# 19~1 .4J1Jak•hs A-fathur Ba.bu' s Sakti Ousha.dhal •Y rJ Due. ( P) Lid • v. Union of India

- **Citation:** [1963] 3 S.C.R. 978
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/19-1-4j1jak-hs-a-fathur-ba-bu-s-sakti-ousha-dhal-y-rj-due-p-lid-v-union-of-india-2697
- **Pages:** 17

## Headnote

19~1
.4J1Jak•hs A-fathur
Ba.bu' s Sakti
Ousha.dhal •Y rJ
Due. ( P) Lid • .
v.
Union of India
978
SOPREME COURT REPORTS
[1963]
•
where these preparations are manufactured, though
· it appears that the petitioners in. the present case
are mostly from Calcutta and the maimfacture in
these case~ must be going on Calcutta.
We therefore allow the petitions and direct
that these three medicinal preparations should not
W•ncllooJ • . -
. be taxed under. the various Excise Acts in force in
various States and can only be taxed in accordance
with the provisions of the Medicinal and Toilet.
preparations (Excise Duties) Act. \Ve pass no order
as. to the .claim for . refund for that is a matter
which the ·petitioners can take up with the State
1962
Stpkmbtr JJ.
. Governments concerned according to law. ·The
petitioners will get their costs from the respon·
dents-one set of hearing fee: .
· Petitions allowed.
BRIDGE & ROOF CO.· (INDIA) LTD.
(B. P.
!
' v.
UNION.· OF INDIA
i'rNHA, C. J., fl. J. IMAM, K. SunnA _RAo,
K. N. WANCHOO, J. C. SrrAH and N.
RAJAGOPALA AYYANGAR, JJ.)
Emplovees Provident
Fund-Bonus-Whether
excepted
· .. from definition of •Bade Wages'-Contribution-Tl'htlh•r to be
paid an bonus-Bonu•, whether drnotes, only Profi! Bonus--
Otntral Goi·ernment Order Validit.11-Employees Provident Fund
Act, 1952 (19 of 1952), ss. 2(b), 5, 6, 19A.
The petitioner No. I
i~ a p_ublic limited compa~~ eng-
- aged in a manufacture of cng1necr1ng goods. In add1uon to
basic wages and dearness allowance p~yable by pet1 ti oner
. No. I it has introduced two Production bonu! ·schemes.
Certain
difficulties
and doubts having arisen on
the
question- whether production bonus could be taken into
cc:>nsi<Jera\iop in calculatin.g the contributi.on under s. 6 of the
•
3 S.C.R.
SUPREME COURT REPORTS
979
Employees Provident Fund Act, 1952, the Central Government passed an order by which it was directed that the produc·
tion bonus payable as part·of a contract of employment either
at a flat rate or at a rate linked to the quantum of work
turned out satisfied the definition of. "basic wages" under
s. 2(b) of the Act. The petitioner No. l was further direct·
ed to effect the recovery of provident fund and contribution
and to make deposit of arrears of contribution in 'accordance
with the first direction contained in the order. Thereupon
the present petition was filed under Art. · 32 of the Consti·
tution.
The main contention of petitioner Ne. l was that
'bonus' without any qualification had been excepted from the
terms "basic wages" in the definition in s. 2(b) of the Act and
therefore all kinds of bonus were excluded from "Basic
wages". Since the section which provides for contribution
only refers to basic wages, dearness allowance and retaining
allowance no contribution need be paid on bonus. Consequ·
ently the order of the Central Government directing th:i.t
production bonus should be included in basic wages for the
purpose of contribution under the section was invalid.
Held, that when the word "bonus" was ~sed without
any qualification the legislature had in mind every kind of
.l
bonus that may be payable to an employee which was prevalent in the indu$trial field before 1952. It is not possible
to accept the contention of the respondent that whatever
is the price of labour and arises out of contract is necessarily included in the definition of "basic wages" and tht>refore .
production bonus which is a kind of incentive wage would
also be included, in view of the exc.eption of all kinds of
bonus from the definition. Therefore the order of the
Central Government, which was presumably under s. l9A
of the Act, was incorrect.
M/s. Tita.ghur Papei· Mills Oo. Ltd. v. Its Workmen,
[1959] Supp. 2 S.C.R. 1012, Mfs. hpahani Ltd. Calcutta v.
Ispahni Employees Union, [1960] I S.C.R. 24, 'l'he Graham
Trading Oo. Ltd. v. Its Workmen, [1960] l S.C,R. 107 and
Millowners Association. v. The Rashtriya Mill Mazdoor Sangh,
Bombay, (1960) L.L.J. 1247, referred to.
OmGINAL JURISDICTION:

## Text

19~1
.4J1Jak•hs A-fathur
Ba.bu' s Sakti
Ousha.dhal •Y rJ
Due. ( P) Lid • .
v.
Union of India
978
SOPREME COURT REPORTS
[1963]
•
where these preparations are manufactured, though
· it appears that the petitioners in. the present case
are mostly from Calcutta and the maimfacture in
these case~ must be going on Calcutta.
We therefore allow the petitions and direct
that these three medicinal preparations should not
W•ncllooJ • . -
. be taxed under. the various Excise Acts in force in
various States and can only be taxed in accordance
with the provisions of the Medicinal and Toilet.
preparations (Excise Duties) Act. \Ve pass no order
as. to the .claim for . refund for that is a matter
which the ·petitioners can take up with the State
1962
Stpkmbtr JJ.
. Governments concerned according to law. ·The
petitioners will get their costs from the respon·
dents-one set of hearing fee: .
· Petitions allowed.
BRIDGE & ROOF CO.· (INDIA) LTD.
(B. P.
!
' v.
UNION.· OF INDIA
i'rNHA, C. J., fl. J. IMAM, K. SunnA _RAo,
K. N. WANCHOO, J. C. SrrAH and N.
RAJAGOPALA AYYANGAR, JJ.)
Emplovees Provident
Fund-Bonus-Whether
excepted
· .. from definition of •Bade Wages'-Contribution-Tl'htlh•r to be
paid an bonus-Bonu•, whether drnotes, only Profi! Bonus--
Otntral Goi·ernment Order Validit.11-Employees Provident Fund
Act, 1952 (19 of 1952), ss. 2(b), 5, 6, 19A.
The petitioner No. I
i~ a p_ublic limited compa~~ eng-
- aged in a manufacture of cng1necr1ng goods. In add1uon to
basic wages and dearness allowance p~yable by pet1 ti oner
. No. I it has introduced two Production bonu! ·schemes.
Certain
difficulties
and doubts having arisen on
the
question- whether production bonus could be taken into
cc:>nsi<Jera\iop in calculatin.g the contributi.on under s. 6 of the
•
3 S.C.R.
SUPREME COURT REPORTS
979
Employees Provident Fund Act, 1952, the Central Government passed an order by which it was directed that the produc·
tion bonus payable as part·of a contract of employment either
at a flat rate or at a rate linked to the quantum of work
turned out satisfied the definition of. "basic wages" under
s. 2(b) of the Act. The petitioner No. l was further direct·
ed to effect the recovery of provident fund and contribution
and to make deposit of arrears of contribution in 'accordance
with the first direction contained in the order. Thereupon
the present petition was filed under Art. · 32 of the Consti·
tution.
The main contention of petitioner Ne. l was that
'bonus' without any qualification had been excepted from the
terms "basic wages" in the definition in s. 2(b) of the Act and
therefore all kinds of bonus were excluded from "Basic
wages". Since the section which provides for contribution
only refers to basic wages, dearness allowance and retaining
allowance no contribution need be paid on bonus. Consequ·
ently the order of the Central Government directing th:i.t
production bonus should be included in basic wages for the
purpose of contribution under the section was invalid.
Held, that when the word "bonus" was ~sed without
any qualification the legislature had in mind every kind of
.l
bonus that may be payable to an employee which was prevalent in the indu$trial field before 1952. It is not possible
to accept the contention of the respondent that whatever
is the price of labour and arises out of contract is necessarily included in the definition of "basic wages" and tht>refore .
production bonus which is a kind of incentive wage would
also be included, in view of the exc.eption of all kinds of
bonus from the definition. Therefore the order of the
Central Government, which was presumably under s. l9A
of the Act, was incorrect.
M/s. Tita.ghur Papei· Mills Oo. Ltd. v. Its Workmen,
[1959] Supp. 2 S.C.R. 1012, Mfs. hpahani Ltd. Calcutta v.
Ispahni Employees Union, [1960] I S.C.R. 24, 'l'he Graham
Trading Oo. Ltd. v. Its Workmen, [1960] l S.C,R. 107 and
Millowners Association. v. The Rashtriya Mill Mazdoor Sangh,
Bombay, (1960) L.L.J. 1247, referred to.
OmGINAL JURISDICTION: Petition No. 62 of
1962.
'
Petition under Art. 32 of the Constitution
9f Jndj11i for iiqforoement of ¥ri.ndi+J:B.ent11il ~i§llts, .
. 19/JB
• Bridg~ ch ,Roof.
Co. (India) Lti.
.
,..
.
Union of India
1862
B1id1e "' Ro•f
Ce .. (lnJio) Lti,
••
Union 1f lndiu
980
SUPJtEMl!J COURT REPORTS
[1963]
G. B. Pai, J. B. Dadachanji, 0. G. Mathur 11.nd
Ravinder Nartdn for the petitioners.
Veda Vyasa and R.H. Dhebar, for respond1mts
Nos. 1 and 2.
M. S. K. Sastri and M. S. Narasimhan, for
respondent No. 4.
1962. September 11.
The Judgment of the
Court was delivered by
WANCHOo, J.-The short question raised in
this writ petition under Art. 32 of the Constitution
is whether production bonus is included within the
term "basic wages" as
defined in s. 2(b) of the
Employees' Provident· Funds Act, No. 19 of 1952,
(hereinafter referred to as the Act) Writ Petition
64 ot" 1962 (The Jay Eugineerin;, Works Limited v.
The Union of India) was heard along with this
petition. In that writ petition a further question
arose as to the nature of the production bonus
scheme in force in that company and parties
have been given time to file additional affidavits
in that connection.
What we say therefore in the
present case as to roduction bonus generally may
not be taken necessarily to apply to the particular
scheme in the case
of writ petition No.
64
of 1962.
The brief facts necessary for present purposes
are these.
Petitioner No. l (hereinafter referred
to as the Company) is a public limited company
engaged in the manifacture of engineering goods,
structural fabrication and rolling stock, and the Act
applies to the Company. The Company has a production bonus scheme in force which provides for pay·
ment of production bonus over and above wages fixed
by the major engineering award of 1958, published
in the Calcutta gazet.te dated November 5, 1958,
which governs 74 major engineering concerns in
3 S.C.R. SUPREME COURT REPORTS
981
that region including the Company. That a.ward
is still in force and has fixed basic wages and
dearness allowance on time rate basis for the entire·
major engineering industry. In addition to basic
wages and dearness allowance payable under the ·
award, the Company has two production bonus
schemes one for the hourly rated workers and the
.other for the rest. It is unnecessary to go into the
details of the two schemes; but
the main
feature of the two schemes
is that p.roduction
bonus · begins to be paid on
certain
rates
specified in the two schemes when the output·
reaches 5,000 tons per year and that no production
bonus is paid when the output is less than 5,000
tons per year. It may' be added that the scheme
relating to the hourly rated workers has been
revised from January 1, 1962 and the main feature
of this revision is that the scheme is now applicable
to these workers on a quarterly basis. According
to this revised scheme, production bouns begins
. when the output for the quarter reaches 1300 tons,
and there is no· production bonus if the output is
below 1300 tons. In the case of other eta.ff, the
old scheme is still in force, though it is stated for
the Company that negotiations are going on for
revising the old scheme, presumably to bring it
into line with the new scheme introduced for hourly
rated workers since January 1, 1962.
.
We may now briefly refer to the relevant
provisions of the Act which require consideration.
The Act provides by s. 5 for the introduction of
Employees' Provident Fund Scheme for certain
industries included in Schedule I to ·the Act. In
consequence a Provident Fund Scheme was framed
in September 1952 known as the Employees
--..
Provident, Funds Scheme, 1952, and it is applicable
to the company. Section 6 of the Act provides
for
contribution by the
· employer . and the
1962
B'idge & Roaf
Co. (India) £td.
v.
Union of India
'iF anchoo J.
1962
Bridge"' Roof
Oo. (lndia) J.td.
v.
Unfon of India
Wanchao J,
982
SUPREME COURT REPORTS
[1963]
employee to the provident fund and this contribution is 6-1/4 per centum of the basic wages,
dearness allowance and retaining allowance (if any)
for the time being payable in the case of both.
Section 6 further provides for certain increased
contribution; but we are not concerned with that
in the present case.
'"Basic wages" have
been
defined in s. 2(b) of the Act thus :
" •Basic wages' means all emoluments
which are earned by an employee while on
duty · or on leave with wages in accordance
with the terms of the contract of employment
and which are paid or payable in cash to him,
but does not include-
( i) the cash value of any food concession;
(ii) any dearness allowance (that is to say,
all cash payments by whatever name
called paid to an employee on account
of a rise in the cost of living), house-rent
allowance, overtime allowance, bonus,
commission or any other similar allowance payable to the employee in respect
of his employment or of work done, in
such employment;
(iii) any presents made by the employer;"
Further, s. l9A of the Act provides for the removal
of difficulties and lays down that if any difficulty
arises in giving effect to the provisions of the Act,
and in particular, if any doubt arises as to certain
matters including "whether the total quantum
of benefits to which an employee is
entitled
has been reduced by the employer", the Central
Government may by order, make such provision
or give such direction, not inconeistent with the
provisions of the Act, as appears to it to be
peoessar,Y or e~peqient for
tqe rell'.).oval of tqe
r
j
3 s.C,R. SUPREME COURT REPORTS
983
doubt or difficulty, and the order of the Central
Government in such cases shall be final.
It appears tha.t difficulties and doubts arose
on the question whether production bonus could
be taken into account in calculating- the contribution of 6-1/4 per centum uncle~ s. 6 ~of the Act,
and the Cerrtral
Government
directed
about
the March 7, 1962 that the question whether production bonus should be liable to provident fund
deduct.on under the Act had been re-examined by
it and it had been decided that production bonus,
. payable a.s _part of a contract of employment either
at a flat rate or at a rate linked to tl;ie quantum
of work turned out satisfied the definition of "basic
wages" under s .. 2 (b) of the Act.
The Company
was further directed to effect recovery of provident
fund contributions on production bonus without any
further delay and arrear contribution in this respect
payable with effect from Janua.ry 1, 1960, was also
to be deposited in the statutory fund immediately.
The present petition was thereafter fi,led in April
196~ and is directed against the decision of the
Central Government which was duly communicated
to the Company in March 1962.
The main contention of the Company is
that bonus without any qualification has been
expectP,d from the term ·"basic wages" in the
definition in s. 2 (b) ·of the Act.
Therefore, all
kinds of bonus whether it be profit bonus or producti•)n bonus or attendance bonus or festival bonus
either as an implied condition of service or as a
custom.iry payment, are excluded from "basic
w,1.ges". Further, s.6 which provides for contribution
on 1y refers to basic wagPs, dearness allowance and
retaining allowance (if any) and contributions have
to be made at the appropriate rate on these three
payments and not on bonus which is not included
in s. 6. It is ur~ed tq(l.t wben the ,A,<Jt was pa.seed
1962
Bridge db R?of
Co. (India) Ltd.
v.
Unt'on of India
Wa~choo .1.
JY61
Bridg~ <4' Roof
<Jo. !India) ltd.
Union:of India
Wanchoo J.
984
SUPREME COURT REPORTS
(1963]
in
1952
the legislature was aware
of
the
various kinds
of
bonus which
were
being
paid
by
various
concerns
in
various
industries
and
when
it
deeided to
exclude
bonus without any qualification from the term
"basic wages" as defined in s. 2( b), it was not open
to the Central Government to direct that production bonus should be included in basic wages for
the purposes of contribution under s. 6.
Besides
this contention based on the interpretation of the
word "bonus" in s. 2(b), ·it is further contended
that if the word "bonus" therein excludes production bonus the provision would be unconstitutional
as it would be hit by Art. 14 of the Constitution
inasmuch as production bonus is not a general
feature of all industrial concerns but has been
introduced only in some.
The result of including
production bonus within basic wages would be that
some concerns where production bonus prevails
would be contributing to the provident fund at a
much higher rate than others where no production
· bonus prevails~
The petition has been opposed on behalf of
the Union of India and also on behalf of the two
trade unions, which are existing in the Company.
It is contended for the respondents that wages are
the price for labour and arise out of contract, and
the use of the term "basic wages" merely indicates
that a certain part of the total ·wages is being
separated for
certain purposes only. Therefore
production bonus being in the nature of incentive
wage must be included in the definition of the term
"basic wages" in s. 2(b), as basic wages there
defined are "all emoluments which are earned by an
employee while on duty or on leave with wages in
accordance with the terms of the contract of
employment and which are paid or payable in
cash to him ...... ". Therefore, production bonus
being in the nature of an incentive wage is included
;r
- .
3S.C.R.
SUPR.EME COURT REPORTS
985
in the terma "a.11 emoluments" in the definition
of "ha.sic wages", for production bonus is earned
by an employee while on duty in accordance with
the terms of the contract of employment.. It is
further submitted that when the word "bonus"
was used in cl. (ii) of the exceptions to s. 2(b), it
only referred to profit bonus, as it was well established before 1952 that the use of the word "bonus"
without any qualification referred to profit bonus
only in industrial adjudications. Therefore, when
cl. (ii) of the exceptions to s. 2(b) excepted "bonus"
without any qualification it ·referred only to profit
bonus and not to any other kind of bonus.·
The main question therefore that falls for
decision is as to which of these two rival contentions is in consonance with s. 2 (b). There is no
doubt that "basic wages" as defined therein means
a.11 emoluments whioh are earned by an employee
while on . duty or on leave with wages in accordance with the terms of the contract of employment
and which are paid or payable in cash. If there
were no exceptions to this definition, there would
have been no difficulty in holding that production
bonus whatever be its nature would be included
within these terms. The difficulty, however, arises
because the definition a.lso provides that certain
things will not be included in the term "basic
wages'', and these are contained in three clauses.
The first clau_se mentions the cash value of any
food concession while the third clause mentions
any presents made by the employer. The fa.ct
that the exceptions contain even presents made by
the employer shows that thougμ the definition
mentions
all emoluments which are earned in
accordance with the terms of the contract of emp·
loyment, care was taken to exclude presents which
would ordinarily not be earned in accordance with
the
terms of the contract of
employment.
1962
Bri41e &I Boof
. Oo. 'lndi11) Ltd.
v.
Union .of India
Wanchoo J.
1962
B•<dge ch Roof
Co. (India) Ltd.
v.
Union of India
War.choo J.
986
SlJPREME COURT REPORTS
Similarly, though the definition includes "all emolu·
ments" which are paid or payable in cash, the
exception excludes the cash value of any food
concession, which in any case was not payable in
cash. The exceptions therefore do not seem to
follow any logical pattern which would be in consonance -:vith the main definition.
Then we come to cl. (ii). It excludes dearness
allowance, house-rent allowance, overtime allowance, bonus, commission or any other similar
allowance payable to the employeA in respect of his·
employment or of work done in such employment.
This exception suggests that even though the main
part of the definition includes all emoluments
which are earned in accordance with the terms of
the contract of employment, certain payments
which are in fact the price of labour and earned in
accordance with the terms of the contract of
employment are excluded from the main part of
the definition of "basic wages". It is undeniable
that the e"ceptions contained in cl. (ii)
refer to
payments which are earned by an employee in
accordance with the terms of his
oont1•act of
employment. It was admitted by counsel on both
sides before us that it was difficult to find any one
basis for the exceptions contained in the three
clauses. It is clear however from cl. (ii) that from
the definition of the word "basic wages" certain
earnings were excluded, though they must be
earned by employees in accordance with the terms
of the contract of employment. H" ving excluded
"dearness allowance" from the defiinition of "basic
wages", s. 6 then provides for inclusion of dearness
allowance for purposes
of
contribution. But
that is clearly the result of the specific provision in
s,6 which lays down that contribution shall be 6-1/4
per centum of the basic wages, dearness allowance
and. retaining allowance (if any). We must therefore try to disoover some basis for the exolusion
3 s.c.it. SUPREME COURT RElPORTS
987
in cl. (ii) as also the inclusion of dearness allow·
ance
and
retaining
allowance (for
any)
in s. 6. It seems that the basis of inclusion
in s. 6 and exclusion in cl. (ii) is that what·
ever is payable in all · conceroa and is earned
by all permanent employees is included for the
purpose, of contribution under s. 6, but whatever
is not payable by all concerns or may not be earned
by all employees of a concern is excluded for the
purpose of contribution. Dearness allowance (for
examples is payable in all concerns either as an
addition to basic wages or as a part of consolidated
wages where a concern does not have separate
dearness allowance and basic wages.
Similarly,
retaining allowance is payable to all permanent
employees in all seasonal factories like sugar
factories and is therefore included in s. 6; but
house·rent allowance is not paid in many concerns
and sometimes in the same concern it is paid to
some employees but not to others, for the theory
is that house-rent is included i:μ th{) payment of
hasio wages plus dearness allowance or consoli·
dated wages.
Therefore, house-rent allowance
which may not be payable to all employees· of a
concern and whieh is certainly not paid by all
concern is taken out of the definition of "basic
wages", even though the basis of payment of houserent allowance where it is paid is the oontract of
employment.
Similarly,
overtime
allowance
though it is generally in force in all concerns is not
earned by all employees of a concern.
It is . also
earned in accordance with the terms of the con tr.act
of employment; but because it may not be earned
by all employees of a concern it is excluded from
"basic wages". Similarly, commission or any other
similar allowance is excluded from the definition
of "basic wages" for commission and other allow·
ances are not necessarily to be found in all ·
concerns; nor are they necessarily earned 'by all
z962·
Bridge ch Roof
Co (India) Liii.
v.
Union of India
Wan&hoo J.
19112
Bri'6~ dr Roof
Co. (India) Ltd.
v.
Union of India
Wanclroo J.
988
SUPREME COURT REPORTS
[1963]
employees of the same concern, though where
they exist they are earned in accordance with the
terms of ,the contract of employment. It seems
therefore that the basis for the <jxdusion in cl. (ii)
of the exceptions in s. 2 (b) is that all that is not
earned in all concerns or by all employees of
concern is
excluded from
basic wages.
To this
the exclusion of dearness
allowance in cl. (ii)
is an exception. But that exception !las been
corrected by including dearness allowance in s. 6
for the purpose of contribution. Dearness allowance which is an exception in the definition of
"ha.sic wages", is included for the purpose of
contribution by s. 6 and the real exceptions therefore in cl. (ii) &re the other
exceptions beside
dearness
allowance, which has been
inoluded
through 11. 6.
This brings us to the consideration of tlie
question of bonus, which is also an exception in
cl. (ii). Now the word "bonus" has been used in this
clause without any qualification.
Therefore, it.
would not be improper to infor that when the word
"bonus" was used without any qualification in the
clause, the legislature had in mind every kind of
bonus that may be payable to an employee. It is
not disputed on behalf of the respondents that
bonuses other than profit bonus were in force and
well'known before the Act came to be passed in 1952.
For example, the Coal Mines Provident Fund_ and
Bonus Schemes Act, No. 46 of 1948, provided for
payment of bonus depending on attendance of
employees during any period. Besides the attendance- ·
bonus, four other kinds
of
bonus had been
evolved under industrial law even before 1952 and
were
in force in various concerns in various
industries. There was first production bonus, which
was in force in some concerns long before 1952 (see
..
3 S.C.R. SUPREME COURT REPORTS
989
Messrs. Titaghur Paper Mills Co.
Limited v. Its
Workmen). (1) Then there was festival or puja bonus
which was in force as an implied term of employment long before 1952 (see Messrs. lspahani Limited
Calcutta v. lspahani Employees' Union) (2). Then there
was customarv bonus in connection with some
festival (see The Graham Trading Go. ( Tndia) Limited
v. Its Workmen). ('). And lastly, there was profit
bonus the principles underlying which and the
determination of whose quantum were evolved by
the Labour App11llate Tribunal in the MiUowners'
Association v.
The Rashtriya MiU Mazdoor Sangh,
BomfJay. (4) The ~egislaturA therefore could not have
been unaware that these different kinds of bonus were
being paid by different concerns in different industries,
when it passed the Act in 1952. Therefore, unless
the contention on behalf of the respondents that
bonus when it was used without qualification can
only mean profit bonus is sound, it must be held
that when the legislature used the term ''bonus"
without any qualification in cl. (ii) of the exception
in s. 2 (b), it must be referring to every kind of
bonus which was prevalent in the industrial field
before 1952. The contention therefore of the
respondents that when the term "bonus" was used in
industrial law before 1952 without any qualifying
term it meant only profit bonus and nothing else,
requires careful consideration." W11 do not think
however that this contention is well founded. It
is true, as will appear from the terms of reference
in various cases of profit bonus that the wqrd
"profit" was not used as a qualifyin2 word before
the word "bonus" in such cases. It may also be
that in many cases where a particular type of bonus
was in dispute, say, attendance or "puja bonus, the
qualifying word ''attendancA'' or •'puja" was us<"
in references. But it appears that where a reference
1. [1959] Supp. 2 s.c.R. 1012.
3. [IS60) I S.C.R. 107.
,
2. ( 19nO] I S.C.R. 24.
4. [1950) L.L.J. 1247.
W62
Bridf!O & Roof
Co. 1 India) Ltd.
Union of India
Wanchoo J.
1962
Bridie &:1 Roof
Oo. ~lndia) Ltd.
v.
Union of India
H'anchoo J.
990
SUPREME COURT REPORTS
[1963]
was in connection with profit bonus, the usual
practice was to make the reference after qualifying
the word '~bonus" by the year for which the profit
bonus was claimed. For example, we may refer
to the case of M illowners' Association Bombay v. The
Rashtriya Mill Mazdoor Sangh. (') Therein para 16
at p. 1252, we find the
term
of
reference in
Ref11rence No. 1 of 1948 (Mil/owners' Association
Bombay v. The Empwyees in the. Cotton Textile Mills
Bombay) in these terms-
"Re : Bonus for the year 194 7"
It seems therefore that when reference was
with respect to profit bonus, the term "bonus"
though not qualified by the word "profit" had
always been limited by specifying the year for
which the bonus was being claimed.
Though,
therefore, it may be true that literally speaking, t.he
word "profit" was not used to qualify the word
"bonus" when references were made with respect to
profit bonus, the matter was put beyond controversy
that the use of the word "bonus" without any
qualification was with reference to profit bonus by
adding the year for which the bonus was being
claimed. It would therefore be not right to say that
in industrial adjudications before 1952, bonus
without any qualifying word meant profit bonu~
and nothing else. Further though the word "profit"
w&s not uBed to qualify the word "bonus", the
intention was made quite clear when profit bonus
was meant by using the words "for the year so and
so" after the word "bonus". We are therefore not
prepared to accept that where the word "bonus" is
used without any qualification it only means profit
bonus and nothing else. On the other hand, it seems
to us that the use of the word "bonus" without any
qualifying word before it or without any limitation
\, (1950) L.L.J. 1247.
+
3 S.C.R. SUPREME COURT REPORTS
991
as to year after it must refer to bonus of all kinds
known to industrial law and industrial adjudication
before 1952.
The reason for the exclusion of all
kinds of bonus is also in our opinion the same which
led to the exclusion of house-rent allowance,
overtime allowance, commission and any other
similar allowance, namely, that payment of bonus
may not occur in all industrial concerns or it may
not be made to all employees of an industrial
concern (as, for example, attendance bunus) and
that is why bonus of all kinds was also excluded
from the definition of the term "basic wages". The
Act is an All-India Act applicable to all industries
mentioned in Sch. I and to all concerns engaged in
those industries; and the intention behind
the
exclusion seems to be to make the incidence
of provident fund the same in
all industrial
concerns, which are covered by the Act so tba t it
was necessary to exclude from the wide definition
of 11basic wages" given in the opening part, all such
payments which would not be common to all
industries or to all employees in the same concern.
We have already pointed out that to this principle,
only dearness allowance in cl. (ii) is an exception;
but that exception bas been corrected by the
inclusion of dearness allowance in s.6.
We are
the~efore of opinion that there is no reason why
when the- word "bonus" is used in cl.
(ii) without
any quali(ving word, it should not be interpreted
to include all kinds of bonus which were known to
industrial adjudication before 1952 and which must
therefore be deemed to be within the knowledge of
the legislature.
This brings us to the consideration of the
1 contention raised on behalf of the respondents that
wages are the price for labour and arise out of
contract,_ anr1 that whatever is the price for labour
and arises out of contract, was intended to be
included in the
definition
of "basic
wages"
1968
Brid!l• ch Roof
Co, (India) Lttd.
\'.
Union of India
Wanchoo J.
1962
BriJge &, Roof
Co. (India) Ltd.
v.
Union of India
Wano/loo J,
992
SUPREME COURT. REPORTS [1963]
in
s.2(b), and that only those
thingr
were
excluded which were a reward for labour not arieing
out of the contract of employment but depending on
various
other
considerations
like
profit
or
attendance. It may be, as we have pointed out
·earlier, that if thern were no exceptions to the main
part of the definition in s.2(b), whatever waA
payable in cash as price for labour and arose out of
contract would be included in the •erm
••basic
wages", and that reward for labour which did not
arise out of contract might not be included in the
definition. But ·the main part of the definition is
subject to ex.ceptions in cl. (ii), and those exceptions
clearly show that they include even the price for
labour. It is therefore not possible to accept the
contention on behalf of the respondents · that
whatever is price for labour and arises out •)f
contract is included in the definition of "basic
wages" and therefore production bonus which is a
kind of incentive wage would be included.
This court had occasion to consider produ·ction
bonus in Messrs.
Titaghur Paper Mills Co. Ltd.
v.
Its Workmen, (')
It was pointed
out that "the
payment of production bonus depends upon production and is in addition to wages. In effect,
it i~ an incenti~e to higher production and is in the
nature of an incentive wage''. The straight piecerate plan where payment is made according to each
piecf1 produced is the simplest of incentive wage
plans. In a straight piece rate plan, payment is
made according to each piece produced and there
is no minimum and the worker is free to produce
as much or as little as he likes, his payment, depending upon the number of pieces produced.
But in
such a case payment for all th at is prod need would
be basic wage as defined in s. 2(b) of the Act, even
though the worker is working under an incentive
(I) [1959] Supp 2 S C.R. 1012.
'
3 S.O.R. SUPREME COURT REPORTS
993
wage plan. The difficulty arises where the straight
piece rate system cannot work aR when the finished
product is the result of the co-operative effort of a.
Jarge number of workers each doing a small part
which contributes to the result. In such a case
the system of production bonus by tonnage or by
any other standard is introduced. The core of such
a plan is that there is a base or a standard above
which extra payment is earned for extra. production
in addition to the basic wages which is the paymeut for work upto the base or standard. Such
a
plan typically guarantees time
wage upto
the time represented by standard performance
and gives workers a share in a savings represented by superior performanct>.
The
scheme
in force in the Company is a typical scheme of
production bonus of this kind with a base or
standard upto which basic wages as time wages are
paid and thereafter extra payments are made for
superior performance.
This extra payment may
be called incentive wage and is also called production bonus. In all such cases however the workers
are not bound to produce anything beyond the
base or standard that is set out.
The performance
may even fall below the base or standard but
the minimum basic wages will have to be paid
whether the base or standard is reached or not.
When however the workers· produce beyond the
base or standard what they earn is not b<tsio wages
but production bonus or incentive wage. It is
this production bonus which is outside the definition
of "basic wages" ins. 2 (b), for reasons which we
have already given above. The production bonus
in the present case is a typical production bonus
scheme of this kind anu whatever therefore is
earned as production bonus is payable beyond a
-.r
a.base or standard and it cannot form pii.rt of the
definition of "basic wages" in s. 2 (b) because of
the exception of all kinds of bonus from that
definition .
We are therefore of opi.gion that
...
1962
Btidge ch Roof .
Co. (India) Ltd.
v.
Union of India
Wanchoo J,
1961
Bridg6 &:: Roof
Co. (India) Lid.
v.
.
U1uon of Indict
It' anchco .1.
994
SUPREME COURT REPORTS
[1963]
production bonus of this type i11 excluded from
the definition
of "basic wa!!es" in P. 2 (b) and
therefore the decision of the Central Government,
which was presumably under s. 19A of tbe Act to
remov.e the difficulty arising out of giving effect
to the provisions of the Act, by which such a bonus
has been included in the definition of "basic wages"
is incorrect.
In view of this decision, it is
unnecessary to consider the effect of Art. 14 in the
prt1sent case.
We therefore allow the petition and hold that
production bonus of the typical kind in force in the
Company is excepted from the term "basic wages"
and therefore the decision of the Central Government communicated to the Company on March 7,
l 962, that provident fund contributions must also
be made on the production bonus earned by the
employees in this Company, must be set aeide.
As this petition was heard along with petition No.64
of 1962 and the main arguments were in that
petition, we order parties to bear their own costs.
Petition allowed.
'