'IHE REGIONAL DIRECTOll v. Sud Mills & Ors.

3, The first category of remuneration falling within the is not definition of ''wages" in sub-s.(22) of s. 2 of satisfied by the bonus in question in the i!llltant appeals. The second category of remuneration defined within the expression the Act speaks of other ''wages" by sub-s.{22) of s. 2 of additional relllllleration paid at months. The bonus under consideration here is not paid at intervals not exceeding two months. It is payable within "one month after the end of each quarter", (645 C-E] intervals not exceeding the Act lilir Mills Co. Ud. v. Sud Mills, (1955] 1 s.c.R. 991; ShEee lleenakshi Mills Ud ..... '.Ibeir Wort.en, (1958] s.c.R. 878; and Stauds.rd Vacuma BefiniDg Co. of India v. Its Wos:kmen and Anr., (1961] 3 s.c.R. 536 relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 741-42 of

1978. From the Judgment and Order dated 2.5,1975 of the Patna t High Court in Appeals from Original Orders Nos. 92 and 93 of 1971. A B c D E F G H E.S.I. CQRPN. v. BATA SHOE CO. (PATHAK, J.] 641 Abdul Khader, R.N. Kapoor and Miss A. Subhashini for the A Appellants. G.B. Pai, Parveen Ku!IJar, Anil Ku!IJar Sharma and F.R. Das for the Reilpondent. The Judgment of the Court" was delivered by PATH.U:, J, These appeals by special leave are directed against the cOlllllOn judgment and order of the Patna lligh Court dismissing two appeals filed by the Kegional Director, Employees' State Inaurance Corporation on the question whether the respon- dent is liable to pay the diaputed bonus to its workmen. The r<!spondent, Bata Shoe Company (P) Ltd., has a branch factory at Digha Ghat and 11nother at Mokamah in the State of l!ihar. At the Digha Ghat branch, the respondent entered into a settlement with its workmen on May 6, 1947, in which it was a.greed that production bonµs payable to the workmen would remain unaltered but employees earning less than Rs.

200 " would get an extra bonus called "good attendance bonus~ at 5% of their yeai; ly salary provided they comp~eted active service for 265 days annually inclusive of Saturdays. It was stipulated that atten dance bonus would be calculated in the same way as production bonus. On November 28, 1951 th<!re was an a.greement by which J.t was agreed that "the system of attendance bonus for the year 1952 will be discontinued and the ex-gratia bonus's percentage will be to all increased by 5%, employees," It was also a.greed that corresponding changes would be made in the Standing Orders and Bules in order to inc9rporate these changes. Later, another settlement was recorded, this tiioo before the Chairman, Industrial Tribunal, Bihar, in a pending Referell<!" of 1955 where it was mentioned that. the respondent had agreed to increase trno general bonus, effective from the fint quarter of 1957, from 15% to 16%. Thereafter on July 27, 1961 there was another settlement which provided :- i.e. instead of 10% it will be 15% "In view of the overall satisfactory settlement on all the 9utstarlding points of the Union and of tho.e points raised by the management, as a gesture of good- will the management declared that with effect from 3rd quarter of 1961 the General Bonus will be incr-.a•ed from lq-1/2% to 17-1/2%. The workmen's rt<pres,.ntativee appreciated thia gesture of the management and expre1·· sed satisfaction on behalf of the wo~n on the increase of General Bonus.• B c D E G H A B c D E 642 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R. This was followed by a further settlement dated January 9, 1963 arrived at in the course of conciliation proceedings before the Conciliation Officer-cum-Deputy Labour Commissioner, Bihar.

It provided that : "JlONUS: The rate of payment of bonus, effect! ve from 4th quarter of 1962 will stand revised at 19% in place of 17-1/2% as at present. The paymen': of bonus will be made one month after the end of each quarter at the rate of 19% of the total salary and/or wages paid to each workman and employee during the quarter inmedi ately preceding (such salary or wages are exclusive of any other special a11owance or rewards granted to him during such period). Such bonus will be payable only those who have completed six months' approved service ending on the last day of the quarter; and to those who have completed less than six months' approv ed service on the last day of the quarter, the bonus will be payable at the rate of 19-1/2% of their total salary or wages as aforesaid. The bonus will be avail able only those who are in the employ of the company on the last day of tile quarter and who have given regular .and approved service during the quarter to which. the payment of bonus is available.

" The last document recording a settlement is dated July 17, 1963, and pursuant to it the bonus clause was deleted from the Standing Orders and Rules. The facts relating to the respondent's l-lokamah factory are the bonus scheme was not substantially similar, except incorporated at any time in the Standing Orders and Rules. G time to time by The respondent company at. its two factories, Digha and the Regional Mokamah, was called upon from Uirector, Employees' State Insurance Corporation to make requisite contribution to the Employees' State Insurance Fund. At first, the managements of the two factories acknowledged their liability to deposit the amounts as part of the contract of employment, but subsequently realising, as they allege, that they were not liable in law to make any such contribution under the Employees' State Insurance Act 1948, they declined to make such E.S.I. CORPN. v. llATA S~OE CO. [PATHAK, J.j 643 the employees was not covered by payment.

Apprehending coercive methods of recovery on the part of the appellant, the managements of the two factories applied under the cl. (g) of sub-s.(l) of •· 75 of the Act for a decision by the Employees' Insurance Court on the question of their liability. The contention of the respondent was that the S:JIJl payable or paid by way of bonus definition of the term "wages" in sub-s. (22) of s. 2 of the Act and, therefore, the respondent was not liable to make any contri bution. The Employees' State Insurance Court accepted the conten- tion of the respondent. Against that order the Regional Director, Employees' State Insurance Corporation, Patna preferred appeals under s. 82 of the Employees' State Insurance Act 1948, and the appeals have been dismissed by the Patna High Court by its judg- ment and order dated May 2, 1975. The High Court has held that the Employees' State Insurance Court was right in taking the view that the bonus in question did not form part of the "wages" as defined in sub~s.

(22) of s. 2 of the Employees' State Insurance Act, 1948. the employee, and in these appeals The contribution payable by an employer under the Employees' State Insur~nce Act, 1948 is computed with reference to the wages the only question is whether the bonus paid by the respondent to its employees at the Uigha Ghat and the Mokamah branch factories under the settlements mentioned earlier can be regarded as "wages" as defined by sub-s~ (22.) of s. 2 of the Act. Sub-s. (22) of s. 2 defines "wages" as follows:- "(22) "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of· any period of authorised leave, lock~ut, strike which is not illegal or lsy-off and other additional remunera- tion, if any, paid at intervals not exceeding two months but does not include - (a) any contribution paid by pension fund or provident fund. or under this Act; the employer to any (b) any travelling concession; travelling allowance or the value of any (c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or A B C D E F G H 644 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R. (d) any gratuity payable on discharge.

" The entire argument of the appellants before the High Court the bonus paid or payable to the ""'1loyees by the respondent was in the nature of re1111neration paid in cash to the employees under the express terms of the contract of ""'1loyment. In other words, the appellants relied on definition of "wages" which speaks of "all re1111neration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled". Before ue, the appellants rely on the same provision in the definition. They also rely on that part of the definition which speaks of "w11e1" as "other additional re1111neration, if lilly, paid at intervai. not exceeding two months ...... ". The remaining provisions of the definition were not relied on. We are, therefore, called upon to consider whether the bonus in question satisfie1 the tems of either of the two kinds of renuneration mentioned above. that part. of It is plain from what has gone before that the bonu1 paid by the respondent to its employees is in the nature of ax-gratia payment or, as has been described in one of the settlements, it is paid as a gesture of goodwill on the part of the re1pondent.

It is nothing else. Indeed, learned counsel for the parties were agreed before the High Court in que5tion Wiit neither in the nature of production bonus nor incentiva bollUI !!Or custnmary bonus nor any statutory bonus. It cannot be regarded a• part· of the provbiQna relating to it were included in the Standing Orders an4 Rulea, they were subsequently excluded from them. In our opinion, there to it• fore, employees under the successive settlements and agreement• made between them cannot be regarded as re1111neration paid or payabt. to the employees in fulfilment of the terms of the contr111:t of employment. the contract of employment. Although the bonus paid or payable by the respondent the bonus The concept of bonus haa received the attflnl:l..oll of thia Court in a series of cases, and we need mention only eome of them. One of the first authoritative decisions rendered by this Court is 11a1r llil1a eo.

Ltd. v. Suti lfilJJI, [l.9551 1 s.c.R. 991, where N.H. Bhagwati, J., speaking for the Court, analyaed the concept of bonus and described it as represent108 the c.allh incentive paid in addition to wages and given conditionally on certain standards of attendance and efficiency being attained. When wages fall short of the lirtng standard or the induetry makes huge profits part of !llblch are due to the i::ontributioo A B c D E F G H E.S.l. CORPN. v. BATA SHOE CO, [PATHAK, J.] 645 .which the workmen make in increasing production, the demand for bonus, it was said, becomes an industrial claim. The view was followed by this Court in the sree Meenalreb1 Mills, I.bl. v. Their w..n-, [1958) s.c.R. 878, but the two conditions, that the wages paid to workmen fall short of living wages and that the industry should be shown to have made profits which are partly the result of the contribution made by the workmen in increasing production were regarded as being of cU1111lative significance.

Then followed Standard Vacuia llefiDilig Oo. of IDdf.a v. Its [1961) 3 s.c.R. 536, which dealt with the VoDmen 81ld Anr., concept of bonus elaborately while re-affirming what had been said in the earlier two cases. lt has not been shown to us that this Court has subsequently widened the concept of bonus the employer ex-gratia or aa an include a payment made by expression of goodwill towards its employees. lt seems to us clear that the first category of remuneration falling.within the definition of "wages" in sub-s.(22) of s. 2 of the Employees' State Insurance Act, 1948 is not satisfied by _the bonus in queation in these appeals. The second category of remuneration defined within the expressi~n "wages" by sub-s. (22) of s. 2 of the Act speaks of other additional remuneration paid at intervals not exceeding two montha. lt cannot be disputed that the bonus under consideration here is not paid at intervals not exceeding two months. lt is payable "one month after the end of each quarter".

We have carefully perused the terms of the definition of "wages" set forth in sub-s. (22) of s. 2 of the Employees' State Insurance Act, 1948, and we are satisfied that the bonus in queation in these appeals does not fall under any category or class mentioned in the definition. A B c D E In the result, we find ourselves in agreement with the High F Court, and therefore we dismiss the appeals with costs .• A.P.J. Appeals dismissed•