prescribed period.6) To suggest an appropriate machinery and methodfor the settlement of bonus disputes.7) To make such other recommendations regardingmatters concerning Bonus that might be placedbefore the Commission on an agreed basis by theemployers' (including the public sector) and theworker's representatives."The Commission, in its report, while dealing with the conceptof bonus and other facts, observed as follows :-"3.20. In our view, the concept that bonus isdesigned to fill the gap between the actual wageand the living wage is beset withdifficulties. ....... Actually the highest bonusesare paid and Awards and agreements, to workmen inindustries where the wages are high; and sincebonus is ordinarily paid at a uniform rate nodistinction is made between workmen drawing a lowwage and those who may be drawing what may be https://hcservices.ecourts.gov.in/hcservices/ considered in the circumstances of a particulartime and place to be already a living wage. Thegap theory also implies that if an industry orconcern can afford to pay the living wage, itshould do so as a wage rather than as bonus.3.21. The concept of bonus is difficult to definein rigid terms, but it is possible to urge thatonce profits exceed a certain base, labour shouldlegitimately have a share in them. In other words,we think it proper to construe the concept of bonusas sharing by the workers in the prosperity of theconcern in which they are employed. This has alsothe advantage that in the case of low paid workerssuch sharing in prosperity augments their earningsand so helps to bridge the gap between the actualwage and the need based wage. If it is notfeasible to better the standard of living of allthe industrial and agricultural workers as aimed atin Article 43 of the Constitution, there is nothingwrong in endeavouring to do so in respect of atleast those workers whose efforts have contributedto the profits of the concern in which they haveworked.********3.27.Our view is that the profit bonus sustem haslittle direct incentive effect. Bonus is usuallypaid to all workmen at the same rate in terms ofmonthly basic wages, or in some cases in terms ofconsolidated wages. The efficient as also theinefficient worker gets bonus at the same rate. Aswas observed by the Tripartite Profit SharingCommittee, 1950, which recommended experiments inProfit Sharing."As to the question who are entitled to bonus, the Commission,while recommending that all employees are entitled irrespective ofstatus, recommended for a ceiling on the basis of wages (Basic Payand Dearness Allowance put together) for the purpose of bonus; thegrounds for such ceiling has been shown therein as quotedhereunder:-"12.7. Our terms of reference require us to makerecommendations on the question of bonus to'workers'. The term 'workers' has not been definedbut would probably include workmen as defined inthe Industrial Disputes Act, and also workmen oremployees as defined in the State Acts applicableto industrial workers, such as the BombayIndustrial Relations Act. But in allocating a https://hcservices.ecourts.gov.in/hcservices/ portion of the available surplus for bonus, we haveto take into account of the fact that a concernwhich pays bonus to workmen would ordinarily haveto pay bonus also to officers and supervisorystaff, who contribute to the working of the concernno less than the workmen. ......... We are of theview that for the purposes of the bonus formula,the portion of the available surplus which we haveallocated as bonus should be deemed to includebonus to the lower paid supervisory staff andofficers. There is another aspect of the matterwhich has to be borne in mind. If the formula wereto provide only for the percentage of the availablesurplus allocable for bonus to workmen, then thepercentage fixed would have to be lower than 60%,for the Company would undoubtedly have to pay bonusto some at least of its supervisory staff andofficers. Besides, if a portion of the availablesurplus is allocated as bonus for workmen only,there would be disputes as to whether employeesdrawing total emoluments of over Rs.500 come underthe clerical, technical, supervisory category andare therefore workmen as defined in Section 2 (8)of the Industrial Disputes Act or whether theirduties are mainly managerial or administrative andthey are therefore non-workmen. Having regard toall these considerations we recommend that in thebonus formula proposed by us the portion of theavailable surplus allocated for bonus should bedeemed to include bonus to employees drawing atotal basic pay and dearness allowance (takentogether) up to Rs.1,600 p.m., regardless ofwhether they are 'workmen' or non-workmen asdefined in the Industrial Disputes Act or any otherrelevant Act, with the proviso that the quantum ofbonus payable to employees drawing total basic payand dearness allowance over Rs.750 p.m., shall belimited to what it would be if their pay anddearness allowance were only Rs.750 per month. Asregards officers and supervisory staff drawing overRs.1,600 p.m., it would be open to the Company orconcern, if it considered necessary, to pay thembonus out of the balance (40%) of the availablesurplus left to it under this formula."10. While the Payment of Bonus Act, 1965, was enacted,following "Statement of Objects and Reasons" were shown :-"Statement of Objects and Reasons.- The Paymentof Bonus Act, 1965 (the Act) provides for paymentof bonus to employees under the Act. According to https://hcservices.ecourts.gov.in/hcservices/ clause (13) of Section 2 of the Act, employee meansany person (other than an apprentice) employed on asalary or wage not exceeding three thousand andfive hundred rupees per mensem in any industry todo any skilled or unskilled, manual, supervisory,managerial, administrative, technical or clericalwork for hire or reward, whether the terms ofemployment be express or implied. However,according to section 12 of the Act, the bonuspayable to an employee whose salary or wage exceedstwo thousand and five hundred rupees per mensemshall be calculated as if his salary or wage weretwo thousand and five hundred rupees per mensem.The Central Government has been receivingrepresentations from trade unions, individuals andvarious associations for enhancement or for removalof the above ceilings. After due consideration,the Government has decided to enhance theeligibility limit for payment of bonus from threethousand and five hundred rupees per mensem to tenthousand rupees per mensem and the calculationceiling from two thousand and five hundred rupeesper mensem to three thousand and five hundredrupees per mensem."11. Learned counsel for the appellant placed much reliance onthe Statement of Objects and Reasons of Payment of Bonus Act, 1965and the statement of Objects as was shown in the Bill of 2002,which was never given effect, but they are not necessary to bediscussed.12. The question of recourse to preamble and interpreting astatute fell for consideration before the Supreme Court from timeto time. In Y.A.Mamarde – Vs – Authority under M.W. Act reportedin AIR 1972 SC 1721, the Supreme was observed that "a preamble,though a key to open the mind of legislature, cannot be used tocontrol or qualify the precise and unambiguous language of theenactment. It is only in case of doubts or ambiguity that recoursemay be had to the preamble to ascertain the reason for theenactment in order to discover the true legislative intendment".In E.V.Chinnaiah – Vs – State of A.P. & Ors. reported in 2005(1) SCC 394, Supreme Court observed "as noted above, the Court willhave to examine not only the object of the Act as stated in thestatute, but also its scope and effect to find out whether theenactment in question is genuinely referable to the field oflegislation allotted to the State". ....... "The approach toconstrue an impugned legislation should not be based on subjectiveintention of legislation, but should be given an objective meaning.The meaning is declared by the Courts after the application ofrelevant interpretative principles so as to consider the https://hcservices.ecourts.gov.in/hcservices/ constitutionality of a statute having regard to the object theconstitution makers sought to achieve. ......"13. It is not in dispute that a ceiling on wages wasprescribed u/s 2 (13) for the purpose of definition of "employees"since the enactment of Bonus Ac, 1965t. In the Statement ofObjects and Reasons of Bonus Act, merely referred therecommendation of the Tripartite Commission setup by Government ofIndia by their resolution dated 6th Dec., 1961, as was acceptedwith some modification with a view to implement the recommendationof the Commission. From the terms of reference made to the BonusCommission, it will be evident that the Government of Indiareferred the matter mainly for determination of the question ofbonus to "workers" in industrial employment. No specific referencewas made with regard to "all the employees" of such industrialemployment. In Chapter 12.7, the Bonus Commission noticed that theterm of reference required the Commission to make a recommendationon the question of bonus to workers. As the definition of"workers" was not defined in the reference, the Bonus Commissionobserved "the term 'workers' it would probably include the workmenas defined under the Industrial Disputes Act and the workmen oremployees as defined under other Acts applicable to the industrialworkers, such as Bombay Industrial Relations Act". However, inallocating a portion of available surplus for bonus, the BonusCommission had to take into account the fact that a concern, whichpays bonus to the workmen, would ordinarily have to pay bonus alsoto officers and supervisory staff, who contribute to the working ofthe concern no less than the workmen. It was in this backgroundthe Bonus Commission made the following recommendation :-"We are of the view that for the purpose of bonusformula, a portion of the available surplus, whichwe have allocated as bonus, should be deemed toinclude bonus to the lower paid supervisory staffand officers". (Emphasis added)14. While making such recommendation, the Bonus Commissionfurther observed that a formula were to provide only for thepercentage of available surplus allocated as bonus to workers,while percentage fixed have to be lower than 60. It is in thisbackground, to make a distinction between the employees, who are'lower paid' from that of the employees, who are 'higher paid', thebonus formula proposed by the Commission from the portion ofavailable surplus allocated as bonus should be granted to theemployees drawing a total Basic Pay and Dearness Allowance (takentogether) upto Rs.1,600/= per month, regardless of whether they are'workmen' or 'non-workmen' as defined under the Industrial DisputesAct or any other relevant Act. For the said reason, it is alsorecommended to include a proviso that the quantum of bonus payableto employees drawing total Basic Pay and Dearness Allowance overRs.750/= per month shall be limited as if their pay and Dearness https://hcservices.ecourts.gov.in/hcservices/ Allowance were only Rs.750/= per month. With regard to the rest ofthe employees (higher paid employees), it was left open to thecompany or concern to consider whether to pay them bonus out of thebalance 40% of the available surplus left to it under the bonusformula.15. It is in the aforesaid background, the recommendation ofthe Bonus Commission was accepted with some modifications as shownin the statement of Objects and Reasons.16. If the aforesaid statement of Objects and Reasons is readwith recommendation of the Bonus Commission, it will be evidentthat the intention of the Legislature was to provide bonus (out of60%) only to 'lower paid' employees and not to those, who are'higher paid'. For them, it was left open to the company orconcern to decide whether to pay bonus out of their 40% of theavailable surplus.Thus, a valid classification having been made between two setsof employees based on their wages, i.e., 'lower paid employees' and'higher paid employees', the ceiling as prescribed u/s 2 (13)cannot be held to be unreasonable or unconstitutional, having itsnexus with the object to achieve. We, accordingly, uphold Section2 (13) of the Payment of Bonus Act, 1965, and in absence of merit,dismiss the writ appeal. However, there shall be no order as tocosts.GLN Sd/- Assistant Registrar / True Copy / Sub. Assistant Registrar To1. The Secretary to Government Government of India Ministry of Labour, New Delhi.2. The Secretary to Government Government of India Ministry of Finance (Banking Division) New Delhi.3. The Chairman & Managing Director Management of UCO Bank 10, B.T.M.Sarani (Barbourne Road) Kolkatta 700 001.1 cc to Mr.S.Ayyathurai, Advocate, SR.40583 1 cc to M/s.Aiyar & Dolia, Advocate, SR. 40708ssv (co)dv/6.8. W.A. NO. 2893 OF 2002